Contents
Let's take a deep dive into one of the most vital Key Performance Indicators (KPIs) and metrics for architecture firms - the Net Revenue per Full-Time Equivalent (FTE). Drawing from Monograph's freshly-released 2024 Architecture Business Benchmarks Report, we're set to break down the nitty-gritty of Net Revenue/FTE. This comprehensive guide empowers architecture firms with the knowledge to dissect this crucial KPI, and the strategies to elevate it. So, roll up your sleeves and prepare for a deep dive into optimizing your firm’s Net Revenue per FTE.
"The benchmark in the report that I believe will have the most significant impact on how architecture firms will operate and succeed in the next five years is Net Revenue per FTE. With many recent conversations around fees, AI, and automation, thinking through how architecture firms can evolve our services and the roles of each individual contributor will be reflected in this benchmark."
- Julia Gamolina, Founder and Editor-in-Chief of Madame Architect
In this guide, you'll compare revenue metrics across a range of firms, learn what puts high performers in the lead, and receive comprehensive, actionable measures to enhance your architecture firm's Net Revenue per FTE.
- Delve into the core concept of Net Revenue per FTE
- Learn how to compute and evaluate Net Revenue/FTE
- Pore over how firms stack up in these essential metrics
- Discover powerful strategies to increase your organization's Net Revenue/FTE
Decoding Net Revenue per Full-Time Equivalent: What it means for architects
With the preliminaries covered, let's jump into the details of Net Revenue per FTE.
What is Net Revenue per Full-Time Equivalent?
Firstly, let's unpack the concept of Net Revenue per Full-Time Equivalent (FTE). This KPI measures an architecture firm's operational efficiency, providing insight into how effectively revenue is being generated in relation to the full-time equivalent workforce. A full-time equivalent (FTE) refers to one employee working full-time; however, it could also represent multiple part-time employees whose combined hours equate to a full-time position.
To put it simply, Net Revenue per FTE assesses a firm's efficiency in generating revenue with its staff.
In architecture firms, where project-based work is common, this metric offers insight into how effectively the human resources are actually generating revenue.
How is Net Revenue per Full-Time Equivalent calculated?
Net Revenue per FTE is a simple but powerful metric that can be easily calculated by dividing annual net revenue by the number of full-time equivalent employees.
Why is Net Revenue per Full-Time Equivalent important for architects?
Net Revenue per FTE reveals the productivity and efficiency of the staff in generating income for the business. It helps in understanding whether the firm is overstaffed or understaffed for the volume of work it handles. This metric also aids in strategic planning, resource allocation, and understanding the firm's position in the competitive landscape.
"As a first look at how well a business is doing, Net Revenue per FTE is very useful. Low numbers often mean the business is overstaffed, their fees are too low, or there isn’t enough work...It doesn’t tell us everything, but for architecture businesses who are focused on it and striving to understand the different factors in their operations that are impacting it, it provides an excellent guide. "
- Rion Willard, Director of Consulting and Business Transformation at Business of Architecture / Host of the Business of Architecture podcast
Net Revenue per FTE allows you to evaluate the value that each employee brings to your company within a given period. This essential metric does more than just count the dollars—it measures the quality of the work being done. So, it's an effective way to examine how your workforce is contributing to your firm's goals. It's a great tool for assessing your company's operational efficiency, with a higher value signifying better efficiency and productivity.
Comparison of Net Revenue per FTE in architecture firms
Comparing your firm's Net Revenue per FTE with the industry averages can make strategic decision-making a lot easier. Our 2024 Architecture Business Benchmarks Report is an essential tool, helping you understand your performance relative to other firms. Knowing where you stand is key to taking the proper steps to improve and maximize your firm's potential. Here's a summary of some of the results from the report.
Average Net Revenue per FTE for architects
It's generally recommended that architecture firms aim for a Net Revenue per FTE of about $150,000. However, using thousands of data points we arrived at a higher average Net Revenue per FTE than previous recommendations.
Overall, the 2024 Architecture Business Benchmarks Report indicates that the average Net Revenue per FTE of architecture firms is $171,163.
But how does that break down across different firm sizes? Our data shows that a larger majority of architecture firms with 15 or more employees achieve a Net Revenue per FTE of greater than $171,163. However, firms with less than 15 employees show large distributions and are not immune to a highly effective Net Revenue per FTE.
Top and bottom Net Revenue/FTE for architects
The quartiles provide even more insight.
- The top quartile of architecture firms achieve a Net Revenue/FTE of $201,350.
- The median Net Revenue per FTE across 180 architecture firms included in the data was $152,264.
- The bottom quartile of architecture firms have a Net Revenue per FTE of $112,497.
Where does your firm's Net Revenue per FTE fall on the spectrum? Identifying your current positioning is the crucial initial phase for enhancing your performance. For an in-depth exploration of these and other key benchmarks, you can access our comprehensive 2024 Architecture Business Benchmarks Report. Utilize these insights to reassess and refine your strategies, and kickstart the journey towards business growth.
