Downs Variava was initially established 40 years
ago by Sydney Downs and focused primarily on Housing. After a successful
first decade during which the practice grew to a size of 40 employees,
the boom in housing work dried up overnight and the practice sank
back down to 2 people.
Today, the practice is run by 3 partners and has 26 staff and are
careful to be involved with a mix of projects so as not to be over-reliant
on one specialized field which had caused serious problems before.
This is illustrated by the list of current projects:
- Danziac Street, Manchester, Mixed-Use
- Chapel at Liverpool University
- HQ Offices at Cheadle Royal
- Information Tower at Gateway House
- Enclosing courtyard at Manchester Business School
The practice uses 'Practice Profiles' to attract work. The are tailored
to suit particular clients, and particular schemes. They can include
staff qualifications, fee turnover, health and safety documentation
computing facilities, name of Bank Manager and consultants.
The practice is accredited under the Investors In People scheme which
helps with tracking a growth in skills and training amongst staff
members.When new people are employed, they are allocated a 'buddy'
within the practice introduce them to the work and are generally given
a contract of work after 6 months providing for pensions, sick leave
and holidays. The contracted working week is 37.5hrs and can be worked
on a flextime basis. All staff take part in a 'Personal Development
Plan' the RIBA CPD requirements which Mr Hickey likened to under taking
a part 4, part 5 and part 6 are you career progresses.
After several years in practice, the Bank insisted they produce a
business plan to give an idea of cash flow and turnover in the future
and to help asses risk. The practice now produce a business plan which
is reviewed every 5 years and sets targets for growth, staffing, turnover.
The current plan, reviewed three years ago, set the target of achieving
a turnover of £1.25m as this was the level at which the current office
at the Towers would be optimum utilizations in terms of staffing levels.
All the objective of this plan have now been achieve ("by hook or
by crook") and the practice has increased it's turnover by £500k in
two years to £1.25m.
Funding a Business
Mr Hickey went to to give an interesting explanation of the problem
of cash flow while running the practice. As most of the expenditure
by the practice is made in the earlier stages of a project, before
the majority of fees have come in, the practice must have enough cash
available during the interim period to cover the shortfall. For example,
on a £2m job with 10% fees, a deficit in the early period of the contract
might run to £40k before eventually showing the £20k profit at the
end of the contract.
The practice requires approximately£600k in funds to cover cost deficits
and this comes from three sources:
- £200k from bank loans and overdrafts
- £50k from creditors in the for of credit (up to 30 days)
- £350k form the partners themselves.
Cash not Profit
Mr Hickey thus explained that it is not ultimately profit which drives
the business, but cash flow. The business must never run out of cash,
or it will go out of business. Therefore cash management is the key
to the whole business, especially in times of growth. An analysis
of three types of of contract shows that traditional contracts lead
to the most exposure in terms of cash flow, but reasonable profit
levels at the end, whereas a design and build contract has less exposure
and can often lead to high profitability on a similar project with
Using a 'Practice Value Funnel' diagram, Mr Hickey explained that
there were many aspects that make up assets of the practice. At the
bottom of the funnel is profit, and working up the funnel we find
- work in progress
- work in view (probable)
- work in view (possible)
- speculative work
The total value equates to somewhere in the region of £2m. However, this figure can never really be realised by the
partners although there are means of selling the value on to younger members in the practice.
To ensure smooth running of the financial side of the practice, regular
cash flow projections are produced, as the cash flow can vary quite
markedly from month to month. Half of the cost of running the practice
is staff cost, and another third is overheads. On a £100k project
they might aim for a retained profit of 8 or 9% which compares very
unfavorably to a building company who could achieve a 3 to 5% profit
on a £20m project. Thus the builder will make 4 times as much profit
from the job as the architect, an illustration of how different business
structures have very different profitability.
In concluding his Lecture Mr Hickey agreed with the maxim that architecture
is a "Great Vocation, but an awful business". However, he foresees
changes within the profession in the future. "The time for small practices
is nearing it's close" and " the title 'architect' is diminishing
all the time" were two of his statements. He also went on to illustrate
how architects effectively earn 50% less from similar projects as
they would have done 25 years ago. This is not a sustainable situation
and as architecture students we must learn to diversify the skills
that we possess in order to survive and thrive.
will have the UK's largest TV screen
Tower on Piccadilly Station Approach
The Great Hall in The Cornerstone at Hope at Everton
House student accommodation for the University of Manchester