596: Team Struggles Part 1 - The Ugly Truth About Why Architects Struggle to Make Money with Enoch Sears & Rion Willard: Otter Voice Meeting Notes

596: Team Struggles Part 1 - The Ugly Truth About Why Architects Struggle to Make Money with Enoch Sears & Rion Willard

Enoch Sears33min

Enoch Sears

00:00

There's a difference between playing not to lose and playing to win. Hello, architect nation. Enoch Sears here, your host of the Business of Architecture podcast here with my co host, Mr. Ryan Willard, hey, and we're shooting on location here from beautiful, sunny San Diego, California, just finished up our Design Council event with some of our top clients that we work with here at Business of Architecture. And now a message from today's sponsor, if you haven't used our cat's spec wizard before, hey, now's the time to try it out. Spec wizard is a patented tool that allows you to specify a product in just three steps, all for free and without even registering step one research and find the right products for your project on our cat.com Step two, use the spec wizard tool to select the right products and options. Step three, generate a complete three part CSI or CSC specification based on your selections. Now maybe you enjoy toiling through long documents, parsing things together and creating a specification, and if that's your case, well, this probably isn't for you, but if you want to get it done in half the time that it used to, or even a fraction of that, our cat is your place again. Spec wizard is free to use and requires zero registration. So to use it, head over to our cat.com that's a R, C, A t.com, today, and try spec wizard. R cat is a fantastic resource, and one that I counted on when I was actively practicing architecture to help me simplify getting these important specifications right.

Rion Willard

01:27

We are looking for architect developer stories for the Business of Architecture podcast. So are you an architect developer with valuable insights to share? We're always on the lookout for passionate voices in the industry to join us on the Business of Architecture podcast. If you're ready to share your journey lessons, strategies with our global audience, we'd love to hear from you reach out to us to explore being a guest on our show and help inspire other architect developers on their path. We'd be interested in hearing your story, whether you're at the very beginning of your development story, or whether you have $100 million portfolio of projects already in the bag, completed, we'd like to hear from you if you're working with the developers, or that you've developed a number of small houses, or you're working at a larger scale. And so the Design Council was always a wonderful time for us to meet with our clients face to face. We've got practices who are here on the West Coast. There's guys who flew in from the from the East Coast, some guys. We've got people from Tennessee, Nashville. And it's always great just to have load of time with people deep dive into a whole load of very specific leadership problems, business problems. Most of these firms that we're working with at the Design Council have already reached a certain level of success. Or perhaps we start with just how, how and why did design counsel come about?

Enoch Sears

02:58

That's a great question. So we started Design Council two years ago, and the impetus for doing that was we started to see that with some of our more advanced clients, after they had started to get a lot of the smart practice principles in place in their businesses, they were wondering what was next. So they started to be less about moving away from pain and chaos and more of what do we do now that we're experiencing more abundance? And so one thing we discovered is while smart practice was great for smaller practices that deal with overwhelm, deal with difficulty, hiring employees. Deal with firm owners who feel like they're always having their hair on fire and just feeling like the business has them as a slave. We wanted to, you know, smart practice helps them, as we like to say, slay overwhelm. Slay the overwhelm. And as these firm owners began to implement smart practice and began to get more freedom in their business, naturally, they wanted to know, hey, how else could we get more help? And what that required is it required more customized consultation, more customized coaching based upon their specific challenges and opportunities that they're facing in their business. And so the first one that we launched was, like I said, two years ago, and we rented out this crazy but beautiful house in the Malibu hills, yeah. And we had five initial firm owners, I believe, who were there at that particular event. And just for two solid days, we dove deep into their specific challenges. First of all, identifying very, very clearly. This is the problem that I see many firm owners make when they're looking at how to move away from the dread practice, as we like to say. And it comes down to, like a lot of times, we're not even clear on where we're at. Yeah, so step number one for them was really identifying where exactly are we at, like, like, really, where are we at? Not, how do I feel about where we're at, although that's important too, but like, what are the measurable facts about where my practice is at right now? How much revenue are we making? How much of that is profit? What are the salaries we're paying our employees. How many team members do we have? How much time am I working in the practice now? Then we move into some of the feelings as well. How do I feel about the amount of time I'm working in the practice? So using that framework, during this two days, these architects were able to not only expand their focus on the business, but actually at that event, that's where we had some really big breakthroughs about other areas of life that aren't directly in our minds, aren't directly related to the architectural practice. So

