Initial Budgeting and Fears for Starting an Architecture Firm
In one of my recent newsletters, I briefly touched on the subject of creating a budget for my dream of starting an architecture firm and the underlying fears that arose from this task. Most people, including myself, have dreams that they’re hoping will come true in their future. At some point in our lives, we decide it’s the right time to take action and work towards these dreams one step at a time. My first step towards realizing my dream was creating an initial budget for my architecture firm and creating a list of things holding me back from pursuing this dream.
Here’s what came out of that session:
1. Initial budget for starting a practice
To start my dream of starting and managing an architecture firm, I sat down with my paper and pen and brainstormed the recurring annual operating costs. As I began, I decided to set a few parameters to guide my decisions. Here is a list of questions that I had to answer:
a) Where would the architecture firm be located?
My plan is to locate the architecture firm wherever I’m currently residing. Right now, there are several places that I’m considering moving to in the future. My top choice would be Buffalo, NY with a follow up of New York City, NY, then Chicago, IL, and finally Santa Fe, NM. The last place on the list is dependent on whether or not my girlfriend decides to move there for employment at a national lab of her dreams.
b) Will the architecture firm need a facility?
I decided that the architecture firm will not need a facility to begin. Instead, the firm’s primary address will either be my home. If this proves to be a problem, then I will get a membership at a co-working space such as WeWork in NYC and Chicago, or D!G in Buffalo. Once the firm begins profiting, I’ll eventually invest in a dedicated office space outside of my home by either leasing an office or purchasing a building/space. Ideally, it would be the latter option.
c) What architecture programs do I plan to use?
To keep costs minimal, I plan to use the Revit Lt Suite, which includes both Revit Lt and AutoCAD as well as Adobe suite for designers, and Microsoft Office 360. This will cover all of my primary necessities from designing an architecture project from concept to completion, integration of consultant CAD files into Revit, creating high-end graphics of all projects, and general office standards and email.
d) What services will I use for a website and email?
Just like my blog, I’ll most likely start the architecture firm by building a website on my own using Bluehost as my website and email host, Squarespace for the website design and content, and Mailchimp or Aweber for creating email lists and marketing campaigns. Once the firm evolves and profits rise, I’ll hire a marketing agency to take my website to the next level and help with creating email templates for sending content to clients.
e) What hard costs will I have to invest in at the start of the architecture firm?
By starting at home, I’ll need to invest in a basic printer and scanner combination, business cards, stationary, and a business phone. I’ll most likely find a phone number that is simple to memorize and design a minimal business card that represents the architecture firm’s brand. As the firm grows, this list will follow and large format printers, branded stationary, and other items will follow.
f) What insurances will I need at the beginning of the architecture firm?
In my opinion, having a great insurance in place is a necessity to protect any architecture firm. In particular, I’ve identified health and professional liability insurance as being the two most important insurances to have at the beginning of my architecture firm. There’s most likely an additional insurance such as property insurance for my home office in the event of a fire or something like that, but ultimately, being healthy and being protected from minor human errors is important for any architect.
g) What recurring licensing and registration costs will I have?
There are three registration costs that I’ll need to cover on an annual basis and they are my New York State architecture license every 3 years, my American Institute of Architects membership annually, and my NCARB certificate annually. As I continue to practice and join more organizations that are aligned with my vision, I’ll most likely add more memberships and charities to the list.
After answering all of these questions, I realized that starting an architecture firm doesn’t need to be expensive. In fact, starting an architecture firm frugally and depending on the success of both my network of people and portfolio of work will allow me to test my ideas without going too far into debt. I also learned that it’s important to take small steps with my future practice and allow the firm to grow – not start at its peak.
So, without further ado, here’s my initial budget. Click on any of the names under software to link to the company's product page. Keep in mind there may be a few things missing from this list.
Revit Lt Suite = $65.00/month
Adobe Suite = $50.00/month
Microsoft Office 360 = $10/month
Squarespace = $10/month
Bluehost = $3.95/month
Aweber = $20/month
Quickbooks Plus = $30/month
New York Architecture License = $350/3 years
American Institute of Architects = $400/annually
NCARB = $350/annually
Health = $350/month
Professional Liability = $1,500/year
General Liability = $750/year
Printer = $500
Business Cards = $10
Stationary = $100
Business phone = $70.00/month
Total annual costs = $10,068.00
Total startup costs = $10,678.00 (Includes hard costs)
All of the numbers in the budget above were simple to find on company websites with the exception of the insurance costs. To find the average cost of healthcare for myself, I used the New York health insurance finder website that was developed as a part of the Obama Care campaign and found that the monthly costs for a local provider ranged between $300 and $400. Professional and general liability insurance numbers came from some quick Google research on the average costs for small architecture firms to obtain these insurances for projects with an annual cost of $1 million dollars.
