The annual survey benchmarks financial performance based on input from over 30 prominent architecture firms in the Greater Boston marketplace. It contains some of the most comprehensive financial data available for New England firms.
Profits for the average firm increased from an average of $9.27 per direct hour to $11.40 per direct hour, a healthy 23% increase. Profit percentages in 2011 averaged 11% compared with 8.7% in 2010 and just .4% in 2009. While firms overall fared better in 2011, improvements were not across the board. Hourly firm profits ranged from a loss of approximately $8 an hour to a profit of $40 an hour. Further illustration of the wide disparity in firm recovery is that the utilization rate (percentage of time worked on billable projects) varied from 48.9% to 74.6%, while the billing multiplier ranged from 2.33 to 3.85. Such broad ranges indicate that some firms are fully recovered and growing, while others continue to struggle.
Additional key findings are as follows:
The average overhead cost per direct hour fell from $64.19 in 2010 to $56.77 in 2011. In addition, the breakeven multiple dropped from 2.93 in 2010 to 2.69 in 2011. These are positive trends for the industry influenced by firms continuing to keep a close eye on expenses and increased billable hours worked during 2011 over 2010. As a group, the firms surveyed increased their average utilization rate to 65.4% for all of 2011, up from 61.6% in 2010 and 58.9% in 2009. A rate of 65% is a widely accepted target. The utilization rate is the percentage of total hours worked that is billable to clients.
The direct labor billing multiple also slightly exceeded the industry benchmark target of 3.00. The multiple of 3.03 is down from 3.21 in 2010, but still a very healthy number. The average billing rate per direct hour fell from $106.70 in 2010 to $101.75 in 2011. These reduction in billing rate statistics are largely due to the impact of increased competition on project pricing.
DGC’s findings are in line with the American Institute of Architects’ (AIA) Architecture Billings Index (ABI), which was at 50.4 nationally in March 2012 and 53.9 in the Northeast. Scores above 50 indicate an increase in billings, while scores below 50 indicate a decrease in billings.
“The industry has been showing significant forward progress for the past two years, although the recovery is still taking place at a fairly slow pace for many firms,” said David M. Sullivan, the partner in charge of the A&E group at DGC. Sullivan expects that firms overall will continue to operate with a close eye on expenses in 2012 and will continue to see modest growth overall.
"While the study shows overall improvement for the industry, it’s important to note that there is a significant gap between firms with the best and worst performance,”
The DGC 2012 Architectural Study, which will be available this summer, highlights the firm’s expertise and in-depth knowledge of the architecture and engineering industries. DGC experts analyze financial data from prominent firms in the Greater Boston region, focusing on operational performance metrics and identifying emerging trends. DGC will also be releasing its Engineering Report later this year.
About DiCicco, Gulman & Company LLP
DiCicco, Gulman & Company LLP (DGC) is a CPA and business consulting firm specializing in A&E firms, as well as private clients, real estate and commercial business. As an independent member firm of Moore Stephens North America, DGC has access to a global network of technical expertise and best practices, which result in elevated performance standards. For more information please visit www.dgccpa.com or call 781-937-5320.
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