You know practice we're going day by day month after month hoping it gets better. With as you need a plan you what does it look like in a year's time two years time.
Hello and welcome to the Business of Architecture. Today I have the great pleasure of speaking with Ray Brown. So Ray has journeyed from the bustling streets of Scotland to the sunkissed shores of Australia, where he now resides with his family in the fine city of Melbourne has been there since 2005. Rays are proud as extends beyond mere business ventures is a seasoned business coach is guided startups, major financial institutions, tech enterprises, and esteemed executives alike. At the moment, he occupies the helm of no fewer than six company boards within Australia. In addition to three esteemed international architectural firms. It's within the realm of architectural business mentorship, that were really interested in where I think Ray truly shines. He recognized a glaring void very much like we did at Business of Architecture, with the business acumen of architects. And he set up a organization co founded called octopus, which is an initiative providing bespoke business education tailored exclusively for architectural practitioners. And that's what we're going to be talking about today, through occupiers re endeavors to empower ambitious architects to navigate through the intricate intersection of commerce and design fostering enterprises that are both financially robust and creatively fulfilling. And Ray is about to launch a new initiative called their business foundations programs they've been doing consulting practice previously. And now they have created a full architectural business curriculum aimed that architecture firm owners to give a real solid grounding for running a successful and profitable practice. I was very excited to talk to Ray about this, we talked about the sorts of issues that we often see architects dealing with in their business, some of the mindset that often gets in the way and makes running a business more challenging in architecture. And we talk about profit, making money, financial optics, and all of the things that are included in the architecture. Business Foundations program from octopus, if you want to find out more about octopus, I'd recommend that you check out the info in this podcast where all the details are and you can go on and have a look. And sit back, relax and enjoy the brilliant Ray Brown. This podcast is produced by Business of Architecture, a leading business consultancy for architects and design professionals. This episode is sponsored by Smart practice, business of architectures flagship program to help you structure your firm for freedom, fulfillment, and financial profit. If you want access for our free training on how to do this, please visit smart practice method.com. Or if you want to speak directly to one of our advisors about how we might be able to help you please follow the link in the information. Ray. Welcome to the Business of Architecture. How are you?
I'm exceptionally well I'm exceptionally well, it's 11 o'clock at night here, but still bright and breezy and raring to go. How are you?
I'm very well, thank you always a pleasure to speak with you. Now you're a business mentor, the co founder of arquebus. You'll be based all the way on the other side of the world in Australia. Yeah, we're in Melbourne, Australia, Melbourne last right. Yeah. And you, you guys have been doing some very interesting and very important work in the architecture industry, you've been serving clients found very much in the same vein that we do here and Business of Architecture, helping architects practices become more profitable, help them develop their pipelines, help them get the kind of financial eyes on what's happening inside the business. So they're not running blinded by this, you know, just by the what's the phrase, but a seat of their pants. And that kind of you know, the overwhelm and the panic that often ensues in architecture practice, you guys have been developing a very complete and holistic program to help architects, you know, move out of those problems. And we're going to talk a little bit about that today and some of the innovations that you guys have been developing. But what let's start with how can we just talk a little bit about yourself, actually, and I know we've had you on the podcast before. When we spoke about this, I think it's really interesting because your access into the architecture industry is quite unique. How did you come to be doing And what you're doing now?