Depending on the location and size of the architecture firm, the insurance numbers will change and the number of seats per software will fluctuate. For example, as soon as I add a full time employee to my staff, I’ll need to add several insurance plans such as umbrella coverages, worker’s compensation, etc. to your insurance package.
What did I learned from creating this initial budget?
By taking an hour out of my day to brainstorm my initial operating costs of my future architecture firm, I was able to start planning the path to my dreams and best of all, it helped me move beyond my daily guesses on the initial startup cost of an architecture firm. This constant guessing in my brain wouldn’t lead anywhere and I always came up with numbers that were at least twice, if not three times, the amount that I estimated here.
This budgeting exercise also helped me realize that my dream is financially attainable within the near future. However, there’s still something holding me back from taking the leap and starting my own architecture firm. My fear of the unknown.
Here are my two biggest fears and how I’m overcoming them
1. Fear of failure
One of my fears is that I’ll start my practice using my savings as my initial investment and work as hard as I could to find my first couple of clients, but after 6 months, I find myself clientless and financially going into debt. In my opinion, every business owner has this fear of failure and as their company grows this fear also grows because there’s more at stake.
To overcome this fear, I’ve decided to save enough money to cover my personal expenses as well as operational expenses for at least one year. Once the savings is in place, I’ll have one year to pursue my dream and if I can’t get at least one client, then I’m definitely doing something wrong and I’ll set a date to call it quits, go back to the drawing board, and decide whether or not I’m cut out to be a business owner.
In addition, I’ll also help on as many projects at my current firm and do my best to help the firm market and obtain more clients. This will help the firm where I’m currently employed grow and it’ll also allow me to learn more about networking and finding clients.
Lastly, I’ll continue developing my 30x30 projects to help me find the areas of architecture that I’d like my architecture firm to focus on. So far, I know that I’ll focus on nothing less than net-zero buildings and human comfort, but I also have interests in universal design, luxury residences, and office design. Most of all, I’d like to become a developer with multiple buildings in my firm’s ownership.
2. Fear of not knowing
This one needs some explanation, so here’s my best attempt at telling you what I mean by not knowing. As a young architect, I’m constantly developing the necessary skills for successfully bringing a project from concept to completion. However, as we all know, there’s always so much more that we could learn about construction documents, writing specifications, and dealing with unique situations for specific projects.
As we encounter these unique situations or an issue in the process of developing an architecture project that we’ve never worked on before, how do we figure out the solutions? For example, say you and I were designing a skyscraper in New York City and it was our first time working on a new construction in that particular location. We now have to figure out all of the rules and regulations as it pertains to architects. How do we know that we found all of the regulations to follow? How do we deal with these new situations?
During a recent meeting with an old friend and a new friend I discussed this fear of mine and they helped me come up with the best answer, which now decreases the severity of this fear in my mind. My new friend has been practicing architecture for at least the past 35 years and I’ll paraphrase his answer. He suggested that you should always looks for someone with knowledge and expertise whom you can ask questions to help you find the solutions.
So if I’m not comfortable coming up with structural calculations or specifying light fixtures, I should ask a structural engineer and an electrical engineer who have done this kind of work before and have them join me team.
Although this answer seems like a no-brainer, there was a part of me that felt as if I, as an architect, needed to know how to do everything for a project. This reassurance from a long practicing architect, who is still practicing today, helped me realize the importance of having a close network of professionals from a variety of professions that I could ask to join me on my future projects.
Once I sat down and started brainstorming my operational costs for starting an architecture firm, I realized that my dream is not as far away as I initially thought. Before going through this exercise, I was stuck on the idea that starting a practice is impossible until I reach a specific age or financial savings; both of which would take at least 10-15 more years.
However, this initial budget helped me realize that starting a practice doesn’t take as much finances and is irrelevant to age. It also became a motivational tool for me to push myself to learn more about marketing, networking, and helping my current firm of employment gain more clients.
Most of all, this brainstorming exercise taught me that it’s important to take the time to develop plans for everything that I’m hoping to create. Whether it’s a business plan for my architecture firm, a plan for bringing a project from concept to completion, or a personal life plan, it clarifies the journey that I’m about to embark on…
I hope this post has helped you in some way and let me know your thoughts or questions in the comments section below!
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