2 colleagues of mine and I are in the process of starting our own firm, and i was wondering how some of you who have your own firms found financing. Were you able to get bank loans/sba loans? Or did you rely on personal savings/credit cards/family?
I know the credit crunch we're in now makes borrowing hard to do, but I was just wondering what other's experiences were like.
Also, how formal of a business plan did you write up?
this is an interesting twist to an otherwise over-asked question. I don't own a practice but really wish I did.
Banks require collateral and I am assuming no one is likely to give up their house to finance a partnered business - I could be wrong. Try your neighbourhood credit union, although it would require you to borrow off money already banked. Find a venture capitalist - increasingly hard in these times. Piggy back off an existing company - whatever it may be Dry Cleaners and Architects?
we did it by having 2nd jobs that were flexible. partner was in real estate, i was doing research.
the normal route based on 3 offices run by friends is to get a job and use that money to start, and then spend the rest of your time finding more work. design takes place mostly in the time between finding work.
most of our time lately is spent networking to find new clients, starting projects and pushing to get things through banks. until recently (actually, today) most of those projects were being stalled at the bank door (we are in japan).
if you are going to start an office i absolutely recommend that you start right now looking for work and do not stop. it took us a while to understand how important it is, and even more so in this climate.
which is to say the best way to finance your office is to have work. anything else frankly does not make sense to me unless you are going to try to do something non traditional?
you don't need loans; you need income. and while it may be nice to have two partners, that also means that whatever start-up (i.e. small) jobs you get will be divided by three. i would definitely take a close look at your finances before you get in too deep. to me, it doesn't sound like you are ready to start an office.
s. - there is a surprising amount of information about this in past posts - it'd take some wading to get through, yes, but there's probably a lot in there you might find useful as well.
i'll echo jafidler - don't take out any loans, especially to pay yourselves. the banks won't really 'allow' that - they're going to want to see anything they loan against being used for harder/more recoverable assets.
if you don't have any real income coming in yet, forget a loan, even through sba. this isn't a very scalable business type (meaning it could expand quickly and exponentially if done right). that makes it much harder for anyone to write you a check, especially on the front side.
throw in the fact that the banks are super skittish about doing risky loans of any kind (and startups are the riskiest), and you can probably forget that route.
i'd recommend doing everything you can to avoid taking on real debt, as mentioned. get used equipment, go low on software, forgo a plotter, work out of someone's house until cash flow begins to really happen, and plan on lower salaries (or no salaries) for a while until work happens.
with regards to a business plan: very, very helpful, especially with partners involved. you all should be taking a hard look at where you want to be in 5-10 years - if you're not on the same page with most things, i'd say your chances of getting to that milestone are very, very slim. look at each person's financial situation -do all of you have other means of income? is one person 'independantly wealthy'? if so, do they really understand the financial needs of the other two partners? (as one example). you all need to do some basic cash flow projections, budgets, and legal work.
sounds like one of you needs to be the operations guy and figure out how to get all this stuff figured out before you all get in too deep.
Yep, all good advice above. My partner has been in business for 12 years and has never taken out a loan. When I came along I personally borrowed a couple thousand from my parents to buy in, but we've still never had an office, plotter, etc. Low overhead is key.
A large firm in my city - 30-ish employees - started with a loan from one of the partner's dad. There's nothing wrong with borrowing money to start, but the first question is do you really need to borrow money at all?
You most likely won't need to hire employees for awhile, so you won't need a physical office space. CASE, who was profiled here on Archinect recently, dosn't have an office; the four of them work from their own apartments and use cell/email/skype to do ALL their business.
If you do need to hire someone for drafting, do it on an open contract basis so they can work out of their home as well. if things go well enough that you need to hrie someone fulltime, consider the office move then.
The other benefit to no office is working in a cafe, where potential clients are to be found...
The policy that I am familiar with is that banks will offer you a line of credit equal to 10% of your revenues. It is now much more difficult to secure this. Most other business loans are to buy equipment or inventory. You need collateral to secure these. Since architecture is an intellectual property business, there is only need for capital equipment like computers or printers. Again, it is difficult to do this because of the credit crisis.
