Most small practices price a project, win it, and only find out months later whether the fee was enough. This guide shows a simple way to check before you send the fee proposal, and again as the project runs.
The question that matters
Not "is this a fair fee?" but "what hourly rate will this fee actually earn us?"
That number is your effective hourly rate: the fee divided by the hours you spend. If it's below what the practice needs to earn per hour, the project loses money, however good the fee looks.
Step 1: decide your target hourly rate
Work out what an hour of work has to earn to cover salaries, overheads and a margin. Use that one number for every project. If you don't have one yet, start with total yearly costs plus the profit you want, divided by the hours you can realistically charge in a year.
Step 2: split the fee across stages
Fees are easier to check when they are split by stage, not left as one lump sum. Many UK practices use the RIBA Plan of Work stages:
- Stage 1: Preparation and briefing
- Stage 2: Concept design
- Stage 3: Spatial coordination
- Stage 4: Technical design
- Stage 5: Manufacturing and construction
- Stage 6: Handover
Give each stage a share of the fee. The split depends on how you work, so use your own history if you have it.
Step 3: estimate the hours for each stage
For every stage, estimate the hours your team will spend. Be honest, and include the time that doesn't feel like drawing: client calls, revisions, site visits, coordination, admin.
Step 4: divide fee by hours
For each stage, divide the stage fee by the planned hours. Then add up all the stages and do the same for the whole project.
Compare each figure with your target rate. A stage under target isn't always a problem, since some stages earn more than others, but you should know which ones they are before you agree the fee.
A worked example
A £30,000 project, with a target of £75 an hour:
| Fee | Hours | Rate | |
|---|---|---|---|
| Whole project | £30,000 | 450 | £66.67 |
At £75 an hour, that fee pays for 400 hours, not 450. To hit the target on 450 hours, the fee would need to be £33,750: £3,750 more. With that gap known up front, you can raise the fee, trim the scope, or accept the lower margin on purpose.
Step 5: check again as the project runs
The estimate is only a starting point. Compare the hours actually logged with the plan every month. Variations, delayed information and extra revisions all show up as hours the fee didn't allow for. Raise a variation when the scope changes, in writing, before the hours are spent.
Free spreadsheet
We made a simple spreadsheet that does steps 2 to 4 for you: enter the fee, your target rate and the hours for each stage, and it shows your effective rate for the whole project and each stage.
Download the spreadsheet (free, no email needed)
Doing this for every project
A spreadsheet works for one project. Projexa does the same calculation for every project at once, and tracks the real hours from timesheets against the fee, so you see the effective rate as the work happens, not after it.