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Fee Models: 6 Alternatives for Architects To Win More Work

July 23, 2023

Tyler Suomala

Founder of Growthitect

For quite some time, the architecture industry has primarily relied on three fee structures: the fixed fee, the hourly fee, and the percentage of construction cost.

In the 2022 AIA Firm Survey Report, 99% of firms claimed their fees follow one of these three structures.

99%! That’s crazy. (In case you’re curious, the other 1% was a cost per square foot model). Stats like that make me wonder…are we missing something? By sticking to the traditional fee options, we could be missing out on some real opportunity to expand the industry and improve the value perception of architects. Are there alternative fee structures that architects haven't explored yet?

The world is always changing, and so are your prospects and clients. They experience different purchasing options in other areas of their lives. In the last 10 years, there’s been an explosion of different payment options from subscriptions (think Netflix, Hulu, Spotify, etc) to micro-loans (think Shop or Affirm). By exploring alternative fee structures, architects can tap into their clients' familiarity with different models, better serve their clients, and even improve firm finances in the process. It's a win-win-win situation.

What if we broaden our horizons and take inspiration from other industries and fee structures? Let's shake things up:

01 // Lawyers

Lawyers typically charge a substantial upfront retainer fee for a specified number of hours of work, providing clients with a clear commitment of their services.

Example for architects: $10k retainer for 50 hours of work.

This is different than how architects use retainers today. If an architect captures a retainer at the beginning of a project, then it’s typically not applied until the final invoice of the project. Meaning it’s more of a down payment that acts as a safety net throughout the project.

Lawyers, on the other hand, only devote hours to work for which they have already been paid.

Pros:

Clear boundaries are set with clients, reducing scope creep and potential disputes.
Familiar model for clients who have worked with lawyers, establishing a sense of trust and professionalism.

Cons:

Could delay the design process and/or momentum by waiting to receive retainers prior to continuing work.
Could limit ongoing engagement with clients as they might be less inclined to seek additional services beyond the initial retainer.

02 // Coaches

Coaches (life coaches, business coaches, fitness coaches, etc.) initiate a fee structure with an upfront payment followed by monthly fees, providing ongoing guidance and support to clients in their personal or professional development.

Example for architects: $5k initiation fee plus $2k per month to help clients discover and implement authentic spatial needs.

This method would actually help architects get paid for much of the discovery process. That is, helping clients understand what they actually need and how they can get it. Whoa, getting paid to listen and ask great questions before designing?! Sign me up.

Pros:

Initiation fee covers upfront costs, ensuring a more secure financial position for the architect.
Monthly fee allows for ongoing support, customization, and a stronger relationship with the client.
Offers a unique selling proposition, setting you apart from competitors and appealing to clients seeking personalized services.

Cons:

Implementation might require more time and resources to create personalized plans for each client.
Monthly commitment from clients might be a deterrent for those with smaller budgets or shorter-term projects.

03 // Events

Event organizers offer immersive experiences where attendees pay a set fee to participate in workshops or collaborative activities over a specific timeframe.

Example for architects: $4997 to work on your project together for a weekend.

Pros:

Provides an immersive experience that allows for more in-depth collaboration and relationship-building with clients.
Intense focus over a short period can lead to faster decision-making and project progress.
Could accelerate the pace and reduce delays for smaller projects like renovations, ADUs, or additions.

Cons:

Limited to a specific timeframe, which may not suit all project requirements or client schedules.
Potential logistical challenges in organizing and coordinating as a host, such as venue selection and food options.

04 // Subscriptions

Companies offer subscription-based services, where customers pay a recurring fee (usually monthly or annually) for unlimited access to products or services, ensuring flexibility and value for ongoing usage.

Example for architects: $5k/mo to explore unlimited design options.

Believe it or not, subscriptions are becoming more popular in the world of design. There’s even a name for it - Design as a service (Daas). There’s successful companies like DesignJoy that offer different subscription tiers for various levels of engagement.

Pros:

Offers flexibility and unlimited design revisions, providing clients with a sense of control and value.
Predictable monthly income stream for the architect, allowing for better financial planning and stability.
Aligns with the growing subscription economy and resonates with clients familiar with subscription-based services.

Cons:

Requires a steady stream of clients to sustain the monthly income, potentially creating pressure to continually attract new clients.
Must carefully manage scope to avoid clients taking advantage of unlimited revisions.
Challenging to price subscriptions appropriately, ensuring they are affordable for clients while providing adequate compensation for the architect's efforts.

05 // Non-fungible tokens (NFTs)

Artists or creators offer unique digital assets as non-fungible tokens (NFTs), charging a flat fee for the initial sale and potentially earning commissions on subsequent sales in the digital art marketplace.

Example for architects: Flat fee for design + commission on every sale of the property thereafter.

No, I’m not suggesting architects sell digital art. But I love the value that architects can gain from a commission-based model. Much of your work is focused on property longevity, yet your business doesn’t benefit much from the longevity that you provide for clients. What if there were a way to capture more of the market value of properties as they shift ownership?

Pros:

Explores new frontiers and potential ongoing revenue from sales in the real estate market.
Provides large financial benefits for the sustainability and longevity expertise of architects.

Cons:

Likely requires significant legal assistance beyond that of the client-architect agreement. (This is definitely not in the standard AIA contract)
Will only receive commission when/if ownership changes, which probably isn’t very often.

06 // Revenue share (revshare)

Businesses establish partnerships where one party receives a percentage of another party's revenue over a specified period, aligning their interests and fostering long-term collaboration and shared success.

Example for architects: 5% of all business revenue for 5 years post-completion.

Another opportunity to benefit from the longevity of your work. I first heard of this model being used from one of my grad school professors that had done it nearly 40 years ago (way ahead of their time!) with their first ever solo project. They designed a string of row houses and only asked for a small share of the rental revenue instead of any other architecture fee. And yes, they’ve been receiving a monthly check from the same owners for the past 40 years 🤯

Pros:

Establishes a long-term partnership and aligns the architect's success with the client's business growth.
Provides ongoing revenue for the architect, creating a vested interest in the success of the client's ventures.
Allows architects to leverage their expertise and skills beyond traditional design services.

Cons:

Requires careful evaluation of the client's potential revenue and business model to ensure a fair and sustainable revshare agreement.
Requires a solid legal agreement to protect the interests of both parties and avoid potential disputes down the line.

TL;DR

99% of firms structure their fees as fixed, hourly, or percentage of construction cost. But it’s worth exploring whether alternative fee models can help your firm improve their value proposition. Alternative models like: