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.

1. 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
1. 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.