Jon Chesto
Managing Editor, Print- Boston Business Journal
Like most industries, architectural firms learned to become more efficient as they bounced back from the blows they suffered in the Great Recession. But it’s rare that we get a glimpse at just how efficient these privately owned businesses have become.
The latest annual survey conducted of Boston-area architectural clients by accounting firm CBIZ Tofias shows that profit-per-billable hour experienced one of its highest increases last year in the 28-year-history of the survey. The firms’ average profit rose from $6.89 an hour to $10.94 per billable hour in 2012, a nearly 60 percent increase. This was largely due to the time-honored “do more with less” approach. The firms’ billing multiple, a ratio that compares fee income with direct labor costs, has reached a new peak.
Architects, CBIZ Tofias managing director Dave Morse tells me, are simply spending more of their time on billable work and less time, relatively speaking, on vacations, sick time and other things that can’t be charged to clients.
Before the Great Recession hit, architectural firms were enjoying record profits. But then commercial real estate work dried up, and many firms were forced to cut jobs.
Morse says his firm’s architectural clients have, in general, built back some staffing levels since the bottom fell out. But their headcounts still fall short of 2008 levels. Likewise, he says, there’s still less billable work to be done than there was before the recession.
Even the pay levels for architects haven’t grown much lately. Average hourly rates at architectural firms rose from $34.07 in 2008 to $37.54 in 2010, but fell back to $36.65 in 2012.
CBIZ Tofias estimates that this year, the architectural firms will be able to approach the record high profits they saw in 2006 and 2007. But its report says the most likely path toward those profit levels this year involves more efficiency efforts. Relief from a significant economic recovery, CBZ Tofias says, isn’t right around the corner yet.
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