Understanding the Real Drivers of Financial Performance for Medium and Large Practices in the last year.
Introduction: More Work, Less Margin?
The past two years have been among the busiest that UK architecture has seen in a decade. Coming out of the pandemic, total revenue for RIBA-chartered practices rose by 17% in 2023 and a further 13% in 2024. Many larger firms expanded their teams, secured new commissions and entered sectors such as retrofit, healthcare, and science.
Yet many directors and operations leads tell the same story. Workloads have grown, but profitability has not followed.
Profit today depends less on the amount of work and more on how consistently a firm manages its data, resources, and scope across multiple projects and studios. Fee control, utilisation, and forecasting all play a part, but so does ensuring that the systems behind them are simple enough for everyone to use properly.
The Profitability Pyramid outlines where firms make money, where they lose it, and what defines the most financially resilient practices.
The Pyramid’s Peak: Where Profits Are Made
Architecture has never been a high-margin industry, yet some practices achieve strong and consistent returns. Their advantage lies in discipline, transparency, and a culture of shared accountability. These firms know that consistency comes from processes that staff can actually follow.
Here are the top five layers where profit is made:
🔺 1. Repeating Commercial Work
For large practices, commercial architecture often forms the foundation of financial stability. Office developments, mixed-use schemes, and workplace projects offer repeatable delivery frameworks and long-term client relationships.
When a firm delivers one successful phase, it usually leads to the next. Each project becomes quicker and more efficient to deliver. The work itself is valuable, but the familiarity and repeatability are what create dependable profit.
Efficiency at this level depends on standard systems that are easy for every team to adopt.
🔺 2. Strong Fee Agreements and Scope Control
Profit begins before design does. Successful firms:
- Scope projects accurately from the outset
- Price each stage with margin, not just break-even
- Establish clear processes for variations
When scope control is applied consistently, it becomes routine rather than a debate. Larger firms benefit when these steps are embedded into day-to-day delivery instead of left to individual interpretation. The simpler the process, the more likely it will be used correctly across the business.
🔺 3. Efficient Delivery and Staff Utilisation
Staff costs represent the majority of expenditure for most practices. How people’s time is used has a direct effect on the bottom line.
High-performing firms maintain utilisation rates above 75 percent. They use practical systems that make time recording and resource allocation straightforward. This allows project and finance leaders to see whether effort matches fee and to correct drift early.
Visibility only works if everyone participates. That is why simplicity and consistency in internal systems matter as much as the numbers themselves.
🔺 4. Specialisation in High-Value Sectors
Profitability improves when firms focus on sectors that value expertise. Healthcare, logistics, science, and infrastructure projects command higher fees because they carry more complexity and risk. Firms that understand these sectors build reputations that justify their pricing.
At the same time, retrofit and workplace design continue to offer stable margins and faster turnaround. The common factor is good data. Firms that review which sectors and clients produce the best results make better decisions about where to invest their time and staff.
🔺 5. Inflation-Proof Fee Models
Fee structures that adjust to market conditions protect margins in uncertain times. Percentage-based fees and time-charge models respond to changes in project cost more effectively than fixed sums.
This protection only works if rates and assumptions are updated regularly. Practices that link resource data to financial forecasting can see the real cost of delivery before a contract is signed. Consistent review prevents erosion later on.
The Middle Layers: Fee Structures & Margins
UK architecture firms typically operate on thin margins. According to recent RIBA data:
- Average net profit margin: 6–10%
- Target project-level margin: ~15%
- Reality for many firms: Closer to break-even on multiple jobs
Fee structures vary, but most commercial projects follow one of three models:
- Percentage of construction cost – aligns income with scope growth, but is often not backed by a bottom-up resource plan to ensure the fee will actually cover the cost of delivering the work.
- Fixed fee – offers predictability to client, but carries delivery risk to practice
- Time-based billing – covers actual effort, but only if rates are updated regularly
No model guarantees profit. What matters is whether the fee actually reflects the real cost of delivery, plus a margin. In times of rapid inflation, that’s becoming harder to achieve unless firms revisit how they price their services.
The Pyramid’s Base: Where Money Is Lost
If the top half of the pyramid is about where firms make money, the base layers reveal how it’s often lost. These are the hidden traps that drain margin, especially for practices between 20 and 100 employees.
🔻 1. Unpaid Bids and Competitions
Bid work can absorb large amounts of time. Without clear tracking, firms underestimate how much resource it consumes. Monitoring the effort spent on each pursuit helps identify which opportunities genuinely contribute to business goals.
🔻 2. Scope Creep
Change is inevitable, but unmanaged change destroys margin. Many teams still record variations informally, which leaves extra work unpaid. Standardising how changes are logged and approved ensures that project leaders stay in control and clients remain informed.
🔻 3. Delays and Inefficiencies
Delays in planning or client decisions extend delivery time without increasing income. If the same team remains assigned to a project for twice as long as planned, labour costs double.
Regular time and progress reporting helps identify these patterns early. The challenge is not collecting the data but encouraging consistent use of the systems that record it.
🔻 4. Fee Undercutting
Winning projects through low fees often leads to burnout and lost opportunities for innovation. A transparent understanding of true delivery cost helps firms price work with confidence and communicate value clearly to clients.
🔻 5. Overhead and Staff Mismanagement
Large practices carry significant fixed costs. When income fluctuates, those overheads can quickly eat into profit. Linking utilisation and overhead data helps directors adjust resourcing and spending before issues build up. Reliable visibility depends on processes that are easy for everyone to maintain.
So What Makes a Firm Financially Resilient?
Based on the last two years, we see four recurring themes among firms that maintain profitability, even in turbulent markets:
1. Strategic Positioning
Firms that know who they serve (e.g., science, workplace, public realm) and say “no” to poor-fit projects outperform generalists.
2. Operational Discipline
Tracking time, managing scope, controlling overheads, and resourcing accurately are non-negotiables for margin protection.
3. Fee Confidence
Profitable firms are not the cheapest, they’re the most value-aligned. They educate clients, communicate clearly, and negotiate without fear.
4. Adoptability
Their systems are clear, straightforward, and used consistently across the practice. Simplicity turns process into habit.
Final Word: Profit Is Designed, Not Hoped For
Profit is not something that appears at the end of a job. It is built from the start through structure, clarity, and discipline.
As firms grow beyond fifty or a hundred people, these principles become critical. Without consistent systems that everyone uses, more work can simply mean more risk.
The Profitability Pyramid provides a way to look at this. Build a solid base of discipline, secure the middle with transparent fee structures, and reach the top with efficient delivery supported by accessible tools and reliable data.
When every team works from the same information, profitability becomes a designed outcome rather than a lucky one.