How to start an architecture firm?

Starting an architecture business

Anyone with an ambition knows the importance of running their own business. Sure getting a good job in your field of practice can be rewarding, but everyone knows the real money is in entrepreneurship. While some are destined to work under supervision, answering to someone else while putting in hours of effort, skill, and ambition. Others are destined to set out on their own, with no one to answer to and no one to validate their success or judge their failure.Be that as it may, starting your own practice is by far the riskiest but most rewarding career move.

This ultimate guide is a starting point for any professional architect who is looking to set out on their own, or still betwixt and in between making the step.

Why should you branch out to start your own architecture practice?

There are obvious reasons why being your own boss is better than answering to someone else. However, don’t decide on going at it alone if ultimately the following pointers are not important to you.

  • You do realize that the only way you can truly exhaust your potential doing what you are passionate about is when you are totally in control of what you do
  • Flexibility over fixed timelines is valuable to you
  • Even the difficult decisions you are not afraid to call the shots
  • It is in you to create something of your own from scratch
  • You prefer building your own team and working with your own recruits
  • When it comes to finances, you want to sign your own contracts, handle your own checks and to be in charge of the profits
  • Interact directly with clients is something you feel would yield better results
  • When all is said and done, you want to have the final say on your retirement goals
  • Working with a mentor of your own choosing is important to you and ultimately get someone to mentor
  • It is in you to build your own brand based on your level of skill, expertise, professionalism, principles and understanding of the industry
  • You want to stretch the limits of your creativity with no secondary obligations attached to someone of a higher rank than you
  • Ultimately, you want a fulfilling job that knows no limits.

Obviously, these pointers do all but cover everything. However, they are the fundamentals that revolve around the decision to start your own architecture business. They answer the ‘’why’’ question.

THE FOUR KEY STEPS TO STARTING YOUR OWN ARCHITECTURE BUSINESS

The following ultimate guide incorporating four simple to follow steps will bring to light everything you need to know about starting your own architecture business. From planning, legal fundamentals, financing, starting and growing.

STEP 1 – WRITE A BUSINESS PLAN

You already know what the business is; an architecture practice. Every business starts with laying out the paperwork. A Business Plan will help lay the groundwork for your practice. From a business plan, you can develop a Strategic Plan that will handle the growth and development aspects of your practice.

FUNDAMENTALS OF A BUSINESS PLAN

Take for example the documents in an architect’s drawing set. These documents contain detailed information about the project’s design and plan; both interior and exterior. The structure’s details cover every aspect of the building to the last stroke of the paintbrush. A business plan is more or less similar. You can develop the fine details of the business from the business plan including

The company’s description – what the company is all about, what sets you apart from others, your market composition and the general design of the business

Organization and Management – What the management structure of your practice will look like, who will be running the company, the management levels, reporting levels and the business’s departmental structure.

Service and Product Line – These are details of the products and services you will be making available to potential clients.

Funding –This includes all your funding and financing options that will go into building the capital structure of the practice.

Financial Prognoses – After detailing your investment and funding sources, you will need to back them up with a system that will ultimately lead to revenue and profits. This part of the plan handles the financial justification of your practice.

Market Analysis – This analysis will be based on your research into how the market is and how it works. The competition you will have to offset, the market segments yet to be explored and ultimately what will make your business stand out in the market.

Sales and Marketing – You will need to detail how you will market your services. This part handles details your key point of sale, your marketing strategy and advertising options, example the internet as your main sales and marketing strategy.

Once you have a business plan in place, you can answer the basic questions as to what will go into starting and sustaining your practice. You can now handle the structuring and business type aspect of the practice.

STEP 2 – CHOOSE AN IDEAL BUSINESS OWNERSHIP STRUCTURE

Your architecture firm or practice’s business structure depends on the ideal size of the practice, based on certain factors that limit your scope of operation. These factors span from your funding options, organization structure, personal interests, your state’s legal requirements, and location. You will be answering the question, ‘’How big do I want my business to be?’’