Yeah, why the long business career started off in South Africa actually in corporate, and then proceeded, but series of businesses in the UK came to Australia in 2005, when my family and I joined a business coaching company, they have never taught me that the sort of ropes are in coaching teams and individuals. So of course, lots of companies probably for the last almost 20 years. And but for the last five years, we've focused on architects. And the reason for that was we had a couple of architect clients, that seemed like really nice people who are really receptive. And I think the biggest thing for me was that they were acknowledging that there was a gap for them. We don't get taught anything about business at university, they realize there was a gap there. But really, there hasn't been a sort of holistic approach to how you fill that gap. My original plan was to get something online that we could sell in big quantity so that I could go and lie on a beach and drink pina colada didn't quite work out. And we built a really, really successful consultancy business a bit like Business of Architecture. So we've got a, what we call it, the principles of business success. We've been teaching people that over the last five years. Alongside that we had a program called Designing architectural practice success. Now, this is a lesson for all architects, you couldn't get the name, right, you could understand get something that's easy to explain to people, we call it, we call it internally adapt. Until you explain that to someone. It was really, really hard and hard to market. So we've undergone a bit of change, we're going to pivot as a business. We're going to go from a consultancy with a little bit of training online, to a fully fledged education company. And we're looking at the what we call the foundation or the business foundations, fundamental business, education. That's what we're looking to provide. And I think that's the that's the gateway to people developing the practice, it doesn't give all the answers, at least, conceptually starts the process.
Great. Yeah. So what sorts of things and this is always an interesting conversation to be looking at what what kinds of issues do you see architecture practices, typically dealing with?
Well, I think the initial thing is the narrative and architecture, that we see that as our biggest competition, really, because this is the story in architecture, architects love speaking to one another. And they love this a little bit, Woe is me. And life is hard. And things that get
hammered the architect blues, I call it
blue is exactly, and it's fairly toxic, because it doesn't paint that picture of an upside. Or if we get this right, we could really do well. And we know a new new that we can take architectural practices that are bouncing along breaking, even making a little bit of profit, and not a huge amount of change across the range of aspects of business. You can bring that same business into into profits. And it's not about huge changes in the business. It's not about lots of more work, typically. And sometimes more work is not the answer to the problem. Yeah, more work can put that on top of a badly run or at an inefficient practice. And that can actually make things worse. So it's, it's a bit like the atomic habits book, it's it's the aggregation of incremental change. Little pets, little bit, I mean, we speak about rhythm is really important. So getting a business rhythm into into the practice so that you're not quite often what we find. And I'm sure you find the same that most practices are driven by two things that are driven by the work and the clients. So the clients on the phone and the work deadlines, and the kind of needs of the business tend to tend to get forgotten, operate in the background or something, when we've got a minute we'll have a look at the numbers or whatever. And when we so many, so many architects that tell us wait till the end of the year for the accountant to tell them how they've been doing. And I mean that there's just no way to run a business. Yeah,
no, that's, that's very common. And well here. I'm often very surprised at how little people are looking at money at all in the business. And you it's interesting, you were saying about kind of some of the toxic culture that exists. And this, I find, it's so sort of deep rooted in the industry, where the whole conversation around money is very unhealthy. I mean, I often recall the story of, you know, when I was my first year of becoming an architect, and the tutor lines us all up and says, right, there's gonna be, you know, there's 120 of us and there's gonna be maybe 30 of you that actually become architects and once you become an architect, you're never gonna make any money. And the real reason why you're here is because You're doing it as a vocation, you're doing it out of the love doing it. It was kind of like pledging allegiance to this lifelong quest of, you know, of, of not allowing yourself to have any money in service of the higher art form of architecture.
And I have a similar story I was on a panel, five years ago with one of my clients at a conference that the topic, the theme of the conference was the Business of Architecture, actually. And there were 300 people in the audience, most of them small businesses, most of them struggling, I suspect, and I was telling the upside story of one of our clients, and she was giving her experience. And there's a gray haired guy on the panel a bit like me, took the microphone and said, Look, what you people have got to realize is that we're not a business, we're not an industry, we're the profession. And I just really that that, that situation has just gone through my mind over and over again, because it's so it's so disruptive. And so it's just not helpful to think like that. So one of the things we see right up front in our first module is, it's good business that produces the foundation to allow you to do good architecture, not the other way around. Good architecture doesn't lead to good business. And so many architects that have done some really good work, they've won some awards. And then they're sitting by the telephone waiting for the phone to ring and saying, I wonder why it's not ringing, because we're really mean architect. And that that is the is the problem in many industries, that people are passionate about the product, and the process of selling that product and marketing that product is given just not given enough attention.