Rion Willard

05:51

it's interesting, you mentioned there that these practices usually have already reached some level of material success in their firms, and they're in they're in a form of abundance. But there's challenges with abundance. What are some of those? What are some of the challenges that firm owners that who are kicking ass actually deal with in my

Enoch Sears

06:15

experience, one of the first things is, how do we protect what we've built right and move forward and innovate. Because if you're not growing or dying, and they know this at a gut level, they understand that if I just stay at the same level, if I just plateau, if we just remain constant, then we're not keeping up. Because technology is improving strategies and strategies for getting work are becoming more competitive, right? The entire world continues to get more competitive. It's more bottom line driven. There's more other competitors on the marketplace. And so if we're just maintaining steady, then ultimately that's a dangerous place to be. So complacency, absolutely complacency, is probably one of the biggest things, yeah, that we deal with when we step into abundances, it's easy to rest on our laurels.

Rion Willard

07:08

Yeah, hey, that's interesting. You say that as well, the fear of losing what I've already built, yeah, and the fear of losing what I've already created and what's working then leads to stagnation, because you're now becoming risk averse. Whereas building it in the process of building something successful, you had a more I've got nothing to lose attitude. Now you've got the I've got something to lose attitude. So the thing that made you successful, the kind of risk taking ability, or the, you know, part of the hunger as well now gets replaced with a fear of losing what I've made, and suddenly behavior starts to change. And then there can be the complacency involved in that the when it gets really scary is obviously when there's a sudden economic change, or what was, what had always been working now suddenly doesn't work for whatever reason, whether it's some sort of economic downturn, presidential change, some sort of world disaster, that suddenly, you know, these are kind of big circumstances, or maybe just a big cultural shift, you know, suddenly have a, you know, influx of AI, or some New Technology, or some industry shift, or a law that shifted your business has always done thing, something one way. There hasn't been any diversification, because it's been, you know, you've just been in the very protective, fearfully protective manner. So there hasn't been any information, sort of like the fight last night, exactly, exactly.

Enoch Sears

08:39

So last night we watched the the Tyson, the Tyson Paul boxing match. And there's, there's a difference between playing not to lose and playing to win. And there's a world of difference between playing not to lose and playing to win. And in my estimation, what we saw last night was we saw two guys who were playing not to lose. Yeah. I mean, let's face it,

Rion Willard

09:00

yeah, one was trying to protect brain cells, yeah, and didn't want to, and was a shadow of his former self, and the other one didn't want to beat an old man up. Yeah, exactly. And it was very uninteresting for everybody involved, absolutely

Enoch Sears

09:17

right? And, I mean, we see this. I see this in my own life, not just our clients lives, but there is when, when we're playing not to lose, we're always on defense, right? And if there's one thing I learned, I'm not a very good chess player, one thing I did learn about chess is, if you're always reacting to the moves that another person made, you're already lost, because that means the other person's leading the game, the other person is winning. They're one step ahead. Yeah. And so this can happen life in a business. It can happen when, like you said, we get complacent, for whatever reason, we get comfortable. And then, instead of focusing on improving, focusing on how can we sell more? How can we land better deals, how can we ex. Expand our client base. How can we improve our internal training systems for our employees? How can we take our culture to the next level? How can we hire team members who are more experienced and have better attitudes, perhaps. How can we continue to take our teamwork to the next level, like that's completely different from a firm that says we've established something really nice here, and we want to hold on to it, and so we're going to be very timid about the moves that we make, and we're just trying to circle the wagon, so to speak. Yeah,

