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Cancelled Projects: How Architects Can Avoid Losing Work

March 5, 2023

Tyler Suomala

Founder of Growthitect

I had an interesting email pop into my inbox after last week’s newsletter.

A firm owner has a steady stream of referrals coming in and a good system in place for converting those referrals into clients. However, about 50% of those clients have cancelled their projects after the Schematic Design (SD) phase due to pricing/cost concerns.

We’ve all had our fair share of cancelled projects. They’re super frustrating, right?

You’ve committed resources to onboarding your client and given them a great experience. You’ve left space in your schedule to continue working on the project throughout the necessary timeline. And, if you’re anything like me, you’ve already committed the total project fee to your financial forecast.

The impact of a cancelled project echoes and reverberates throughout multiple layers of the firm and business.

And while there’s no way to remove this possibility completely, there are several things that we can do to reduce the frequency of cancelled projects and/or make them more beneficial to our business.

Let’s jump into a few possible solutions!

01 // Build Stronger Relationships

At the foundation of every cancellation (and celebration) is your relationship to the client - it’s the most important aspect of your firm’s health and the first thing to analyze. Spend more time building rapport with prospective clients and implement a solid discovery process that focuses heavily on understanding your client’s current challenge and desired outcome. This will put you in a great position to respond to potential objections (with AAA or FFFF) and reinforce their primary goals.

But don’t stop there - ensure that you spend time setting appropriate expectations about next steps. Answer questions like…

How long will this take?
What’s are the steps involved?
What’s the range of cost that someone should expect for a project like this?

…before getting a signed contract.

Altogether, this will (1) allow you to respond to objections when and/or if they come and (2) ensure that clients are aware of all necessary costs and time commitments prior to signing the dotted line.

02 // Adjust Fee Structure

One issue with small upfront fees or commitments is that they make moving forward seem more optional. As the project starts moving and the invoices pile up, it’s natural for some clients to have moments of hesitation. And if stopping the project is easy in those moments where emotion overtakes logic, then that’s what will happen.

Instead of starting with a small commitment, consider capturing more of your total project fee upfront through a larger retainer. This will ensure that your client has a stronger commitment and improve the chance of projects moving forward. (People naturally avoid situations that involve sunk costs.)

Remember: The goal is NOT to “lock” clients into something they don’t need. It’s to ensure that your client has a real need through deep discovery and then do everything in your power to help your client reach that need.

03 // Include A Cancellation Fee

You offer tremendous value to your client and, as a result, your time is extremely valuable. Given the amount of effort it takes to onboard a client and commit to various project phases, it’s not unreasonable to include a cancellation fee in your contracts.

How much? Explore different fixed or percentage-based models that take into account remaining project fees.

PS - I’m not a lawyer and this is not legal advice. I highly recommend speaking with a lawyer before making any changes to your contracts.

04 // Productize Small Commitments

If you often find that clients are hesitant to commit to the entire project fee before completing conceptual or schematic designs, then productizing that phase is a great option. This is also a great option for things like feasibility studies or other necessary research.

”Productizing” simply means that you turn a specific service into a marketable “product” that has a clear outcome and endpoint. For example, you could productize “Passive House Design” to cover a typical SD phase. Or you could productize “Building Feasibility” to capture costs associated with research.

This works in the opposite way of the previous options - it’s a smaller commitment for hesitant clients that can be systematized to create an additional revenue stream for your firm. And while early phases are typically smaller fees, you should charge more for the productized version to account for things like onboarding and research.

Here’s a tip: Want to motivate a client to move forward? Consider crediting a portion of the product cost towards your total project fee should they choose to continue the project.