Profit in landscape architecture

[Robert Holden]

 

Profit in landscape architecture

In accountancy  ‘profit’ refers to the financial benefit that is achieved when the  work done and the expenses incurred by a business are exceeded by revenue generated by the  activities of the business. 

In short profit is Total revenue -Total expenditure

The  owners of a business are responsible for deciding what to do with profit, and may reinvest it in the business, pay off outstanding debt,  reward employees with bonuses and pay-rises, make payments to shareholders, and so on.

There are different types of profit that can be measured as:

• gross profit,
•  operating profit,
• net profit.

Profit may also be referred to as a profit margin which is the percentage of the gross revenue that represents profit.

The UK construction industry is notoriously susceptible to changes in economic outlook  and regularly goes through booms and busts as it is used to hold back or push forward the wider economy.. The 2015 UK Industry Performance Report (produced by Glenagan, a UK construction industry analyst consultancy) suggested that the profitability of the construction industry was around 3%, up from around 2% the previous year, but well below the peak of 9.9% in 2009. In 2019-20 Glenagan report profitability as 2.9%. Design consultancies generally achieve better profitability than this. Caroline Cole in her 2014 RIBA Journal article reported that architectural consultancies then achieved 20% profitability: “Across the country, practices average a healthy profit margin of just over 20%. However, this figure conceals some worrying variations in fortunes, especially at the larger end of the spectrum: almost 60% of the largest practices do not meet our benchmark for profitability, which is set at 15%; more than a third fail to muster even 10% profit.”

There is a lot more information available related to profit and landscape architecture practices in the USA. TRUIC advises that for landscape company practices “Profit should be priced in at at least 10% of cost (minimum), for both the design and the construction businesses. Some companies operate at a 15% margin, but this is rare, especially for a smaller company.”  TRUIC is short for The Really Useful Information Company self-described as “a team of entrepreneurs who are passionate about education”. A piece by the  Landscape Leadership website, run by the US sales and marketing agency, reports that “The average profitability for a landscape company is net 5 percent. But … that a well-run landscaping company should be between 10 and 12 percent. “Incidentally ASLA reports on the total value of landscape architecture services in the USA  as $2.7 billion Wonder what is the equivalent value in the UK.

Sources

Glenagan UK Construction Industry Report 2019-20 https://www.glenigan.com/wp-content/uploads/2021/12/Glenigan_2019-20_UK_Industry_Performance_Report.pdf ref. pp.7-8

Caroline Cole, ‘Success begins at home’ RIBA Journal article, 1.4.2014, https://www.ribaj.com/intelligence/success-begins-at-home

TRUIC https://howtostartanllc.com/business-ideas/landscape-architect

Landscape Leadership https://www.landscapeleadership.com/blog/how-to-identify-most-profitable-landscape-services

Jared Green, “Landscape Architecture Services in the US valued at $2.7 Billion” The Dirt 7 March 2018 https://dirt.asla.org/2018/03/07/landscape-architecture-services-in-the-u-s-added-2-7-billion-in-value/