A PRACTICE ( ^[6]) ( ^[28]) ( ^[57])

1. Services: Use "Schedule of A/E (Architectural/Engineering) Services" on pp. 6-15 to plan the services for building design.

2. Compensation (A/E Fees)

   1. See App. A, item E, for A/E fees as a percentage of construction cost by building type.

   2. Total services fees can be broken down as follows:

      

   3. Of the total A/E fees, standard consultants' fees can be broken out as follows:

      Civil engineering and landscape architect	2.5 to 6%
      Structural engineering	1 to 2.5%
      Mechanical engineering	4 to 10%
      Electrical engineering	4 to 10%
      Other

3. Rules of Thumb for Business Practice

   1. Watch cash flow: For a small firm, balance checkbook. For a medium or large firm, use cash statements and balance and income statements. Estimate future cash flow based on past, with 15% "fudge factor," plus desired profit. Many architects (and businesses, in general) get in trouble by not immediately paying their bills (to consultants and vendors) as they are paid by their clients.

   2. Have financial reserves: Six months' worth.

   3. Monitor time by these ratios:

      1. 
         

      This tells what percent of total labor cost is being spent on paying work. The higher the percent the better. Typical range is 55 to 85%, but lower than 65% is poor. However, principals often have a 50% ratio.

      1. 
         

      This ratio is multiplied times wages for billing rates. Usually 2.5 to 3.0, Will vary with firm and time.

      1. Overhead rate: looks at total indirect expenses...