Rion Willard

10:27

it's interesting. We often talk about with our clients the kind of caliber of problem ladder that we want to be going through in a business. And sometimes when we might describe a business just being it's just problems, but part of the business owner, what we want to be doing is getting a higher caliber of problems. And right at the bottom, the lowest caliber of problem to have is I haven't got enough money. And it's not uncommon for businesses to be struggling in that for the entirety of their existence, and it's very sad when we come across business owners who are looking to sell. They've overvalued their businesses in their minds. They've might have a good portfolio of work, but they don't have any systems in place. They don't have any leadership succession in place. If they were to walk away for the business for more than 30 minutes, everything starts going haywire and and they and often, when we look at the books of businesses like that, the cash, like the cash history, is always very underwhelming and pretty depressing. You know, in terms of the lifestyles that it's what it's able to provide, and there's, there's not much of an asset there for someone to let go of. So the first level of problem is that cash problem. Businesses who get good at sales, marketing, active prospecting, who, who? They do great work, and they get the referrals, and they mechanize referrals, referral systems. They have a very good chance of elevating themselves to the next tier of problems, which is, I've got too much work,

Enoch Sears

12:06

yep. Well, before we move on to that round, let me pause you to go back, because what you said about the first tier of problem is so, so profound. And if we could just get every architect who's watching this video, every designer, every up and coming architect who's watching this video, listening to this podcast episode, to like, really get that idea. Oftentimes, as we have firm owners come to us because of the challenges and things that we talk about here on Business of Architecture, they want to get their lives back. They feel like what was once their Paradise has now become a prison. They became. They got into architecture because they wanted the flexibility, but now they find that they're working all the time and they're not making any money. It's very rare that architects come into our world and the first thing they say is, I'm not making enough money, as a matter of fact, and over 350 calls that I've been on with firm owners, I can probably count on my hands, one hand, how many firm owners that was the first thing is, like, I'm having money problems. So they don't, we don't typically see it like that, yeah, right, which is very, yeah,

Rion Willard

13:07

no, it is, it is. I'm glad you've pointed that out, because a lot of firms think they've escalated out of the cash problem into a workload problem. And it's not. They're still in the cash. They're in the cash. Yeah, yeah, absolutely. And now they've got one little project which should be easy for them to deliver, and their cash problem is making that, that workload just totally unfeasible, exactly. It's like, and they can't hire. Yeah, it's like, when I was, when I was in college, I took my, my little crappy toda Nissan.

Enoch Sears

13:38

It was a, it was actually a Nissan Sentra that I picked up up back at Cornell, it was like literally missing one it was missing one headlight, and the hood had primer on it. You know, kind of leaned to the side when you drove it, but it got great gas mileage. But I remember I took it in to have the tires replaced and balanced and everything. And when I was leaving, I felt a slight wobble in the tower, and as it began to accelerate, this wobble became a loud clatter, right? And so then I had to turn around and went back to the shop as the guy sheepishly admitted that he hadn't tightened down the lug notes molds all the way on my tire. And so the same thing applies to a practice that has money problems, right? Is like when you're when you're progressing through these different layers of problems, you can, you can have enough work, you can have an overload of work. And you may not identify that you're having money problems, because the cracks start to appear. But if we were to peel it backwards, say, Absolutely, having money problems, why did you take on? Why do you feel a

Rion Willard

14:37

necessity to take on that? Roger, that you should have said no to Yeah, it's like, well,

Enoch Sears

14:43

you know, so oftentimes this is where a business diagnosis is one of the most powerful things that we offer and that we do when, when practices come to us, just the value of them understanding, what are my real issues, not the issues that I think that I have, but what are the real issues?

