Why most architecture and engineering firms overspend on design software and underinvest where it matters.
Most architecture and engineering firms invest heavily in design software but neglect business management tools, often at the cost of efficiency and profitability. I learned this lesson firsthand when I co-founded my own firm in 2013 with a couple of partners. We left larger firms because we wanted to have more control over the work we did and flex our design muscles. We started working from our living rooms with laptops, a subscription to Revit LT, and a dream. We slowly started to bring in work and grow the team.
Although we were confident in our ability to design and deliver projects for our clients, we were lacking in business knowledge, underinvested in planning for growth, and neglected building systems and processes as we focused on the creative work. We grew our tech stack by adopting more design tools from SketchUp and Revit to Adobe CC, Bluebeam, and more.
Yet the biggest weakness of the business wasn’t design. It was making sure the team was billable and efficient, that we hit deadlines and kept each project on budget. The more tools we adopted the worse this got as our design workflow jumped between software tools and often necessitated duplicating work. Instead of a streamlined, repeatable, and efficient design process, we made things up as we went and each project was executed differently.
At the same time, with the goal of saving money, we resisted investing in software that helped with managing the business. We used QuickBooks Online for financial management and then folders full of spreadsheets that we custom built for various aspects of the business. Our thinking at the time was to save money with “free” spreadsheets. We felt we were already spending too much on software and didn’t want to increase our budget. We didn’t have a clear enough financial picture to understand that the biggest cost by far was time, and that investing in software that could cut down on firm management, reduce manually building and updating disconnected spreadsheets, and having to enter the same data in multiple places was costing us hundreds of billable hours each year.
It took us a few years operating like this before we pulled the trigger to move from spreadsheets to a more integrated firm management tool. The financial impact was significant. We were able to better manage our team, visualize project schedules and deadlines, get up-to-date reports for individual projects, team members, and firm-wide performance, and most importantly we saved hours of administrative time each week. Time we then were able to spend doing business development and serving our clients.
In short, the investment in software on the business side of the practice was more impactful for our financial stability than investing in new design tools. The management tools gave us better data about how we were spending our time, where we were going over budget, and when we were wasting effort, so we could make smarter management decisions. Firms that reassess their software stack often uncover redundancies in design tools. By optimizing our workflow, we cut unnecessary software costs, saved valuable time, and improved overall efficiency and quality of our work deliverables.
After moving on from running the firm, I started consulting with architecture and engineering firms on operations and firm management. While working with dozens of small firms, I saw many of the same mistakes that I made. There was a resistance to investing in business software and an overreliance on custom built spreadsheets and other tools.
Spending cash was carefully analyzed while spending time was overlooked. Leaders more quickly invested in design tools but would second guess the value of tools that would improve financial management, marketing efforts, or resource planning. The passion for designing great projects and impacting communities drew attention away from thinking about the right balance of tools for all aspects of the firms.
Most firms I consulted with were underinvesting in marketing, task management, project management, and financial management software, while the bulk of resources were spent on design software. It might make sense at first glance, but design wasn’t where firms were having problems. Challenges were almost always related to project management, team management, and cashflow management. Yet firms weren’t willing to invest in the tools that could address these parts of their business. They were blinded by their passion for design. It was easy for an architect to decide they needed the latest design tool, because that is what they were passionate about. It was difficult for them to justify tools to address the challenges that were outside their area of expertise.
Some metrics to consider, using data pulled from the 2024 BQE Benchmarking Report, BQE CORE user data, and the 2024 AIA Firm Survey Report:
- Firms that invest 3-6 percent of revenue in software, including design and management tools, see higher operational efficiency.
- Firms using integrated business management tools saw a 20 percent increase in profitability compared to industry averages (15.9 percent vs. 13.2 percent profit margin).
- Automating billing and invoicing coupled with e-payments lead to 30 percent faster client payments, improving cash flow.
- Architecture and engineering firms using all-in-one management software generated $13,000 more revenue per employee, a more than 9 percent increase ($159,000 vs. $143,000 revenue per FTE).
What I conclude from my personal experience running a firm, consulting with firms, and from the statistics above is that many firms over-invest in design tools, creating redundancies and wasted money. Meanwhile they underinvest in tools to improve their operations and make their team more effective. Staff salaries are by far the biggest expense at every firm, and architecture and engineering firms that underinvest in software often compensate with higher labor costs and operational inefficiencies. Investing in tools that can save admin time, and make your team more billable, will have a huge return on investment.
You should have software tools for each aspect of your business: marketing and business development, project management, team management, financial management, and of course design services. But these should be balanced. If your firm isn’t investing in business software as much as design tools, it’s time to rethink your strategy. Take a close look at where inefficiencies are costing you billable hours and invest in solutions that will save time and maximize your firm’s profitability and long-term success.
Lucas Gray is director of content and community at BQE. Contact him at lucas.gray@bqe.com.