Yeah, no, it's very deeply interwoven into the architecture culture, of being anti business, if you like, are very suspicious of business. I mean, I'm sure you know, about the AIA and the Riba in the past, it was actually, you know, it was it was in breach of the code of conduct to be marketing, your advertising your your services. And so that that kind of culture kind of still persists of like it's well, it's ungentlemanly to actually be going out and finding work or advertising and, and even amongst architects, I mean, I will often say to our clients that if another architect says, describes another architect as being a good marketeer, it's not an insult. It's normal, it's normally normally means Yeah, but they're, they're good at marketing, meaning that their work has no substance or they're doing they're cheating. It's literally like that it's a color. It's like they're cheating, which is baffling.
Ya know, I had a call this morning with Tyler Sermorelin in the States, and he's doing such great work online and helping people just bring some of these concepts and issues to the fore. And we were speaking about sales, and he had exactly the same sort of construction as I have around that every sale begins with a problem, you got to understand someone's problem. And you've got to convince someone that your solution is better than everybody else to solve that problem. And see sales then become the bridge between somebody's problem. And your solution. It's no more than that. So it's nothing sleazy. Sales is not sleazy. It's simply a bridge between somebody's problem and your solution. And the better you build that bridge, the better relationship you'll have with the client, the better work you'll get, and the more you'll be able to charge. Yeah,
absolutely. And you can approach the marketing and selling as you know, this is my, this is me helping. You know, when you're making calls or phone calls to people that you've never met before. It's not desperate. That's the other thing I'll often hear. Architects say them, well, I don't want to be, I don't wanna be reaching out, I don't want to be contacting people I've never met before, because I'm just going to come across as desperate. As opposed to a mindset of, you know, you, you're reaching out to help somebody, and there's going to be, you're going to be able to give them something of 10 times more value than what they're going to pay pay you for. And you're going to be able to charge a premium fee for it. It sounds Yeah. And I think
that it's a choice that I absolutely see it as a choice. Do you want to be that struggling person that has worked long hours, and gets paid less than you could get paid, working for someone down the road? That That, to me, that baffles me, when right in front of you is an opportunity to step ahead of the pack or differentiate yourself whatever way you want to put it in, you've got to be a good architect in the first instance, but most of the people we deal with are great architects are passionate about what they're doing. And I think because the people that reach out to the likes of you and the likes of us the realizing that there's more to this process than just good architecture. And once they make that realization, then it's an amazing breakthrough. Okay and Prof. But as the SP got we meet a lot of practices will say to them, are you making profit or make a lot of profits? 100,250 or whatever? And is that after a salary up yourself? Or no, we take our salary out of that. It's not really a profit, it's actually an income. And there's not much left after decent income. Some of the numbers that we come up
against. Yes, yeah, no, I. And, you know, this is quite important, because I think the idea of what profit actually is, is is mysterious in the industry. I've had the exact same conversation with people or speaking to somebody a few weeks back, and I was asking them, okay, what's the profit in your in your business? And they were like, 50%, I was like, Wow, that's amazing. That's, that's a temp, tell me more about the 50%. And then it turns out that it wasn't 50%. It was 50%, after they paid their consultants. And I was like, Well, hold on a minute. That's not That's not profit. That's, that's money that you've got to run your business with, basically, and, and pay your salary out? And then it turned out, you know, but then we start looking at it more. And it was, it was like, Oh, well, actually, we're making a loss. And that was, that was pretty shocking, actually, to have that kind of conversation and the kind of casual pneus of thinking that it was 50% profit, and being happy with it, and then realizing with a bit of direction, actually, we're making a loss. Yeah.
