What is needed to start an architectural firm today?
This is a thought experiment. If you were starting an architectural firm today, how would you do it? At the time of the American Revolution, what did an architect's office look like? Probably not much different than in 1900, except the projects may have gotten bigger. In 1976, what would the differences have been? Well things have changed on the technological front. There are electric lighting, telephones, electric erasers, adding machines, light tables, automobiles for site visits, diazo and mimeograph printing for plans and specifications respectively. There is still that timeless part about needing a client with a project, however. Programming is more sophisticated. But designing and detailing a project isn't really any different.
What about today? In 2013 what would be different? What could be different? What should be different? Except for that timeless part - a client with a project - EVERYTHING!
You don't need: an office, a phone system, a plotter, a fax machine, a library, flat files, a conference room, a reception area, a server room, a network, a GBC punch and binder, past project files, etc.
What DO you need? You may already have some of this.
Computer - $1,000
iPad - later ($750)
Smart phone - $200
CAD - DesignSight - FREE
Basecamp subscription - $25/project for now
Invoicing System - PayPal account
Bookkeeping service - Wave - FREE
Insurance - later ($500) - once you have work
Website/Domain/Email - Weebly - $100
Google Apps with Drive - part of Weebly
Dropbox - FREE (for additional shared storage)
Wide format printer-copier-scanner - $300
Total to get started - less than $2,000 the first year, and about $200/month expenses.
You may not need employees for some time. You can farm out work that you need help with to other self-employed architects, who could be anywhere. India? You really can't overstate how much Internet-based services change the need to be in one place with your design team. Add Google Hangout to your repertoire with its ability to share your screen with up to 10 people and you may just be old-fashioned if you think an office is necessary.
So, work on getting that client. That is the only real barrier to having your own firm.
PROJECTS AND BUSINESS DEVELOPMENT
There is no one time that is better than the next for starting your own firm. There is one key ingredient though. The key ingredient is a paying client with a project. So, as the cliche goes, don't give up your day job … until you have the key ingredient. To a lesser degree you also need to feel competent to do the work you are hired for. Let's cover that first.
You have to feel competent to work on your own or to have colleagues that can assist where you need help. However you can always hire the expertise you need to do the work. Nevertheless you should have a little experience in all facets of designing a project, getting bids, and administering construction. But you wouldn't even be thinking about the possibility of your own firm if you didn't have this issue covered.
If you can get the clients, you can always find a way to get the work done. The opposite is also true, but with a footnote. It is much easier to hire design help who will produce results than it is to hire business development help who will produce clients. As far as I can tell, this is because the more dependable the business development helper is at corralling work, the more likely he/she will be to start their own firm or find a better-paying opportunity elsewhere.
It is more likely, at least at first, that you will need to develop your business yourself. So how will you go about this. Well it helps if you have family connections, but you will find it easier to grow the firm more dependably if you develop a system for getting clients rather than only take advantage of work that is offered to you.
So what methods of business development should you consider?
“Marketing is what you do to make the phone ring.” And you have to do a lot of it without much feedback. Marketing tactics are non-client and non-project specific. The marketing activities you should consider include such things as working on developing your niche, building relationships, networking, promotion, RFQs and numerous image or brand-building opportunities.
I will touch on each of them starting with the least powerful. However every one of these activities can contribute to what you want your firm to become.
This is an incomplete list of things that reflect on you and help/hurt your image: firm name, logo, stationery, business cards, physical location, website look and feel, domain-name email, project signs, automobile, clothes, etc. These things don't matter much if your image is a struggling, hungry start-up. However, to the extent that you want to "punch above your weight" and be considered for 'where you are going' rather than 'where you are', they matter a lot.
RFQs take two forms - the private and the public owners. To some extent providing RFQs might be a temporary necessity, but they lead to becoming a commodity. Nevertheless you want to put out information that a private client might find worth considering. The format is up to you. The public clients, like state, federal, and governmental agencies have their qualification processes that vet the firms who want to work for them. At the federal level this is the Standard Form 330. The idea for both types of clients is to put information in front of the people that you think will be selecting architects.
