STARTING A FIRM

BY ELENA MARCHESO MORENO

INTRODUCTION
There are several reasons that one would want to start their own architectural
firm:
A long held ambition
Downsizing/retrenchment/getting fired from a job
Frustration with the course of life as an employee.
In the USA, nearly 1000 firms were starting up every year.
Whoever starts a firm must have a clear set of goals, training, and enough capital
to operate for some time.
Careful planning will payoff in the future.
Identify goals, business plan, the market, capital, marketing approach and
delivery. (Value chain)
However, only 25% of new firms survive the first 3 years of practice. Many fail due
to a lack of capital to see them through the slow times.

WHAT IT TAKES TO SUCCEED

You need to acquire some business skills.
Obtain work by knowing how to market your skills, negotiate contracts and close
deals.
Build relationships with clients and earn their trust.
To grow, hire staff and consultants and work hard to keep their loyalty.
Have skills to work effectively with other consultants and contractors.
Financial management practices also play a big role:
Finding loans and other means of financing
Entering into leases
Managing cash flow
Managing financial stability
When these things are all in place, the firm will operate profitably.

DESIGNING THE FIRM

-when starting up a firm, architects have animage of what they want, the size,
project types and clients and structure.
-When coming up an architectural firm, an architect need strategies for structuring
the the architecture practice, identifying markets, selecting projects etc.
Legal forms of business;
An architect need to decide thelegal form of business. whether the company will be
sole proprietorship, partnership, or corporation.
The tax and legal consequences are different for each type of form.
the form of the business you chose, may change based on the way the business is
growing.
Sometimes an architect can chose the subchapter S corporation in order to avoid
double taxing of corporate earnings and shareolder dividends. Shareholders can also
offset business loses against their personal income with subchapter S.
Other forms like limited liability partnerships and corporations have been the
preferred forms for other design firms.

2. Organisational structure;
The framework you designfor the firm will be theunderlying support for all business
activities
You need to establish an identity of the firm and and how it will be positioned on
the market.
Identities can be- a focus on aesthetics, providing services and and added value or
technological innovations
Take stock of your target markets and evealuate their growth potential for
architecturl services then plan where you will concentrate, which building type and
range of services.
Don't overextend the firm
Clients are looking for experts who are vnot only designers but consultants.
Focusing on a niche will be very profitable for the firm.

IMAGE AND MARKETING

Marketing effort and firm’s image are closely aligned
IMAGE
New firms rarely have an image that is readily recognized, therefore image alone
may not bring enough work
Firms or principal’s reputation combined with marketing effort can help determine
success
The image created for a firm should be closely aligned with the new firms vision
Without this alig=nment, it is difficult to lead a firm sucessfuly
Firm’s image is projected in all undertaking of the firm- from firms name,
letterhead, business cards, office space, location
Iffirm is small, it is offered small projects. This can be a good starting pointto
set professional standards
Firms image should be realistic and attainable
Depending on firms size and projects offered, small project for a small firm can
help in setting out firm’s professional standards
These standards if established early ,they can be easily maintained and the
resulting firm image can bring good clients and good projects
1 or 2 unprofessional actions can set precedent that leaves the firm open to
manipulation by some clients

2. MARKETING
Developing marketing strategy is one important activity for a start-up architecture
practice
Active marketing is much better approach to bringing in projects than expecting
good work to speak for itself and bring in more projects.
Ways to start marketing:
send a simple letter to prospective clients, previous clients, consultants, local
business groups, friends, relatives and anyone who might provide a lead that lets
them know you have started a firm.
Develop list of potential clients by checking business directories, company annual
reports .
Going through publications potential clients would read to find leads.
Talk to representatives of specific government agencies and find out what future
building programs might be coming along
How to build image abd name recognition.
Give speech.
Offer a service to community group.
Write articles.
Serve on community organizations.
Offer story ideas to the press.
- Start drafting a market strategy after you identify some points about the firm
like: where you want to go, its strengths and weakneses and type of projects you
want to get.
A good marketing plan is clear, to the point and measurable. Plan shud include
steps to take to reach particular market.i.e number of calls to make a day,
meetings to have and proposals to submit.
Marketing goal should rely on marketing data.
Avoid committing to a tough marketing challenge.
-forms win1 in ten jobs it goes after.