I'll be quite controversial now. And I spent my business life fighting with accountants. And the main reason for that is accountant told them that sales outputs advisors, and the business people, not just architects, they kind of look to the accountant for that guidance. And accountant is not good at it, they're not good at the advice. They're not good at looking forward to good at counting the numbers. And to some extent, they're not, they're not good marketing people. Because they have a service that the government says you need to not an accountant, you must go and get yourself an accountant. So they don't really need to do that much in terms of marketing. I actually work with an accounting practice. And when you come in to the left, I've got a sign on the wall that says there's a sort of seeing in the day of the day. And a few a couple of months ago, they put up a sign that said, most of our successful clients have got a budget. Have you got one? And I thought, What a dreadful thing for an accountant to put on a board. Why? Why is every business that they advise not going to bench it. But quite often, it's a situation where well into the new financial year, your accountant coming along and said, Let's go through your numbers. And let's look at how you did last year and that bit that you spoke about, we would call margin the difference between the selling price and the cost price. That's very different from profit. And yet, I select a set of accounts today for one of my businesses and the new accountant. Put that in profit at that line there. That's nothing to do with profit. But that's mark that goes there. And as you see, to pay the rent and electricity and the marketing and the running of the business.
Yep. It's very interesting. So let's talk a little bit about what's possible for an architecture business, when it's got decent systems in place when it's got a little bit of business acumen. When there's a kind of perspective that's been created, where they're engaged with the business, what sorts of things do you see, or turnarounds you see with businesses,
you're the target that we give to most of our clients is 15 to 20%, net profit, net profit after market rate salary for the owners working within the business. And we've got people obviously doing less than that, and people go through difficult times, and they might have a couple of months of losses. But at least they see that coming and list, we've got some tactics to counteract that. At the other end, we've got clients who are making 30%. Net. Now, unless you've had some sort of starchitect getting really high fees, what we find is that 30% is probably not sustainable. And that's more practice of five or 10 people. And as I said to this client, I said, the rivets must be popping in your business at the moment if you're making 70%. And he came back and he said, Well, how did you know? Because that's exactly what we're making lots of money, but we're very stressed and feeling overwhelmed. And we're actually starting to let people don't. So there's this element of sustainability and what's possible in the market, and that's driven by your efficiency and the fees that you charge. But there is a range that kind of makes sense to the business adequately. 15 To 20% pretty fine.
Yeah, I mean, the clients if they're doing anything above 20% is a big, big thumbs up. And we do have the, you know, depends Then on the some of the markets of those practices working in the super luxury, high end, markets often can make 30%. and above. They can charge. I mean, that's a very sort of niche market. And we're talking about those catering for the houses that are in the sort of $50 million kind of range that those businesses tend to have very have higher profits.
I was speaking to someone who just in the last week who they build warehouses for Amazon, right, sort of $400 million build. And they're making reasonable, very, very good profit margins. Yeah. And then this delay for a number of years,
yeah, and clients serving tech, as well. So working with like, you know, Tesla, or rivian, those kinds of
companies can often mean that's one of the basic things that we teach in a new teachers is event positioning. So we speak about, you need to specialize in systemize. And then you need to scale. And typically people do a little bit of systemization. And then they scale and suddenly they've got 10 people. And what we find is we're constantly backfilling the system side of the process and trying to get them into it, this this whole thing about working on your business, not in your business. It's a really neat thing to see. But who actually tells you how to work on your business. Like that's the missing piece, we think that we're working on your business, look at it from a day to day, month to month basis. What am I looking at? How do I how do I and it's not that it shouldn't be an industry within your business to work on the business, it's, we work very much around a monthly board meeting. And that that takes an hour, an hour and a half a month, we've got set report, and we've got set structure, finance, operations, sales and marketing, little bit of strategy at the end, if required, and that that rhythm is just so important that people get used to where do you look? When do you look? How do you read the KPIs that tell you what the trends are in the business, and you get that you get that early warning on problems that are going to arise? And probably one of the key KPIs that we use as a six month rolling average of work secure, how much work you put, I know it's lumpy, and sometimes you miss a month, you don't win any work. But if over a six month period, what's the average amount of work that you're picking up? And if you if you record that number, each month, that number will tell you what the business looks like in six months, you have enough work for the people? Or are you going to need more people? Or what is the business looking like out in front? And that's a revelation to most architects, you just don't think like that that moment.