Promotion takes several forms such as direct mail, newsletters, ads, sponsorships, events, Facebook(?), and so on. Direct mail consists of sending a letter/post card/brochure/pamphlet or similar piece to a mailing list. Response rates are normally very low, so you are just trying to remind the recipient that you exist. Newsletters could take the direct mail approach or be the email version, which has the benefit of costing about 5% of the hardcopy version. The hitch is that it will take much, much longer to build an email list than a mailing list. Ads are obvious; most are expensive for their return, except the electronic variety using, say, Google AdWords, Facebook or LinkedIn. A sponsorship of someone else's event is like advertising; or you could hold your own event to celebrate a milestone or support a worthy (and related?) charity or civic project. Facebook is a good way to keep your name in front of your "Likes". This could be especially useful if your target audience is individuals rather than organizations.
Networking is basically making connections - in person through the Chamber of Commerce, social clubs, alum organizations, church, friends, family; or electronically through LinkedIn, perhaps even Facebook qualifies as networking as long as there is interaction. See Matt Handal's article on how to do it right.
Relationship-building is a takeoff on networking; but, at least in my mind, it is different because it is more targeted - you are seeking out people to contact with the sole purpose of finding a way to help them and become their go-to person for all their design and construction questions.
As I have mentioned before, building a niche, while time-consuming (and measured in years), is the ideal form of marketing your firm because eventually you have your clients seeking you out because of your specialty. There is not only less competition, there may be none. Your fees are whatever the market will bear and your productivity is sky high. I would recommend that you do all of these things with the idea of establishing your niche ... say, biophilia-inspired dwellings!
So what do you do after the phone rings? Or after your potential client answers your call, or responds to your marketing?
There are two things every client is looking for: technical competence and trust. In other words, do you know what you are doing and can I safely put my project in your hands? Once you have your prospect's attention, remember "it is all about them". Let your marketing take care of the competence stuff. If they have concerns, let them bring them up. A competent person doesn't try to convince you of how competent they are. Take the approach of the doctor, but rather than "What seems to be the matter?", start with "What do you have in mind?". Then listen -like a psychiatrist, "I see…"; "What do you mean by that…"; "Tell me more about that…". Let them do 90% of the talking. They don't want to hear what you would do for them until they are sure that you know what they want. From time to time recap what you have been told. Take notes to show you respect their information and want to capture it. If this is a real project, this conversation will go on for an hour or more.
If they see you as a commodity, they will ask for a proposal long before an hour is up. Depending on how much you need the work either comply in writing or decline right there on the basis of not knowing enough about their project to prepare a meaningful proposal. Things are not likely to go well for the client that doesn't have time to tell you what he has in mind. When it doesn't, they will remember the guy who 'screwed it up' AND the guy who wanted to do it right.
At the end of the meeting promise a recap in writing as quickly as you are comfortable doing it. Don't over-promise and under-deliver. (That's a good rule to live by.) Seeing their thoughts in writing is very powerful. They know they told you this stuff, but this is evidence that you heard them, that 'you get it'. As part of this recap, suggest that you meet again to review what you propose for them. The next meeting is about some first steps that they might want to take. THIS IS NOT A BASIC SERVICES FEE PROPOSAL.
Every project has five or six key issues that need to be understood - space needs, desired character, context in which it will occur, legal, political and managerial constraints, a timeline, and a budget. Propose to investigate one or more of these for them. Give them as quick a turnaround as possible (to keep the ball rolling) and a fee that seems reasonable enough that they don't feel like they need to get a second quote to do this 'small study'. This should be in writing and you should outline several first steps, but propose the one that you think will answer a question they want answered. Follow through, and repeat.
There are many branching-off directions that this process might take. Improvise. Or better, get some real training from one of the gurus. My recommendation is Stu Rose and Trina Duncan, Professional Development Resources, Inc. They authored The Mandeville Techniques that I have been describing here. They have well-thought-out methodologies for everything - cold calling, proposals, interviews/presentations, everything.
Invest in yourself and your career.
The new firm needs to consider administration and finance issues, too. There are quite a few of each flavor. I list the issues below with my take on what a new firm might consider or the decision that is needed.
Bookkeeping - keep it simple. See our 'Small Firm Accounting' series of articles.