Rion Willard

14:59

So. Uh, moving when, when, when, there is, let's say, a system for winning work. We've got competent sales people in the business who have got extended networks, and we're talking about more than one as well, because we've got a we we see this a lot when we've got a business that's got one person who can bring in work, normally, the owner, and then they're starting to bring up partners or leaders, and the leaders the new leadership of the business. They've got even worse, they've got no interest in winning work, or they've never done it before. But let's imagine that we've we've got a firm that has solid pipeline in place. They're monitoring it. They're proactive. They've got multiple people in the in the organization who are competent with sales and selling. There's a decent foundational knowledge of what marketing is. And I'm going to say with this one that you understand your market like just as a bare minimum, you understand what their pains are, your you identify as an ally or an advocate to that particular industry that you're serving. You, you you view yourself as a business that's serving and helping somebody else, and you've got a very deep knowledge and understanding, and you know how to articulate the problems of those particular clients. And I think this is important, because I'll often speak with architects, and we'll we'll talk about what the problems of your clients, and they'll say something along the lines of, Oh, they've got issues with their construction documentation process, and they never have enough drawings when they're doing the buildings. I'm like, That's not their problem. That's your problem. But you're now projecting onto, you know, you're seeing a kind of an issue in their process. But that's not, that's not what they go to sleep worrying about, because if they did, then architects would be minted. That's right, absolutely minted. Yeah. In other words, your

Enoch Sears

16:55

clients aren't going to bed thinking, I just wish we had 20 more sheets and details in that, in that drawing set. But as architects, it's either for it's easy for us to look at that and say, well, that, that is the problem there. You didn't take the DDL down to the this particular degree, right? And, and, of course, it varies by market,

Rion Willard

17:12

yeah, but it's, it's Yeah. So, so with the architectural lens, we can identify problems with their architectural process, okay, or lack of fine, but that's not the problem. That's not the problem that we're talking about here. What we're interested in, in terms of having a business that understands marketing and has a good pipeline, is that they understand the things that the clients are worrying about with their with their own business, and the there are things that clients are worrying about in their own businesses that have driven them to even think about they need to make a change to their office space, to their house, to their, you know, laboratories or their healthcare center. And we want to know what those driving emotional motivators are. You know, from residential it might be often it's kind of big lifestyle, big life. Milestones that have happened, children have left, or children have arrived, is prompting a shift in in their their residents, or with businesses, I think it's always interesting with architects, the more competent they become in being financially literate and also being able to talk the language of business, they can have really good paying conversations with their clients, because now you can talk to a client as business owner to business owner, rather than architect to client. And there's that shifts the power dynamic, firstly, and it also positions the architect in a with a higher level of status, because you're now able to talk on a strategic level, you're able to start talking profit and money and where the operational inefficiencies are happening. And a skilled orator or skilled salesperson is going to know how to is going to know the kind of lay of the land in terms of the typical pain points that their client demographic is going to have, and they're going to guide the client in a conversation or through their marketing collateral, whichever it is, to articulate and become more present to those problems that they've been worrying about. And when that happens, there's a sense of like these are the guys. I haven't heard anybody talk like this before they understand. They get me, they know. They know what's happening because they're using my language Exactly. They're using my language. And that's a big differentiator. It's a real big differentiator. Most clients don't have sustainability problems. Might be a desire for some of them, but it's often that's not often the driver of a project. So when we're trying to sell a kind of a feature of our architectural process or or part of our architectural philosophy, whilst that's important to have, you know there is utility to having that in the in the in the world. You know as part of your messaging, you. That without understanding the pains of your clients is, is it's going to be ineffective, it's going to be a mismatch. It's going to be a mismatch, absolutely. So let's imagine that there's a that's what we're talking about when we're when we're saying a client or an architecture firm is able to to move out of the cash problem to the next level of the next tier problem, which is now capacity, which is now actually getting the work done. And this is more about efficiencies and systems. So you've got a good sales and marketing system which is bringing in work. It's allowing you to have a lot of money or have a decent profit. You're 20 to 30% profit margin now the cash problem or the capacity problem, sorry, this is now about protecting that profit, and it means having systems in place that work can be done efficiently, effectively, consistently, that there's systems in place for financial monitoring. So team members, project managers, project project architects, they care about the fee, they care about the budget. They care number one, about how much profit they are protecting throughout the project. And they're going to protect the project. They're going to they're going to deliver fantastic design in accordance with the design philosophy of the practice, and they're going to do that by protecting the 30% profit margin that's been negotiated, and that's the game. And they've got fee, and they know how much the fee, how much the fee is, and what it translates to hours. They know that those hours now need to be distributed amongst the rest of the team. And this is part of the kind of the capacity solutions or problems, because now, now you can start to see where we were missing team members. We want to bring people in to do this. Now we want to distribute the hours effectively and then have people do the work well, protect profit and happy days. Now we can be consistent. Okay, so that's a, you know, practice without that, that's where there's, there's problems, but that's, that's the the next tier problems, the capacity problems, once that's kind of locked down to some degree, then the top tier problem is people problems, and this is now you've you've brought people on, and now there's things like your business culture actually needs to be addressed, and your leadership. And how do you enroll team members to be suitably infused about your new initiatives and and ideas? How do you have your how do you how do you have your team members be proactive and really care about what it is that they're that they're doing. And so that becomes your your people problems. And then once there's a kind of level of satisfaction to to all of these, then, then what are the next problems after that? And this is some, well, really,

