In this article originally appearing in Leading Architecture in 2008, Philip Kleijnhans talks of the ability of an architect to adapt to a cruel market, how response, debate and intricate notions of running a business visavis a practice can be handled, and how as a principal, one needs to go beyond working for your business rather than in your business.
Our leading architects have finally reached such a stellar competence that they can confidently compete with the best in the world. I firmly believe that – and I have had the privilege to work with some of those architects and their talent was an inspiration to me during our associations. However, the one thing that I couldn’t help noticing, is that they were notoriously bad business men - quite uninformed in the basic skills of business survival and I am using this opportunity (especially aimed at the young professionals just starting out), to illustrate how simple survival really is. Unfortunately, they never teach you this at school or university. So here goes – 10 simple things, if implemented, will increase your chances of survival dramatically.
I can tell you (with certainty), that you can determine your own destiny with one simple concept – goodwill, opportunities, work, anything... The entire planet works on flows. If you out-flow something, something else flows in the back of that. This is senior to politics, economics, considerations by others (even yourself). All you have to do is outflow, out-flow, out-flow. See where you can add value and do it and have fun with it. Never be serious. (Understand that when things get serious, there must be a problem). Just share stuff with others, even your peers… Never feel threatened that there is a scarcity of flows. There isn’t – just do it. In a while, you’ll be amazed at the torrent of inflow that you can create by doing this.
This must be one of the most misunderstood subjects on the planet – the concept of money. Important to know, if your attention is stuck on it, it doesn’t flow. If you don’t need it, it flows. Therefore, you have to get yourself into a position where you never “need” money. So this is how you do it. Firstly, try not to take your fees in lump sums, as per the work stages. Try and spread it out evenly over the duration of your project. This way, you struggle in the beginning (and may have to go into overdraft), because as you know, you earn most of your fees in the planning stage of the project. The good thing is, when you get to project 4 by this principle, you’re still receiving the last fees on project 1 and some fees on projects 2, 3 and 4. This puts you in a screaming affluence and your game becomes managing this money. This is obviously better than needing it. Secondly, you set up your company bank accounts correctly: firstly, you have a current account that you trade with. Try not to use your overdraft. Secondly, you have a call account, which accrues interest, where you keep your VAT, and some money for Tax. Practically, of the 14% VAT, you arguably pay 10% or 11%, if you manage your affairs correctly. The rest stays in that account and builds up for Tax. Thirdly, you have a savings account with a minimum balance as required by the bank. Of all your fees, 5% goes into this account and you may never ever, ever touch it. You rather go into overdraft than touch this money. There is only one exception – you borrow from that account only if your solvency is seriously threatened. The knowledge of always having money, helps you to take your attention off it and concentrate it on your profession. Again, you will be amazed how this accumulates in a relatively short time and it gives you financial freedom.
You can only practice if you are solvent. In order to be solvent, you need to do a few things. Firstly, you have to make money – preferably a lot. Secondly, you spend less than that. Thirdly, you make it before you spend it (see how the banks are trapping you with credit cards and overdraft facilities?). You then build up a cushion and never fall back on it (the savings account above) and lastly you keep your good credit as a second cushion. If you do this, in sequence, you will never be insolvent.
4. Sources of income.
Professionals tend to concentrate only on their profession and become really good at it. However, it is a good idea to derive your income from more than just that one source. You should get it from, preferably, three sources. This could be anything. In addition to your profession, it could be something you are passionate about like painting, manufacturing something, investing in a branded franchise – anything that you have sound knowledge and certainty about. Remember, you’re in the perfect position to develop property. Start small with the certainty that you can pay for it if the wheels come off. Then progress to a second, third and more properties. Soon, your wealth will overtake you. As a principle, position yourself well that you don’t compete with your clients, rather add value and invite them into the deal if they are interested or if it is big enough.
5. Risk Work.
I don’t know how we got ourselves into this one – we should have seen it coming! But it is there now and we have to deal with it. So, reserve this for clients who are loyal to you and, per your stats, are responsible for considerable chunks of your turnover each year. Be careful of the smooth-talking operator – if you do his work for nothing it goes to the bottom of the pile – be assured of that. If he paid you (even something), it hurts him as much as it hurts you and it goes to the top of his pile of potential projects.
6. Organization Board and Statistics.
This warrants a separate discussion - but do an organization board for yourself, which tracks your project through your business. This is usually done with seven divisions:
o Division 1: Establishment.
o Division 2: Sales / or appointment on projects.
o Division 3: Treasury.
o Division 4: Technical.
o Division 5: Qualification.
o Division 6: Public relations.
o Division 7: Executive division.
