Firm Advice

Thinking about starting your own firm or going out on your own as a sole practioner? If so, there are some basics you should be reminded of when starting your firm. Keep in mind, this is not an all-encompassing post and you should consult legal advice as you feel necessary. I’ve worked in the architecture profession for over 20 years, the past 14 years as a licensed architect and the past 5 years as running my own architecture firm.  I’d like to think I’ve learned a few things over the years that are worth sharing. Below is a business outline that I feel is crucial to starting your own firm. I’ll be honest, I haven’t followed it to the letter. I won’t say which I haven’t, but I can say I regret not having done some…vague enough… don’t you do the same.

Strategic Planning

Establish your Vision, Mission, and Values. Going through a strategic planning process will help you in defining your goals, as well as provide the framework to create a specific business plan to achieve them. It will also help you establish and build your unique ‘Brand’ and guide your day-to-day decision making. A situations arise, or goals change, refer to your strategic plan for guidance and/or to revise as needed. Your strategic plan is fluid and it should be revised as needed, at least once a year minimum. The basics your plan should contain are the following:

    1. Vision: How do you see your firm in 2, 3, or 5 years?
      1. How much revenue and profit would you like or need to be successful?
      2. Do you plan on having employees, if so how many?
      3. What project types will you serve? Geographic location(s) you will serve?
      4. What services will you offer? Will they be direct or subcontracted? (architecture, landscape architecture, interior design, graphic design, civil, MEP, or structural engineering…)
    2. Mission: What is your key purpose?
      1. Why do you want to do this work?
      2. What do you want to be known for? (unique design solutions, traditional architecture, contemporary architecture, great service, technical abilities, LEED solutions…)
      3. What makes you and your firm unique?
      4. Try and develop a benefit statement or slogan for your Key Purpose.
    3. Values: What are your core principles regarding design and business?

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I don’t think your strategic plan should be shared with your clients or posted on your web site. The purpose of the plan is to guide you, not as ‘fluff’ to market or a sales attempt.  That doesn’t mean write it and just forget about it. To be purposeful your plan needs to be simple and employed as framework for you to reference and guide you as to why you’re doing what you’re doing. Bob Borson has some great advice in his Mission Statements post. We all want to be the best and offer the best services, we don’t need to tell clients that… but we do need a plan as to how we’re going to achieve.

Legal Entity

Most business entities can be set up rather easily and with little to no assistance. However, it’s best to consult with an attorney to discuss what type of business structure will fit your needs the best. If you’re not comfortable doing so, a business attorney can also assist you in setting up the legal entity. There are several legal corporation structures, for example:

    1. Sole Proprietorship- personal exposure for all liabilities
    2. Partnership- personal exposure and possible control issues
    3. S Corporation- insulation from many liabilities, tax burden passes through to individual owners
    4. C Corporation- insulation from many liabilities, subject to corporate taxes, flexible
    5. Limited Liability Corporation or Professional Limited Liability Corporation- simple but has limitations

It’s best to consult an attorney and review these, as well as other, options available to you. Meeting with an attorney for an hour is worth the cost and can save you a lot of hassle in the future.

Licensure

Make sure you are licensed in every state (or jurisdiction) that you are providing services. Many states require local licensure just to offer to provide architectural services. Be sure to review the specific requirements for each state prior to offering or providing services for clients or projects. Some states will also require your corporation be registered with the local Architecture Board and have a separate corporate seal and number than your personal architecture seal. Create a method for Continuing Education requirements and tracking for yourself and any other professional architects in your firm.

Insurance

There is a lot to cover when it comes to insurance… there’s Professional Liability Insurance, Errors and Omissions, General Liability Insurance, Property/Casualty, Workers Compensation, etc. Certain clients and projects will mandate what type and amounts of insurance you should carry. It’s best to find a reputable insurance broker and discuss your options with them.