So So what sorts of things do you typically find yourself addressing inside of the business? What kinds of systems do you help them get set up? What kinds of processes do you get them trained in? Yep. So
the facts speak about the business Foundations Program, which is the new program we're about to launch? We start off with, with mindset, strategic in the beginning, the bit about the narrative and abundance, and it's good business leads to good architecture, not the other way around. We speak to a business cycle. And you Where are you in the business cycle? And quite often, that's a good starting point, because people realize they're not the only people feeling disillusioned or stressed. That's quite common in industry, it's quite common in business, not just only in architecture. So that's reassuring, right up front, then we speak about vision. And that's how do you do vision? People speak about it? But it's the process of developing a vision? How do you tell you get to that? We speak about structure, which is how do we separate the business from the individual. So quite often in business, it's identified with individual leader. And that's what we call a theory of business over here business of a sheep business. And the first thing is to try and get people to think like a we business. When are we going over, we're developing. And that takes a lot of pressure off the leader of the business, if that load is spread across the business, then then we'll look at, obviously a bit on marketing. So very high level positioning, getting them to put this marketing words that fit in we speak a lot of what we call the tribe. So who is your tribe who you get when people say to you so we get a lot of tire kickers on the on the telephone. Well, that means that your marketing is not working, not attracting the right people. The wrong people. We use the car industry as a really good analogy because if you need a showroom that matches your client base, if you don't, there aren't many Suzuki buyers coming into Rolls Royce showroom or vice versa. Because these are well positioned businesses that that no other set in the market. Know how to taper people live on the service, the price and the product all matches up. So positioning work. So getting positioning, right. And then sales. Classic thing we speak about what's your sales process? Oh, well, yeah, we get that weather briefing meeting, we're going a lot of detail on that. And then we spent two days on the fee proposal together. And then when you do, oh, well, we email it to the client. And immediately if you're laughing, and I laugh, and you're gonna go deep, it needs to be a two, two meeting process, you didn't the briefing meeting, you prepare the proposal, and then you present that proposal. And it's just defies logic that you would lose control of the sales process. With the client, we're gonna get the last page, see how much it is. And that could be the end of the story, we up at no time to sale and convince, and then we say to clients who you're selling to things, confidence and perceived value. And if you don't take every opportunity to do that, and learn how to do that, and practice how to do that, then you're going to struggle?
Well, it's, it's so it's funny, the learning to present just simply one of the first things I'll say with our clients is very similar sort of thing. You know, before we even go into learning a sales framework, which will let you know, a conversational framework and how you can lead the conversation, get into the habit of just presenting your proposals, just, you know, say that and other podcasts, just present it face to face, because there's so many things you can pick up on questions you can ask objections you can handle, and you can you can navigate the conversation into closing it right then and there, as opposed to, you know, just sending it out and waiting and then getting into the chasing, and then the client is now comparing your proposal to somebody else's proposal. And now all they can tell the difference is just the price. And you know, it just just you just let go of all of the control of the of the process there. And it's very frustrating. It's very frustrating for architects,
then I've had clients say to me, when do we follow up? When do we find the client and check in? Well, if you haven't asked that question, you definitely have lost control the process. Yeah. And just, again, speaking to Tyler today about the clothes, you know, and how you know, people, you hear that in the clothes that sounds very salesy, but at some point, you've got to ask for the business. You've got to learn how to do that in a, in a way, and the two questions that we say to our clients that you need to not in these words, necessarily, and you can change them and put them into your tune, but say to the client, what criteria you're going to use to choose your architect, what's important to you in this process? If not, don't assume that price is number one, because quite often price is not number one, to assume, get the actual criteria the client is going to use. And then the second question is, what specifically do we need to do to get your business? How do we how do we were really excited about your project? How do we get that now, people recoil a little bit, maybe that former words, but those two, those two concepts, you need to find a way to ask both of those questions of the client. Because that will, and then you can get your history, then you can say find out how many how many presentations you have to make. So when one was that one in 3.21, and five, and then that will that will inform your forecast in the future, and your marketing and the level of interest that you need to get. So we do a module at the end and fully financed, actually, to the second last module, because it's not it's complicated, but it's very new to people. And I think if you do that upfront, we do the kind of stuff that's a little bit more sexy and interesting at the beginning, and then we work our way up to finance. And then we do a final module, which is how do you implement all this stuff? Yeah, how do you? How do you take really what we're presenting to people that concepts? We're not, we're not going into the knowledge and understanding piece, which sometimes needs a little bit consultancy, or a little bit of more research, as a lot of things you can do on your own, but even implementation, you need some structure to that, how do you do that? And you pretty much you don't get initiative fatigue in your practice. I've had another new idea of another new system and because immediately that goes off the rails and you don't get value, whether that be from the system or the new software or whichever it is you're trying to implement.
