Architecture Business Benchmarks: Understanding and Improving Utilization Rates

As an architect or architecture firm owner, staying on top of industry trends and practices is crucial to the success of your business. That's where our report comes in. Allow us to introduce you to an invaluable resource - the 2024 Architecture Business Benchmarks Report. This report uses thousands of data points across 1,000+ architecture firms using Monograph to unveil:

• 5 key business metrics with averages and quartiles (bottom, median, and top), so architects know where their business stands.
• Data focused on firms between 3 and 30 employees with graphs and scatter plots for each metric so architects can quickly compare.
• Actionable steps that architects can take to improve each metric.

Unlike most benchmark reports, Monograph’s Architecture Business Benchmarks Report gives you a baseline to start a conversation around something that's factual and not based on sentiment or surveys.

The report gives everyone the same starting point from which to evaluate your business and have important conversations. As firms continuously educate themselves on financial literacy, a better understanding of financial metrics will lead to more informed decision-making.

–Robert Yuen, CEO & Co-founder of Monograph

Outlined meticulously within is a treasure trove of information, spanning across 5 key business metrics of architecture firms. But today, we focus on one pivotal section - Utilization Rates.

So, why focus on utilization rates in architecture firms? This particular measurement elucidates how efficiently your firm is operating in comparison to industry averages and quartiles. Expounding on these utilization rates can unmask potential inefficiencies in your business procedures, while underscoring opportunities for advancement and enhancement.

Consider this: Are your architects spending most of their time on billable projects? Or are they burdened with administrative tasks and other activities that do not contribute directly to your bottom line? These are critical questions that directly influence your utilization rates. And this is where our 2024 Architecture Business Benchmarks Report proves its worth.

Decoding Utilization Rate: What It Means for Architects

To shape the future skyline, you, as an architect or architecture firm owner, need a strategic, data-driven approach. Knowing industry averages and benchmarks, such as utilization rates, is not merely fascinating trivia. They are critical tools that paint an accurate portrait of the industry's landscape.

To whet your curiosity, we will unearth some of the insights on utilization rates from the 2024 Architecture Business Benchmarks Report. So, prepare yourself for some industry intel to navigate your future business strategies.

What is Utilization Rate?

Imagine this, you've spent the whole day penning down impressive designs for a new project, pouring hours into this process, but a significant part of what determines your firm's success is how many of those hours were billable. That's where the Utilization Rate comes into play. It provides insights into how effectively your firm transforms hard work into tangible, billable results.

Utilization Rate measures the efficiency of a workforce. Firm-wide Utilization Rate calculates the proportion of billable hours worked by all employees compared to the total hours worked across the firm. Role-based Utilization Rate assesses the same proportion of billable hours to total available hours for a specific role within the firm, such as principals, project managers, or administrative staff.

How is Utilization Rate calculated?

Utilization Rate is an industry favorite because it's a powerful indication of workforce productivity and it's also very easy to calculate. Simply divide total billable hours by total hours worked.

Why is Utilization Rate important for architects?

Firm-wide Utilization Rate gives an overall picture of how effectively the firm is managing the time of its workforce. It helps in strategic planning and resource allocation. Role-based Utilization Rate provides insights into specific roles, helping to identify which are most profitable and where improvements are needed. This is vital for setting realistic billable hour targets and managing staff workload.

Utilization Rate can empower you to understand if your team is spending the right amount of time on billable work vs non-billable activities.

–Lucas Gray, Director of Business Development & Senior Business Consultant at Charrette Venture Group

Comparison of Utilization Rates in Architecture Firms

As an architect or owner of an architecture firm, proficiency in understanding and optimizing Utilization Rates is key in optimizing your workflow, maximizing financial success, and outperforming the competition. But, what are the industry averages? What performance metrics are your peers achieving? The newly published 2024 Architecture Business Benchmarks Report provides comprehensive, quantifiable insights around utilization rates for the Architecture and Engineering (A&E) industry.

Average Utilization Rate for Architects

Historically, many industry leaders have indicated that a good benchmark for utilization rate in the architecture industry is around 75%. However, there hasn't been reliable data from which to confirm this until the release of the 2024 Architecture Business Benchmarks Report (ABBR). Using thousands of data points, we uncovered a higher benchmark than what has previously been recommended.

Overall, the ABBR indicates that the average firm-wide Utilization Rate for architecture firms is 82.4%.

But how does that break down across different roles within an architecture firm? The average Utilization Rate for principals is 74%, while project managers tend to have a higher average of 88%. Perhaps unsurprisingly, project architects and designers have the highest average Utilization Rate at 92%.