What makes Net Revenue per FTE higher for Monograph users?
I should note that the results of the report being summarized in this article are sourced from accurate, first-party data of Monograph users. In reviewing these results, you may have noticed that the average Net Revenue per FTE recorded in the report is tens of thousands of dollars higher than other commonly accepted recommendations or results. For example, Lucas Gray, Sr. Business Consultant at CVG, recommends that firms aim for a Net Revenue of $150,000. And Deltek's 2021 Clarity Report indicated at average Net Fee per FTE of $140,000.
However, Monograph users average a Net Revenue per FTE of $171,163. Why and how are Monograph users achieving such a high Net Revenue per FTE?
Monograph is a popular, design-centric project management platform built exclusively for Architecture and Engineering (A&E) firms. Due to Monograph's real-time tracking, easy-to-use reports, and simplified staffing process, architects are able to manage projects and firm health very effectively, avoiding many common business pitfalls of other architecture firms.
For example, after switching to Monograph:
- Verdant Studio, a 12-person architecture firm in Arkansas, spends 80% less time planning project budgets and timelines.
- Rossmann Architecture, a 30+ person firm in Quebec, 3x'ed revenue over a 9 month period.
- Garrison Architects, a 9-person architecture firm in Brooklyn, NY, reduced time spent on monthly invoicing by 66%.
Altogether, these improvements will increase Net Revenue per FTE.
Proactive measures: Tactics to improve Net Revenue/FTE in your firm
After covering all of the data, you're likely wondering what you can do to increase your Net Revenue/FTE and build a more productive and profitable firm. Assessing the data from our 2024 Architecture Business Benchmarks Report, we identified key strategies employed by industry frontrunners in boosting their Net Revenue/FTE.
Understanding how Net Revenue per FTE impacts business performance
Why is Net Revenue per FTE so vital? From an operational perspective, it serves as a lens to view productivity and efficiency. By analyzing this metric, firms can explore patterns and trends that help them understand their business's health and competitive position in the marketplace.
It's beneficial for your firm to compare its Net Revenue per FTE with the industry averages. This comparison is an effective benchmarking method and can show how your firm measures up in terms of efficiency and productivity, key components in the competitive world of architecture. If your firm's Net Revenue per FTE is higher than the average, it means you're getting more out of your workforce. However, a lower Net Revenue per FTE might highlight areas that need improvement.
"Net Revenue per Full-Time Equivalent (FTE) because it's the clearest indicator of a firm's earning potential. It directly impacts other important metrics shared in the report like utilization rate and realization rate. And, it gives firm owners a clear understanding of how well they are doing in comparison to the industry standard, highlighting areas where they can improve."
- Robert Yuen, CEO and Co-founder, Monograph
5 ways architects can improve Net Revenue/FTE
Here are several strategies that architecture firms can use to increase their Net Revenue per FTE:
- Enhance employee skills and efficiency through training and development programs.
- Optimize staffing by balancing staff roles and responsibilities based on project demands.
- Increase net revenue by diversifying services, improving project management to reduce costs, and focusing on higher-margin projects.
- Implement technology solutions like modern project management tools for more efficient operations.
- Regularly review and adjust billable rates based on Net Revenue per FTE trends, market conditions, and service value.
Suffice it to say that having the proper tools in place can significantly improve your Net Revenue per FTE.
"Net revenue will significantly impact how architecture firms operate and succeed in the next five years. Why? Implementing technology requires some initial investment but also contributes to ongoing innovation costs. However, when technology is applied strategically, it can benefit firms.
Efficient technology integration enables firms to streamline workflows, liberating employees from tasks documentation and administrative tasks and allowing individuals to focus on work where their skills as systems thinkers, innovators, and community builders are most valued. Technology can also empower employees to expand the practice of architecture, develop new products and services, and create new business models.
The opportunity for technology creates exponential increases in Net Revenue per FTE."
- Evelyn Lee, Founder, Practice of Architecture & Host, Practice Disrupted Podcast
Next steps
The 2024 Architecture Business Benchmarks Report comprehensively covers 4 other core metrics including:
- Net Cost per FTE
- Utilization Rate
- Realization Rate
- Time to Payment
Each metric includes averages, quartiles, charts, and strategies to help architects get a clear picture of their business performance. Plus, the data used to generate the report is extremely accurate.
"We’ve certainly noticed that there's a lack of real, factual data points in the industry for architects to benchmark against. Industry reports have historically been based on self-reported surveys of architecture firms. But there’s a lot of variability in how firms interpret certain metrics, which can lead to skewed and unreliable results.
Monograph’s Architecture Business Benchmarks Report uses first-party data directly from the source of Monograph’s thousands of users. For that reason, I believe it’s the most accurate report of business metrics to ever be shared in the architecture industry."
- Robert Yuen, CEO and Co-founder, Monograph
Get your free copy to easily compare and evaluate your architecture firm's business performance.
Then, once your ready to optimize business performance at your firm, get started with Monograph and see why 1,000+ architecture firms use it every day to manage their projects and operations.