Choosing Your Client:

A financially sound firm depends on building and maintaining healthy long term
relationships with clients.
Choosing clients isn’t a luxury, but sound business practice that helps to mange
risk and increase profitability.
To Choose clients;
Learn as much as possible about the client- (past commissioned work, level of
understand of design & construction process).
Check client’s reputation – investigate decisiveness, focus levels, & whether they
pay on time.
Check management structure – Investigate chain of command and access to decision
makers.
Check financial status - request financial references from bank and credit ratings
Consider chemistry between firm and client.
- Remember that a bad client& project have a negative impact on your reputation

THE BUSINESS SIDE OF ARCHITECTURE:

Financial Consideration
Financial planning is important for any architecture practice.
To begin a practice, you will need start-up capital and some firms require a large
amount.
The start-up capital will pay for expenses such as office space, phone bills,
computers, drafting supplies, furniture and stationary.
Italso covers your salalry
It can also help with marketing expenses.
Where does start-up capital come from?
Majority of practitioners receive bank loans during their firm’s formative months
and beyond.
Other designers use their own savings or borrow from relatives
convince a new client to pay a hefty retainer.

Banks are in the business of lending money and they invest in what they consider a
good risk.
Unfortunately, most new firms are not considered a good risk hence need for
preparation when approaching banks.
Getting loans is a matter of selling yourselfsince firm doesn’t havetrack recordso
thebetter prepared you are the higher the chances.
Banks require that owners of a new firm invest 25 to 50 percent of their own
savings into the business. The banks then considersthe characterand managerial
abilities of the borower and the firms prospectusfor profit.loan will require
personal guarantee by owner
When you want to take a bank loan, bring along business plan, resume and projection
of your operating budget.
The most conscious approach to start-up capital is to go slow and avoid extravagant
expenses. Cash flow is difficult to manage for a new design firm.
You do not need an elaborate office to start with.lease some usefulequipment
instead of buying. This is less risky.
Listassetsyou need and expensesyou will incur, then make thechoice that
immidiatelyhelps toshape the firm identity you chose.
It is recommended to start firm with enough cash to last six months to 1 year.
Manage your account reciebles effectively tosurvive.
Tosolve this, determint the operating cash needs. Don’t wait to month end to
anticipate cash flow problems.
Call clients soon after sending invoice to make sure they have reciebed and
verifywhen they will pay.follow up day after due date.
Ensure youmake profit

SETTING FEES
Set fees to make a profit after paying bills
Place a value on services that reflects the value of your time to the client
Place a value on services that reflects time and includes overhead and salary
expense
Rates for a new small operation can be less than larger organizations due to lower
overhead costs
Identify an average hourly rate for project rates based on expertise level, but
pricing based on value is also an option
Calculating Hourly Rate
Architects tend to bill on a cost basis
Identifying an hourly rate is also a popular method
Calculate base salary rate by multiplying hourly rate by number of hours worked per
day and days worked per year
Include overhead costs and percentage for profit to get payroll burden and burden
rate
Use formulas: Salary rate + Overhead factor = Payroll burden; Salary rate + Payroll
burden = Salary + Burden rate; (Salary + Burden rate) X Profit factor = Hourly
rate.

Financial management systems andtaxes

Architecture practices don’t usually require complicated financial management
systems.
A good system allows uto view the financial health of the firm and prepare for tax
obligations.
For most firms, a bank statement, cashflow projects and periodic documentation
required by bank, Tax authority and some clients is enough.
Insurance: is vital for firms. It is also expensive hence requires assessing all
alenatives.
Dont avoid liability insurance even if firm is small.
Time to start own firm: when you meet necessary requirements and the time feels
right to you.if youthink u needmore experience then wait.