Top and Bottom Utilization Rates for Architects

The quartiles provide even more insight.

• For the top quartile of architecture firms, we see an impressive average Utilization Rate of 95.2%.
• On the opposite end of the spectrum, firms in the bottom quartile have an average Utilization Rate of 71.1%.
• The median Utilization Rate across the 337 architecture firms was similar to the average, at 82.4%.

Are your numbers matching these averages or are you falling behind? Knowing where you stand is the first step toward improvement. To dive even deeper into these benchmarks and more, we invite you to download our 2024 Architecture Business Benchmarks Report. Leverage this data to evaluate and advance your strategies, and start realizing your firm's full potential today.

What Makes Utilization Rates Higher for Monograph Users?

In reviewing these results, you may have noticed that the average Utilization Rate recorded in the report is 7.3% higher than the industry-recommended benchmark of 75%. It's important to note that the benchmarks revealed above and in the report are based on first-party data from Monograph users.

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 and easy-to-use reports, architects tend to spend far less time on administrative, non-billable tasks and more time on billable activities like design and client relations after switching to Monograph.

For example, after switching to Monograph:

• Garrison Architects, a 9-person architecture firm in Brooklyn, NY, reduced time spent on monthly invoicing by 66%.
• Woodhull, a design-build firm in Portland, ME, reduced time spent on scheduling reports by 95%.
• Verdant Studio, a 12-person architecture firm in Arkansas, spends 80% less time planning project budgets and timelines.

Altogether, these improvements will increase Utilization Rates.

How can architects improve Utilization Rate?

If you're reading this, chances are you're an architect, a firm owner, or or someone deeply involved in the field of architecture, constantly looking for ways to enhance your business performance. Most assume that the goal is to reach a Utilization Rate of 100%, but that's generally poor practice.

A Higher Utilization Rate Isn't Always Better

Achieving a 100% Utilization Rate, contrary to what might seem intuitive, could actually indicate that your firm is overworked and potentially on the brink of burnout.

Misconceptions about Utilization Rate often stem from treating an architect's productivity as though it were a machine's, but human creativity doesn’t work in quite the same way. Burnout, stress, and overcommitment can begin to reign, diminishing overall quality, when rates get too high. On the other hand, a Utilization Rate that is consistently below 60-70% is considered too low, which could suggest the firm isn't taking full advantage of its resources or maybe not securing enough project work.

Understanding How Utilization Rate Impacts Business Performance

The concept behind the Utilization Rate is more complex than simply dividing the hours of work done on actual architecture by the total number of hours worked. We have to consider that the value of hours worked by different team members, and even by the same member at different times, may not always be equivalent. That’s why experts recommend setting overall Utilization Rate goals for entire firms – and potentially at the department or studio level.

Remember, Utilization Rate is not just about how much potential output is being used, whether it’s from a person, a business, or a machine. It's also a critical tool for budgeting in architecture and engineering firms - ensuring that firms are spending enough time on non-billable activities like firm finances and business development. High-level figures stimulate strategic decisions about hiring, pipeline, and revenue, while serving as one of several crucial metrics that architecture firms should monitor.

5 Ways Architects Can Improve Utilization Rate

Here are several strategies that architecture firms can engage in order to improve Utilization Rate:

1. Implement efficient project management to maximize billable work and minimize downtime on administrative activities.
2. Use accurate time-tracking tools to properly capture all hours, both billable and non-billable.
3. Hire an operations manager to reduce and delegate non-billable hours across firm leadership.
4. Proactively balance workloads to prevent burnout and ensure staff are engaged in billable and non-billable tasks, when appropriate.
5. Regularly review and adjust staffing levels and role responsibilities to align with current and projected workloads.

Conclusion

In this in-depth look at utilization rates, we've shared insights and data to help you better understand this crucial performance metric in the architecture industry. As we conclude, let's recap the main points and clear up any remaining misunderstandings:

• Utilization rate measures the proportion of billable hours to total hours worked within a firm.
• One of the vital approaches to improve utilization rate is by creating a transparent environment where employees understand how their work contributes directly to setting and reaching the firms' goals.
• Setting overarching utilization rate goals for A&E firms, and in some cases at department or studio level, is highly recommended.
• Understanding the importance of utilization rate is essential to maximize business performance - but maintaining a higher utilization rate is not always the most beneficial scenario. There must be a balance.

To get a comprehensive understanding of your firm's Utilization Rate, and 4 other critical business metrics, download our new 2024 Architecture Business Benchmarks Report. It gives you a clear sight of where your firm stands, compared to industry benchmarks, and how you can optimize your business strategies to advance towards your set goals.