A project shouldn’t be an economic uncertainty. Yet, many architecture firms find that budgets overrun and margins shrink. How can you ensure a project will be profitable before signing the contract?
By analysing past projects, using historical data, and identifying patterns, you can create more accurate calculations and make better decisions.
In this article, we explore how insights from previous projects can help you negotiate better agreements, avoid unexpected costs, and ensure the projects you take on are financially sustainable.
The biggest profitability challenges in architectural projects
Even with experience, estimating a project's profitability with complete accuracy is difficult. Some of the most common challenges for architecture firms include:
- Poor use of historical data – Many firms have valuable data from past projects but fail to use it effectively in new calculations.
- Variable time usage and inefficient resource planning – Adjustments and new requirements along the way can extend project timelines, eating into margins.
- Client expectations and project development – Projects often evolve due to changing needs, regulations, or unforeseen challenges, affecting both time and costs.
- Cost miscalculations – Underestimating the time and resources needed at different stages can lead to lower profitability than expected.
How to use historical data for better forecasts
1. Analyse past projects in to identify patterns
- Which types of projects stayed on track, and which had significant deviations in time and cost?
- Identify where additional work frequently occurs and incorporate this into new project estimates.
- Use these insights to create more realistic estimates for future projects.
If you don’t have a project management system that quickly provides you with this data, it’s time to consider one. Spending hours collecting and structuring project insights manually is time better spent elsewhere. See how Milient can help.
2. Assess the profitability of different project types and clients
- Which project types have delivered the highest returns?
- Are there specific clients or projects that repeatedly generate excessive unforeseen work?
- Use this information in pricing and negotiations when securing new agreements.
3. Choose the right pricing model for your project
- Fixed price or hourly billing? How does this impact profitability?
- Ensure contracts include payments for changes and additional work.
- Read more about choosing the right pricing model in our blog post on pricing models.
4. Scenario analysis: What if the project takes 10% longer than planned?
- Simulate different outcomes based on past project experiences.
- Calculate how delays or changes impact profit margins.
- Plan for multiple scenarios to ensure you have a financial buffer if the unexpected happens.
5. Use digital tools for financial forecasting
- Milient provides an overview of actual costs and time usage from past projects, helping you create more precise budgets.
- Use data to identify project types with the highest risk of budget overruns.
6. Set clear profitability requirements before signing new contracts
- Define a minimum margin for each project based on historical data.
- Assess how flexible you can be with pricing and time without compromising profitability.
Want practical tips for better financial control in projects?
We've gathered expert advice from the industry in handy guides you can download for free.
For example, explore our free guide to improving project profitability for more tips and strategies to strengthen your business.
