Retainer Fees (or Lawyers vs Architects)

 

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I ran across these statistics online, from 2008, presented as Lawyer vs Architect:

Education time: 4 + 3 vs 4 + 3 (undergrad + grad)

Education debt: $100K vs $100K

Mean Salary, first job: $96K* vs $56K

Salary Range, first job: $52 – $140K* vs $46 – $68K

What an appalling discrepancy in earning power; especially when education and debt are exactly the same. The difference is amazing. Do architects not know their real worth or are they really worth that much less?

Unfortunately the rules of play are set in each respective industry. It’s going to take a long time to close the gap.

Lawyers will have their day in the sun; I truly believe that. I read that law schools have graduated 40,000 people a year over the past few years and that there will be 1.5M lawyers in the US in the next decade. Where will all these people work? There are enough crooked minds in the profession to make work up, but it’s safe to say that average salaries will have to come down as a result.

So logic says the gap will get closed from the lawyer end. The architecture end is a different monster and will require an enormous culture shift. Top architecture firms will have to start paying their employees significantly more than they currently do (think $80k out of grad school and not $56k). Enough top firms will have to do that so that they attract all the top talent. If this happens, mid-tier firms will have to step up, and so on.

Of course, salary isn’t an isolated variable and needs to correspond with higher contract fees (the enormous culture shift bit). That’s right, architect salaries are directly tied to architect fees, so its time to belly up and start asking for more money. (A real problem in the industry is that 80+% of all architecture firms have less than 5 employees, which means low overhead, scrappy mentalities and a willingness to compete on price; low price. That and the fact that I can count all the architects I know who are comfortable talking about money on one hand.)

So Rule #1 is that top architecture firms have to start the cultural shift by paying (significantly) higher salaries and demanding (significantly) higher fees. Rule #2 comes from the other side of the hierarchal tree. Rule #2 is that small and start-up firms have to stop competing on price. It’s a downward spiral that negatively affects the entire industry. Architects are incredibly well educated, provide a vital service (shelter, boiled down to its essence), and they cannot continue to downgrade their societal importance. (What’s more important, a signed contract or a roof over your head? Debatable, I know.)

I started this blog with retainer fees in mind, have clearly gone astray, but want to close the loop, so retainer fees are my Rule #3. Retainer fees will help change the culture of compensation in the industry by making sure architects don’t get stiffed on payment.

Retainer fees (surprisingly enough!) are most commonly used in the legal profession. Despite my liberal lawyer bashing (I do actually know and like some lawyers), there’s a lot to learn from our professional service brethren when it comes to making money or just plain earning a living.

By definition, a retainer fee is a fixed amount of money that a client agrees to pay, in advance, to secure the services of a consultant. The fee is typically not associated with the success of a project or based on achieving particular results.

From an architects perspective, a retainer is honesty money; a way for a client to show they’re serious about engaging your services and even more so, that they have the ability to actually pay for your services.

Retainers are most relevant with first time clients and less relevant for repeat clients.

Think of them as an insurance policy. The retainer should be enough to cover a month or two worth of payments; in other words, enough to cover your work over the time you get to know and develop a relationship with the client. By the time you’ve worked through your retainer fee, you need to have made a decision on the trustworthiness of the client.

So that’s Rule #3: Charge a retainer fee for every project you work on. Rule #3 is directly connected to #’s 1 and 2. Retainer fees won’t work in a bubble; everyone has to participate. If I start asking for a retainer on my projects, and Joe Architect does not, Joe Architect will probably get my job (who wants to pay more money up front when they don’t have to) and the entire industry will be worse off because of it. Both I and Joe Architect have to require them. We have to level the playing field and level it on a higher (and more profitable) ground.

In summary:

Rule #1: Zaha and Rem, pay up.

Rule #2: Recent big firm refugee, don’t take a legitimate job on at a loss.

Rule #3: All, require retainers on every project you work.

If by some bizarre chance the whole industry starts playing by these rules, a more lucrative living will be had, vacations will be exotic and enjoyable, and school debt will get paid off before retirement. And you won’t have to sue someone to get there.

– Billy


*Salary numbers reflect those of corporate lawyers.

 

6 thoughts on “Retainer Fees (or Lawyers vs Architects)

  1. we retained an architect and paid him more than half of the flat fee he proposed for the design of an addition to a cottage. He e-mailed us 3 versions of a similar plan (he calls it "3 concepts") for the main floor (loft and lower level plans were to follow). We were not at all happy with anything we saw. There were also errors in the drawings such as 2 cooktops in the kitchen, wrong drawing of existing windows which were to remain, poor use of space. We shared this with a few friends and all agree this was not good and we should stop our relationship with this firm before more work was done. They have not responded to our request for an itemized bill for services thus far performed and a refund of the balance of our retainer. What should we do next?

  2. great article. our profession has a lot to learn about fees from the other professions.however, i don’t use retainers. first i qualify the clients by talking to them a lot to see if we will be able to work together. then i charge an hourly fee for the first part of the project. this gives everyone a feel for how much work is involved.@anna – re-read your contract, send a certified letter requesting the itemized bill again, with a firm date you’d like to see the bill by. then follow up with a phone call. make sure you have written that you are terminating the contract and give your reason. treat this like you would any late bill or project at work – try not to feel a personal attachment to it. p.s. these are the things the architect should be doing, too. and from his perspective, he wants to get paid at least something without having his name and reputation dragged through town.

  3. A fascinating read. Altho those of us that enjoyed an architectural education may know how to conceptualize ourselves out of a corner (or into one), we haven’t been trained to run a business! I’ve worked in mid to large-sized firms up the East Coast and have now had my own design firm in the Berkshires for 15 years. I designed for these other firms, but never ran the books, so my ongoing education on that front was non-existent. And you are right when you say most architects are uncomfortable about talking dollars and sense. Its all so hush-hush!In my own practice, I DO take retainers, typically, and write my contract that it will be held till final invoice. And it’s never been an issue, until yesterday. Which is how I ended up finding your blog and why I am writing here. Over the past two weeks, Ive been courting a potential new client for a new construction project in Westchester County. The project holds many sexy elements for me… beyond expansion into a new and affluent territory, its to be off-the-grid, LEED certified, with cool clients, and I was up against one of the most revered architects in the USA for the job. Fortunately, I won the job this weekend based on my past projects, my aesthetic and use of materials, the testimonials from my past clients they met and .. me, of course. This job is a big, big deal for me. But here’s the sticky part.I sent my contract on Tuesday, (its very simple: I outline fees, services, reimbursed expenses and cancellation policy) and request that it is signed and returned with the retainer fee (estimated at one-month’s services and held till final invoice).I met with the clients the next day for our first site visit, and everything is hunky-dory with the contract, except for the retainer portion. This client says he deals with many architects on many other jobs (he is a contractor himself), and has not come across this before. He said it felt to him as tho I didn’t trust him. I explained that wasn’t the case, but its typical of my business, and I haven’t had this issue in the past. I don’t want to jeopardize the job over the issue, but at the same time, cannot afford to lose an invoice or two of fees due to some unforeseen circumstances. What should I do?

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