This starts off with Division 7 in an effort to illustrate how this is a continuous process. It is actually a circle and traces the project, as it goes through the company. Therefore, Divisions 1 and 7 is actually seamless and the division is only identified at the stage of where the project is. More specifically, Division 7 is the idea of the company with your auditors, lawyers, bankers, company policy, contracts etc. Now that the idea is in place, you need a place to operate from.
That’s Division 1, it’s your establishment. This is the office, the equipment, staff, reception, boardrooms etc. – everything that places your business in the physical universe. When that is done, you obviously need a project, hence sales, Division 2. This is where your appointments happen and the negotiations around the project. When this is in place, the money on the project is going to flow - with you spending it or the client paying you an up-front retainer (as it should be ideally). Anyway, this is where your invoicing happens and your assets are recorded. Then comes production – Division 4 – this is the engine room of your business and by far the most time and effort is spent here. All 5 work stages are cramped into this division. After you have completed your project, it is time to look it over carefully, correct all the mistakes, or you validate the people and things that went really well and ensure that this continues, Division 5 - qualifications.
Then lastly, Division 6, which is public relations – at the end you obviously go to your client and based on the good performance (hopefully), you talk about the next project. And then the process starts all over again. In this organization board all the functions are denoted with the persons name next to it. This ensures that everything gets done and that someone is responsible for it. Amazingly enough, if a function is not denoted in any of the divisions, it does not happen (like a 5 camouflaged hole). Also, if a post is denoted and there is no name attached, everybody does some of it but no-one takes real responsibility. Each division also has an ideal scene, stated at the bottom, to which this division aspires. Depending on your organization board, you should also keep statistics of each vital function, to keep you accurately informed on the state of your business.
Let me give you an example: If, in Division 2, which is sales, your stat denotes prospects dropping from 4 to 1, you know you are going to be in trouble in 6 months time. This gives you a headsup and you know that you have to concentrate on getting potential work in during your next month, to get that stat back up. This is what it does. It allows you to manage your company effectively and stops you from getting into trouble. It also allows you to expand because you do more of the good stats.
If I have to single out the most important and respected attribute that you can cultivate and create, it’s ethics. Uncompromising ethics. Always tell it exactly how it happened, don’t embellish it, don’t colour it in, view it exactly how it is. We all make mistakes and to the degree that you assign blame, you are not taking responsibility. There is always something that you could have done to prevent the problem. So never bullshit, tell your client and your colleagues exactly what happened and you will be amazed how the truth resolves everything. Sometimes it’s a bit painful for you but you will feel better about yourself and your clients will respect you. It is an admirable attribute and vital in business.
This is actually a life policy – not just business. If you always surprise and provide more than what was expected, your survival will be guaranteed. To the degree that your exchange reduces, your survival diminishes. Exchange can vary from stealing, which is obviously no exchange, to exchange in abundance. The latter obviously the most prosurvival.
9. Create opportunities.
Try and be more causative with regards to your business and see what opportunities are remotely out there. Be alert and if someone talks to you about an opportunity, match it with the right person in your universe that may provide a solution or a service. 6 By doing this, you are not only assisting in creating something, but actually facilitating it. Very valuable. As you become known for this, more and more people will revert to you for assistance and your value actually increases. This is all additional to being a really good professional. In keeping with this, understand that if you need three projects of a certain value to survive well, always be sure that you have ten prospects out there. That’s just how it works. Some of the projects fall by the wayside or are postponed for a myriad of reasons. You can always collaborate with some colleagues that you have a good association with, or someone that really needs it.
10. Self Importance.
If you have done these basic things above, you will probably find yourself doing quite well. This is where the danger of self importance comes in. So, understand this – your true value is not determined by what you own or how much money you make, it’s determined by what you are able to contribute. The most rewarding experience you will ever have, is when people have winfalls, or benefit from something you created and no-one knows that, except you. It is a pleasure that actually becomes quite addictive. Please note that most of the organizational aspects above, someone can help you with, which actually frees you up to do what you do best ie. your profession. Good organization will actually increase the chances of you actually having fun, which will show in your work. There will be a distinct lack of seriousness which, as you may well know, dampens creativity. So, have as much fun as you can – it is all over before you know it.
Philip Kleijnhans Thetaplan Inc: Director. Originally published as a Leading Architecture Article – 3 June 2008