Metrics for Success: How Architects Should Measure Business Growth
Leading a successful design practice does not guarantee it is a profitable business. Do you know and track the key metrics (KPIs) to extract meaningful, relevant, timely and actionable insights to operate and improve your practice? In this helpful tutorial, learn about the quantitative measures of a successful architecture business, and begin tracking your growth towards your goals.
by Ray Brown & Bec Kempster
KPIs for Architectural firms: What metrics should you track in order to control your design business?
A Key Performance Indicator, or KPI, is a measurable value that demonstrates how effectively your design firm is achieving key business objectives. The key driver for utilising KPI reporting is to extract meaningful, relevant, timely and actionable insights that can be used to operate and improve your practice. KPIs provide trend information that is often absent from other forms of reporting.
Think of them as the numbers you’d like to know each week, or each month if you were basking in the sun on a remote, tropical island while your practice was being managed by others. The metrics that, even if you’re at arm’s length from the business, would provide you with reassurance that the business was in good heart.
There are two types of KPIs. The first is a lead indicator, which predicts what may happen in the future. For example, work secured in the month (but which may be delivered over two years), or the number of enquiries in a month which will be a barometer of future work.
A lag indicator points to what has happened in the past, such as revenue or profit in a month. It provides an indication of what happened after the event. Look to include a mix of both lag and lead indicators in your reporting.
When setting up your KPI report, we recommend you include data from the previous twelve months as this will immediately allow you to chart whether your practice performance is improving, or is poorer than the previous period.
Whilst KPIs can vary for different practices, there will be six to eight numbers that will give you a good indication of the health of your business.
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