Enoch Sears

23:03

I mean, even, yeah, the next one after that is, it's funny. It's, it's almost an inverse mirror of the bottom. So top one's money problems, which is, I'm making so much money now, what do I do with the money? And that's, I know it sounds tongue in cheek. Well, I'm making so much money now, what do I do with the money? But when you are, when you are starting to make decent amounts of money, taxes become an issue. And how do you structure things from a tax perspective? Because if you think about it, you know, a 30% taxation on the money you make is a huge cost. So, so really it becomes, what do you do with any with any profits, you know people, that's why high income earners, they have professionals devoted to, how do we then take the money that you're earning? How do we protect it? How do we invest it? How do we then grow it responsibly? So on the bottom level, we could say it's money issues. At the top level, it's money issues. There are different kinds of money issues, yeah. And when we look at the two of the middle they're really about systems and people, like you said, right there's systems at the bottom, and people right above that, people issues leadership, yes, like that, yeah.

Rion Willard

24:02

So we're coming back to Design Council. And yeah, these are some the often our clients in the Design Council. These are the practices that are dealing with the higher level problems. They're often they're often making a lot of money. Um, they're figuring out what's next. What next do they want to they want to be doing. They're also thinking about legacy and do I want to sell my business? Do I want to sell it to people in the in the organization? Would just be easier if I sold it to another architecture firm. Do I want to continue growing it and starting new businesses that are complementary and synergistic with the original architecture firm. And this becomes really interesting, certainly for us, it's, you know, it's quite exciting when there's a high level of business competency that's been executed inside of a firm, and now they've got a whole new. Level of of business problems to be thinking about, like, you know, some of the conversations over this weekend, for example, business acquisitions as a way of fast pacing growth, or again, talking about setting up construction firms or interior design divisions with inside of your some inside of your company. So that's what the weekend was about, where we had these high level clients come in. We want to, we structure it like a mastermind. So when you get, when you get a group of people who are all at a certain level, who are got similar sorts of problems. And each person who's got 25 years, 30 years worth of experience, there's something quite interesting that happens in terms of the quality and the caliber of the conversation. And people can bring problems into the group, and you'll have somebody over here who's done that and did it really well, someone over here who did that, and it didn't do it so well. And there's a kind of nice way of expanding on those, on those issues, yeah, one

