Kate & James

Kate and James had been running their design and construction business together for twelve years. sixteen people across architecture, interior design, project management, and administration. the business had built a strong reputation for commercial interior projects: hospitality, retail, and corporate fitout work across melbourne and regional victoria.

the partnership had divided naturally over the years. Kate led design and client relationships. James led construction delivery and subcontractor management. on paper it was clean. in practice every significant decision required both of them in the room. client briefs needed Kate's sign-off before James could mobilise. subcontractor variations needed James before Kate could update the client. the business moved at the speed of two people finding time to talk to each other. at sixteen people and $4.8m that speed was no longer fast enough.

the revenue model had a problem neither of them had looked at closely. the design fees on their projects were priced at rates set four years earlier. the construction margin on the same projects was healthy. the design work (which was the most time-intensive part of the engagement and the reason clients came to them) was being delivered at a margin that did not reflect its value. Kate knew the design fees were low. she had been reluctant to raise them because the clients had come to expect the current rates and the design work was how the business won projects. the result was that the part of the business Kate owned personally was the least profitable part of the business.

there was a team issue that had been building. two of the senior designers had been with the business for over three years and were capable of leading projects independently from brief through to construction documentation. Kate reviewed everything before it went to the client. both designers had been asking for more autonomy. Kate had interpreted this as ambition. what it actually was, was a signal that the structure had no room for them to grow. one had begun looking elsewhere six months earlier.

the designer who had been looking elsewhere stayed. within three months both were leading their own projects without Kate in every client conversation. Kate's direct design hours dropped from forty-five per week to twenty. James stopped waiting for Kate before mobilising on site. the business moved faster than it had in years. revenue grew from $4.8m to $6.3m in fourteen months. Kate repriced three legacy client retainers in month four. all three accepted. design margin improved by fourteen percentage points.

the partnership had all the capability it needed. what it didn't have was a structure that let both people operate without waiting for the other. and the design fees that had been left unreviewed for four years were the single highest-leverage financial change in the business. it took one conversation per client and cost nothing to execute.