Professional Relationships

Make sure to develop and maintain key relationships to assist you and your firm, i.e. banker, lawyer, finance and tax accountants, insurance brokers, vendors, engineering consultants, code officials, architects…

Startup Capital

Many firms start out as Sole Proprietors working out of their home and ‘bootstrapping’ it with little to no startup capital. Modative’s post, How to Start an Architecture Firm – Introduction, is a good read for how to start a firm via bootstrapping. However, if your goal is to start out a little ‘bigger,’ there’s more to consider. New firms rarely begin collecting revenue on day one, you should secure a source of funds required to cover your operating expenses in the time period between opening and receiving regular revenue to cover operating costs. Collection periods can vary significantly be sure your contract states your collection period. If you plan on starting ‘bigger,’ typically three to six months of operating expenses are needed prior to starting. Operating capital can come from many sources; personal funds, outside investors, personal credit, bank loan, SBA loan, etc.

    1. Establish your operating budget to determine your cash need
      1. Rent
      2. Space/building improvements
      3. Furniture
      4. Computer hardware
      5. Computer software
      6. Utilities, phone, internet, insurance, salaries, travel, etc.
      7. Marketing
      8. etc., etc., etc…..

Developing your Business

How are you going to market your services? How are you going to sell your services? How will you follow up with potential clients? Where will you ‘find’ clients? These all need to be answered if you want a chance at succeeding. Most architects starting out need to use work done while employed at a prior firm to market themselves. When doing so, be sure you have the firms consent, credit them as appropriate, and be honest with your particular responsibilities on that particular project. You’ll also need to continually develop your business and maintain the following:

    1. Marketing materials
    2. Identify potential clients and projects
    3. Website creation and maintenance
    4. Social media strategies (blog, Twitter, Facebook, LinkedIN, etc.)

Handshake

Production Management

How are you going to execute your work? Numerous means/methods are required to complete a project, typically one individual does not possess all these skills. This is a positive to a partnership- one partner has a particular skill set that the other does not, together they complement each other’s skills. You’ll ned to develop a method for:

    1. Design
    2. Construction documenting
    3. Project management
    4. Construction administration
    5. Computer systems maintenance
    6. Printing
    7. Contract Management
    8. Fee proposals

Business Management

How are you going to deal with financial and accounting matters? Unless you’re on your own, its best to engage the services of a bookkeeper/tax accountant. They can provide you valuable advice on the financials of your firm as well as strategies to grow.

    1. Invoicing
    2. Financial statements
    3. Taxes
    4. Payroll and withholding

Fees and Services

How are you going to determine fees for your services? You should not be competing on the basis of price alone. However, one advantage of start-up/sole proprietor is that you will typically have a low overhead compared to larger established firms. However, position your firm relative to the competition such that you have a unique characteristic or advantage to sway clients to engage your services, it should not be because your fees are the lowest. If you compete on the basis of fees you’ll end up in bidding wars which will result in lower profit margins, which will ruin your firm quickly as you’ll always be trying to ‘make it up’ on the next project. When establishing your fees you need to know your actual Costs for delivering the services (salaries, overhead, etc.), your Selling point, or Price that will allow you to make a profit without compromising your services… read that last part again… “profit without compromising your services.” You should always strive for that.

Ready?

Based on the above information you should feel a bit more confident starting a firm with a plan in place. Keep in mind, it’s a loose plan that will evolve and change as the firm does, but it’s a plan none the less. Further great advice can be found on the Entrepreneur Architect web site by Mark LePage. site Above all it should be fun running/ owning your own firm. It’s hard work, sometimes frustrating work. You’ll rise and fall but you get credit for both, which is exciting! If you’re not having fun you should re-consider if running/owning your own firm is really what you wish to do.

I’ll close with one last key piece of advice, learn to know when you don’t know and ask for advice. So what tips/ advice do you have for starting and running your own firm, post them up in the comments below!

 

Design Business On,

** I’ll say it again, learn to know when you don’t know and ask for advice.

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