Sole Proprietorships and partnerships are the most common business ventures for any budding architect. Here’s all you need to know before deciding whether to go solo or partnering up.

Sole Proprietorship

This is the most basic and common form of business. You are the entity itself. You are not separate from the business as an entity. If you plan to be the sole owner of your practice, then a sole proprietorship is the way to go.

Legal Requirements of a Sole Proprietor

As a sole proprietor in the state of Illinois, you will need to

  • Register your business with your local county clerk’s office.
  • Obtain a Federal Employer Identification Number if you will pay salaries to one or more employees.
  • Conform with the tax and pensions regulations that apply to your industry of operation.

Advantages of a Sole Proprietorship

  • It is the simplest and most inexpensive form of business to start
  • You are in complete control of the operations
  • You enjoy the profits yourself
  • Few legal requirements

Disadvantages of a Sole Proprietorship

  • The liabilities that apply to your business extend to your personal life. This means you will be liable for the losses and debts the business might accrue, as the law does not recognize you as a separate legal entity.
  • A sole proprietorship might prove daunting as you control every detail of the business

Limited Partnership

A partnership can be a great business structure for an architecture practice. The partners have to be included in all aspects of the business operations including capital, profits, dispute resolution, change of ownership structure and every other situation that concerns the business. You can team up with a fellow architect or even more and work as a unit. This would form your greatest source of strength; unity.

Legal Requirements for a Limited Partnership

You will need to obtain an LP form from the local county clerk’s office. The LP form will incorporate all details relating to the partnership, including ownership, location, tax compliance, and all statutory fees you will agree to before starting.

You will also need to submit a partnership agreement, state certificates that detail the names of partners, physical location and state mailing receivership options and finally all miscellaneous permits and registrations that apply. These documents vary in format from state to state.

Advantages of a Limited Partnership

  • Shared financial obligations. No one partner has to bear the burden of funding
  • Easy to start and run. It is fairly easy to register a partnership, with few bureaucratic requirements.
  • Diversified skills. All partners contribute their skills to projects and decisions.
  • Employee career progression. Partnerships attract highly motivated employees for a reason; there is a possibility of making partner.

Disadvantages of a Limited Partnership

  • Disagreements can threaten the life of a partnership venture
  • You will have to split profits as per the capital contribution ratio of all partners

‘’Your expertise will win you clients and your professionalism will keep your business alive. Focus on what makes your business unique as your expertise is no similar to any other firm. Don’t be afraid to form a constructive partnership with a fellow professional in the business, if you have to’’; expert advice from staff from Entrepreneur Media Inc. in their 6th edition of Start Your Own Business.

It is important to note that a partner does not necessarily have to be an architect. You can seek to partner with people and businesses within the industry who shares the same ideology and mindset. Building designers, renovation experts, interior designers, and constructors are suitable partner examples.

STEP 3 – REGISTER YOUR BUSINESS

You are at the practical and implementation stage of your future architecture practice. After completing this stage, you will have decided on the business name, registered it and complies with every other statutory obligation and legal requirements to run your practice.

Choosing your Business Name

Before settling on a business name, there are a few fundamental factors to consider.

  • Pick a name that will reflect your identity as an architecture firm, not just any other practice
  • You will need to protect the name right from the start. Your business is one of the most important and unique features of the practice.
  • If you require a web presence, which is very likely, consider a name that will be easy to choose a domain name from. Choosing a web-ready name can give you an online marketing leverage.
  • Be as professional as possible. An architect’s practice is as professional as it gets and it starts with the name.
  • You will need to avoid stiff penalties for trademark infringement. The United States Patents and Trademark Office provides a Trademark Electronic Search System (TESS) that you can use to know if the name you choose is taken or not.

 

Registering Your Business Name

Registering your business might simple or complex, depending on how much you know about the process. The process involves registering a ‘’Doing Business As’’ (DBA) name. This process is just letting the state or local government that you will be doing business under the registered name. If you are using your own name, you can skip this step and go straight to incorporation. This process does not provide trademark protection.

What is Trademark Protection?