That's interesting that you keep the financial module to the to the end and end to the vision thing.
Parts upfront. Yeah. Clients like that. Architects like this, this sort of big picture when you introduce them. We say to new clients, that consultancy business. Can you show us the drawings for your business? So we can look at us a bit Skansen. In the jointer. Business, well, what does it look like when it's finished? Well, we've never really thought like that. But then then the penny drops. And they say, Well, we do that every day for our clients. And we wouldn't just start laying a few bricks and hoping it all works out, and a building. But that's actually what we're doing in. In our practice, we're going day by day, month to month, hoping it gets better. With us, you need a plan you need what does it look like in a year's time two years time? Will it work out exactly like that? Probably not. But at least everybody's aligned around that journey, and doesn't reflect a journey. If you're on a journey without a destination. That becomes very confusing for everybody. Any idea is irrelevant. But once you get that destination clear, then you're looking at your sales in one city flights to the one city, in businesses to say everything becomes contextualized around division. Yep. Yep.
And so how does the program work? Is it totally, totally online? Or is it like in cohorts or in groups of people, as a community, people can join? Yeah,
we've done the program live. And we we've pre recorded version. And that's done. We've, we've recorded a group. So we've got a group of architects that go through the program like everyone else, and we explain it's a bit like an empty chair, you effectively buy an empty chair, you listen to the discussions. And typically, the questions are the same for whether it's live or pre recorded as the questions come up the same. And what we've done in the new business Foundations Program is we've taken the original program. And for each module, we've added in on a chapter extension, just covering the stuff that we've learned in the last five years to new models, new frameworks, and then probably the biggest change that we've made as we've introduced an expert panel. Okay, so we've taken all because you said earlier, it's a very small ecosystem of people who are helping architects and business. So Tyler's done a piece, Nikita Morel, Amy Edwards, in North Lyon fee proposal. So I think we've got seven or eight experts, we've all done a module in the program, and that this program will be something that people can go back and revisit. So you can do it once. It's eight modules, right, an hour and a half for each module, but it's split into 10 and smaller parts. There's a long workbook that goes with the program, there's a really comprehensive introduction to business and then put you in a position to see can I do this on my own or do I need some consultancy help or you need some specific expertise, maybe your own finance or marketing? copywriting is really important. And that I think using experts, it almost gets architects thinking like how these specialists think you pay for something you pay for that confidence and perceived value something that you don't have naturally yourself
amazing, brilliant green stuff. So people want to get in contact or find out more about the program was the best way for them to
win we if we could put the link in the in the in the notes for this episode. But you'll find that on the octopus website and the program is business Foundations Program.
Amazing, brilliant really, really excited with this initiative right and always an absolute pleasure to be speaking with you love what it is that you guys are doing in the in the industry and I know that the call
