Starting a Practice Flashcards
What are the Advantages / Disadvantages of a Partnership (similar to sole trader) business structure?
Advantages:
- relatively easy to start up and low cost
- additional capital available from partner
- few government regulations and legal requirements
- shared risk
- non-disclosure of profits or financial information to public
Disadvantages:
- unlimited liability
- each partner equally and jointly responsible for other partners mistakes & debts
- Management problems (who is the boss?)
- need to have written partnership agreement
- lack of continuity (business ends if partner dies, is made bankrupt etc)
What are the Advantages / Disadvantages of a Company business structure?
Advantages:
- Limited liability
- Separate legal entity
- Shares transferable
- Tax benefits afforded to companies
- Unlimited life
Disadvantages:
- More complex business structure to start and run
- Higher set up and running costs than other structures
- Highly regulated by government
- Difficult and expensive to dissolve a company
- requires you to understand and comply with all obligations under the Corporations Act 2001
How would you start your own practice?
- Ensure I am registered
- Gather information from professionals and peers to understand the risk of the decision
- Consider what type of business structure would be most appropriate
- Prepare a business plan to formalise particulars of the business. Vision statement, mission, target market, cash flow forecast, strategy
- Register business name and get ABN
- Obtain necessary insurances PII PLI WCI etc
- Business Premises?
- Employ Staff?
- Library
- Office Manual
- Computers and Software Licenses
How will you bring business into the practice?
- Advice friends & family that you have started a practice
- Marketing/advertising
- Networking/ attend industry functions
- Social clubs/groups you a members of
- exposure through competitions
How do you obtain finance for your own firm?
- Through your own capital savings
- Business loan from financial institution/
What professionals do you need to speak to get the right advice?
- Your financial planner/bank – obviously going to be some initial costs involved with start-up
- Solicitor
- Accountant
- Insurance broker
- Business advice in regards to developing a business plan
What would you have in your Library / where to get advice?
- Australian Standards
- a range of contracts, recent service / consultant agreements and builders quotes,
- Advisory Notes , Insurance policies , Local Planning Authority Schemes , BCA ,
- Current Town Plan
- Acumen
Advice:
- AIA membership & Acumen notes
- Advice from colleagues & mentors
- Professional consultant advice
- Accountant
- Solicitor
- Insurance broker (& risk advisor)
What types of insurances do architects need?
- General business insurances : fire / burglary /electronic equipment / motor vehicles
- Worker’s compensation
- Professional indemnity insurance
- Public liability insurance
- Director’s insurance
Architect’s professional risk services is an insurance broker able to give specialized advice to architects
How to establish your fees?
- Quote fees which will enable a proper professional service to be provided and, cover all costs and make a reasonable profit
- Make sure level of fees quoted is consistent with the prevailing market
Key information required to accurately establish fees are:
- Use accurate historical records of the cost to the practice to provide services for various types of project
- Have clear understanding of the scope of service required for the project
- Use realistic hourly rates for the staff to be used for the project
- Include appropriate margin for profit
- Have appreciation of the market conditions
How do you invoice?
- Monthly, irrespective of amount
- This ensures that cash flow is maintained and if the client raises a dispute you aren’t in a position of risk where you might lose a back log of fees.
- Written in CA agreement
What do you do about late payment?
- Email, notify client.
- illustrating that their payment was due including reference to the invoice and the payment date and perhaps reattached the invoice
- Remind client of their obligation to pay invoices on time as per the CAA
- License can be revoked until invoice is paid as per the CAA
What methods / types of fee structures exist?
- Percentage fee: based on: ‘cost of works tendered’ / ‘cost of works executed’ / ‘cost of works estimated’
- Lump sum fee : based on a percentage of estimated cost or on an assessment of the work involved
- Time charges – calculated on office overhead and profit assessment.
- Hourly rates - generally a multiplier of the money you want to earn (profit) plus coverage for overheads.
- Combined fee – percentage or lump sum fee to cover the architect’s services and all consultants’ fees payable by the architect
What is the salary multiplier?
Expense (including salary) + profit / salary = mulitplier
(this is around 2 to 3)
How do you calculate a % fee?
- Completely review the project
- Nominate what drawings are required and resourcing to complete works
- Once time is calculated, apply hourly rates to establish rough cost with profit
- Work out percentage from there from clients cost of works
What is in an Office Manual ?
A way to implement appropriate administration systems in an architectural practice to provide the basis for an efficient and profitable practice.
- Procedures and protocols
- Sets out templates and document usage
- Reinforces lines of reporting and responsibilities
- Sets out expectations of quality, deliverables and outputs
- May describe specific processes for particular project or client types