Enoch Sears

26:09

of the one of the problems that we see at the level of firms that we work with here at Business of Architecture is a lot of reluctancy or challenge delegating, because delegating is very easy to understand logically. It's very easy to say, yeah, no problem. You just delegate, right? But actually being able to do that is hard, especially when you have a pattern in the past of doing everything yourself. And so one of the things that we saw, that I noticed during the this two day event, is as as as as these firm owners were sharing about how they run their meetings, one of the questions that came up is, how do I manage five or six team members? I feel like I'm just constantly managing them, and we spend two hours going over every single project, and I feel like my head is exploding with all these balls that I'm juggling, the things I'm trying to keep tabs on. Well, we asked the question, Well, why don't you have the staff for reporting to Why don't you have them do the planning? Why don't you have them set the deadlines? Why don't you have them report to you? So when you get into the meeting, it's simply a matter of, here's what I said I was going to do last week, and then did you do it, or did you not do it? And we don't need to go down 10,000 things. It's like, hey, look, I had we talked about what I was planning to do last week. This is on track. This is off track. This is on track. This is on track, right? And so when you shift, when you shift that, that burden of oversight, of project management as a leader, when you get that off of your plate and put it onto the person who is responsible for delivering that result, this is what it looks like to manage and to lead, because management isn't as much about telling people what to do all the time. That's not management. Management is about setting an objective, or what the military now calls the commander's intent. See, the way they used to do at the military is they used to develop these very intense and detailed plans. Right about all the situations they did. They did all sorts of planning for adverse effects and conditions. So they had this kind of tree of like possibilities that could happen with the plan. And so then what they found that would happen is you'd have these elite warriors out in the battlefield. Who knows? Something they didn't even expect to happen? You know, it's the middle of the night. They're supposed to take some position, and then, like, a bunch of goats walks across the road or something. You know, it's like it's at the right moment where they're supposed to be, whatever happens. Okay? And so they said, Well, hey, look, it's not so much about following specifically my instructions. You're a smart individual, you're trained, you have the knowledge. You know how to coordinate, you know how to communicate. Here's the intent of what I want to have done right? What I want to have is I want to have drawings submitted to the authority having jurisdiction, and I want these drawings to go through no more than two plan checks. I want it to take X amount of time, and I want to know that there's change orders in the field will be less than x in terms of our liability and things that we missed, just that, just that. That's the commander's intent. Now go to it. You figure out when you're going to manage your time, when you're going to do that. So we meet every single week and we say, okay, Sally, you're a product architect. Here you have 40 hours this week. What do you think you're going to be spending your time on? You know, come to meeting prepared with a little plan. We don't need to see everything, but you know exactly we're going to spend your time. And the next week, when we meet again, you report on how you spent that time. And of course, that time is then done in the context of the project budget, so it's back to the money. So we know, like, Okay, I already know a week in advance. If it's Monday and I'm planning out my team member is planning out the hours that they're planning to spend on this project, then we're already getting a week look ahead to where the budget will be next Monday in terms of how much we work on the project, right? So then you. Have these things happen where you haven't checked on this project in a while. You go to check the numbers on the project, and you tally up the hours that people were like, Oh my God, you know what? We're way over, guys, guys, we and then you're just like, then you're in reactive mode, guys, we gotta get this project out. I mean, every architect probably listening to this that owns a firm has done this, I've done this before, right? You're like, Hey guys, you know, we want to throw these details in, let's just skip those details for now. We'll put those details in in the field, or we'll do some change orders or something, or we'll do it after, you know, we get the initial journey plan check, we'll submit them the second time. We'll add those drawings in and do revisions, which puts you in the reactive mode while you're responding. And going back to our chess analogy. You are always behind the eight ball responding to the situations of life instead of taking a proactive approach. And that's a wrap. Hey. Enoch Sears here and I have a request, since you are a listener here of the Business of Architecture podcast, Ryan and I, we love putting this podcast together. We love sharing information as much as we can glean from all the other industries that we're a part of to bring it back to empower you as an architect and a designer. 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