Trademark protection is all about applying for a license that protects your words, names, symbols, and logos against copyright or use by an unauthorized third party. The laws governing trademark protection are elaborate and wide. But in summary,

How To Register Your Business

Once you have chosen your business name or DBA name, you will need to contact your county clerk’s office or relevant state agency. Once you have all legal documents including licenses, identification, permits and tax compliance certificates, you can attach them in one piece and register at the state government’s office or the county clerk’s office.

If you, later on, wish to change the business structure to an LLC, for example, the Internal Revenue Service will be your next stop as you will need to update every document associated with your business.

STEP 4 – CHOOSE A BUSINESS LOCATION

The location of a business will directly affect its success. That said, there are a few factors to consider before settling on a business location, specific to an architect’s practice

  • The needs of the business come first. You will need to answer questions such as; does my business require proximity to clients? How much space do I need to conveniently operate? What are my lighting options? For an architect’s business, the answers to these questions are yes, yes and obviously a very large space, respectively.
  • Evaluate your financing options. Startups require investing in office space before eventually breaking even and making a turnover. You should research on prime locations with all utilities and amenities at proximity. Access roads and security should also be of priority.
  • Business Friendliness. How are the local taxes? What’s the area’s minimum wage? Are tFriendlinesscosts? Does the area have government incentives? Are there small-business loans and other financial incentives?

Carefully explore all these options and limitations and choose a location suitable for your architecture practice.

Business Licenses And Permits: All You Need To Know

Federal Licenses and permits apply to LLCs and corporations, limited partnerships and sole proprietorships are registered at county level and in some states at State level. Every state requires you visit the county clerk’s office for guidance on how to register your business.

Licenses and certifications vary depending on what industry your business operates in. Professional services businesses do not require as many permits and certification as food and beverage, alcohol, tobacco, and firearms. Every state’s official website has stipulated guidelines on how to completely legalize your architecture practice.

START-UPS FINANCING

Here are a few tips on how and where to source funding, especially if personal financing is not enough to get you started. Phil Stone in his book Raising Start-up, 2001 pointed out short-term financing against long-term debt as ‘’the best way to efficiently manage capital requirements for start-ups.”

Cost Estimation

You already have a rough idea as to how much it will cost you to start and run your business. Some of the most important costs to consider include registration and licensing costs, leasing or rental, operating expenses, wages and salaries, inventory costs, consultation and legal fees among others.

Come up with an actual figure; it is important to also overestimate your value so as to cushion unforeseen costs.

Personal Financing

If you are using personal financing to fund part of the whole of your business, it is important to set apart your personal financial accounts with the business account. You would not want to go broke in the name of financing your business. You will also be able to keep track of your expenditure, both business and personal. This can only be done if your personal and business accounts are separate.

Financial Experts

As your business is a professional type of business, you can make use of financial advisors who will provide financial counsel and advice. A financial expert should be able to provide you with advice on how to prepare your income statements, tax filing, fiscal fitness, funding options and any other matter regarding money.

Credit History

Your credit history will determine if you qualify for a loan. It will also determine how much you can get. Almost every other lender requires your credit report from a credit bureau; Equifax and the like. It is important to initiate a personal credit report way before you apply for a loan.

Funding options for your business

With the help of a good financial advisor, you will come up with a cash-flow analysis that will enable you to determine when your business will turn a profit or if you need additional funding,

Borrowing is by far one of the hardest things to do. There are two methods of financing you can use; equity financing and debt financing

Equity Financing – this is when a business seeks to fund, and instead of repayment through cash, the lender is given partial ownership, in the form of a percentage of the company. Venture capitalists are the most popular sources of equity financiers.

Debt Financing – Debt financing involves borrowing a certain amount of money that should be refunded after a set repayment time. Sources of debt financing include banks, money lending institutions, friends and family.

Collateral – No one lender can give you funding if they are not sure that the cash they give you will be repaid. There is where collateral comes in. Your house mortgage, furniture, and fixtures, receivables, stocks and bonds or Certificate of Deposit are some of the most common collateral options.

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