Accounting - without other owners in the firm, but with a descent bookkeeping system, you may not need much in the way of accounting to start with. Real accounting is about tax issues, profits and reports about how you are doing financially. You may need this eventually, but not on day one.
Debt - to the greatest extent possible avoid debt. Rapid growth is the main need for debt, and even then, you can get in a jam. If you already have a problem, adding debt is really dangerous.
Cash-On-Hand - you can't have too much. Shoot for a steadily increasing balance on hand. When you can cover all your expenses for four months, great, that's a worthwhile target. Just keep accumulating more cash. The risks of investing the cash usually outweighs the returns as long as the amounts you are adding are larger than what the investment return would be.
Payroll - when you get that first regular employee, get a payroll service to do the payroll. We calculated that it took about 20 hours a month to run payroll and handle payroll taxes, etc. This was using Deltek Advantage software which made it a snap. Doing payroll in house will take about $3,000 a year; a service will cost 1/3 to 1/2 of that.
Invoicing - there are lots of ways to do this, even PayPal has an invoicing system that is free. The option of getting paid by credit card is attractive. Whatever you use, use it the first of the month. Don't delay. You already have 30 days of expenses tied up; your client may take another 30 days to pay you; get the invoice in the pipeline for payment right away. Also consider invoicing twice a month.
Overhead - you know it is easier to spend money than it is to make money. Act accordingly. Also investigate your options. Every expense that we assumed we needed in 2003 is now available for much less, often 50%+ less than we paid. Rent is the one exception.
Setting Hourly Rates - take 120% (adds 20% profit) of your monthly expenses except design consultants; divide that amount by the total number of actual billable hours for the month. That is your AVERAGE hourly rate. Adjust it up and down based on the expertise of the individual. Double check that the chosen rate times the number of billable hours per individual when added together still equals at least 120% of all your expenses. Avoid the impulse to get it exact. It is far more likely that you will have fewer billable hours than that you will have more. There is an upper limit to the number of hours you can be billable, but the lower limit is zero billable hours.
The administration issues will follow in the next article.
These are the administration issues your new firm will need to consider. I list them below with my take on what a new firm might consider or the decision that is needed. This is the last article in the series.
Policies - plenty of time to address this. Deal with policies when needed. See our 6 page About Us article.
Facility - working from home is how many firms started with their first moonlighting job. Delay the expense of office rent as long as possible. See our 'Why Do Architects Need An Office?' article.
Consultants - no need to look elsewhere than the consultants your employer has used and that you are familiar with. However, go elsewhere if there will be weirdness. See our 'Guidelines For Working With Consultants' series of articles.
Insurance - three things trigger the need for insurance: 1] an office ($500 min), 2] employees ($500 min), 3] desire for risk mitigation or a client requirement for professional liability insurance ($1,000 min).
Staffing - plenty of architects have a one-person practice, so it is not a forgone conclusion that you will need employees. If you do need help, the choice is Contract Employees or Regular Employees. A contract employee may seem expensive, but a regular employee triggers a number of other expenses, like payroll preparation, workers comp insurance, an office, computers and software and so on. Delay the regular employee choice as long as you reasonably can without creating other problems. Find help that is more capable than you actually need. The greener the employee, the more time you will have to spend with them, which may defeat the whole point of having an employee.
Form of Ownership - nowadays I suspect that nobody uses a pure partnership or a professional services corporation because the limited liability corporations forms seem to have taken over. In most states, the LLC doesn't really provide any or much of a liability shield for an architect. You will want to incorporate either for tax reasons or for multiple owner reasons. Neither are going to be an issue for the first few years.
Continuous Improvement - take two hours a month to document what is working and what isn't and brainstorm some action steps you can take to make your processes better. Take a look at our 'Do You Have Unique Methods?' article.
Benefits - this is only an issue when you have regular employees. Be creative, implement mostly non-financial benefits where you can. Benefits raise your overhead all the time, good times and bad times.
Compensation - find good people and pay them what they are worth.
These are exciting times. The mega-firms dominate. But every day you can read about a new tool or technology that lets the small firm provide a service that wasn't possible for the big firm just five years ago. I think the big firms are Goliaths, very vulnerable to the niche-oriented small firm.