Bringing in enough revenue to support 3 partners is not impossible but it's a lot of work. Larger projects with a client need for multiple points of contact can make this work financially. House additions probably aren't enough to make this work. Schools and other larger government work can.
selophane: there's an old saying to goes something like this - "start as you mean to continue"
just to play 'devil's advocate', you might want to consider what you want your practice to become and start off in a manner consistent with that aim. for example, if your expectation is to become a mainsteam "corporate" practice, you're going to find it very hard to attract corporate clients working out of your garage - corporate clients just don't award very much work to "Mr. Ed" practices. they want confidence that the firm they hire has the capacity to do the work and will still be in business when the certificate of substantial completion is issued.
yes -- this strategy requires substantially more money at the beginning and if you don't already have it in the bank, then you'll need to figure out a way to borrow it. you probably will be required to provide personal guarantees for any money you borrow from a bank, and those personal guarantees will put your house, car, retirement savings, etc. at the bank's disposal should you default on the loan.
this strategy involves more risk -- but, a case can be made that a stronger investment also helps you manage, or minimize, that risk.
I feel that this topic is getting away from what I asked, which was not how should "I" finance a firm but rather how did "you" (meaning existing practitioners) finance the start of your firms.
we saved prodigiously for several years, salting away every penney we could -- we basically had about 18-months of living expenses squirreled away before we made the leap. about 6-months into the new firm, I began to think I should have put away 24-months of living expenses.
we did rent some class B office space to start out in, and we didn't pay ourselves for nearly a year - only after "cash-in" started to reliably exceed "cash-out". during the period before paychecks started, we supported our families out of savings. we didn't buy anything that wasn't absolutely necessary - either at home or at the office.
s - we had project income coming in from projects lined up before we opened the doors. we didn't have to borrow until year 4. some of the out of pocket expenses (initial laptops, etc.) i paid for out of personal savings. my salary was artificially low the first year (meaning i took home less than i could have) so i wouldn't have to borrow.
so, financing came out of my pocket. it was the initial capital investment in the firm. amount was roughly 5,000 for the first 6 months (that paid for the laptop, cards, phone, etc.). we operated of my house the first 6 months, until cash flows started to stabilize. our first place was a 7th generation sublease, which was basically renting 2 rooms in a huge open office area. worked, though, and the price was right...
should qualify that the number out of pocket does not reflect the non-salary i wasn't taking home. meaning, that was direct, literal expenses we had. we weren't quite as hard up as fogey, but let's just say i wasn't making minimum wage either.
now, flip side is that i know of a few firms, very well connected in their areas of expertise, who could make the jump and ramp up very quickly, with 10+ employees after year one, minimal self-investments, and grew very quickly to 40+. those guys made very good money but have also fallen the farthest in the current marketplace.
i'll extrapolate one general rule from their situation: they were a very 'commodity' driven firm - low fees, did a lot of chain retail and restaurant work (repeats of a carmax or something like that) - where they had clients giving them lots of repeat, lower fee work. have no idea what they had to finance to ramp up, but that's an easier sell for a bank than 'hey, i have a high concept firm and no work'. which is closer to what we were saying at the time.
Self-financed based on income, computers, CADD software, etc accumulated through after-hours work. Built the start of our referral network and happy clients through moonlighting and basically transitioned into our firm.
Worked out of the apartment until we grew out of it. This was a bit tricky, because we would basically dodge clients requests to come to our office to meet and would go out of our way to meet them at their house/office/local Starbucks. Gotta be scrappy!
2 - no office space. This will kill you. Unless you have a ton of money coming in and need a place to meet daily, then forget it. Coffee shops work wonderfully.
3 - partners are good if they bring somethign to the table you don't have: money, money, money is a good place to start. Or business experience. 3 guys dreaming with nothing different to offer will just be, like noted above, 2 more pieces of the pie gone.
4 - cash flow is king. you need money to make money. No money? Then you need to save or find a partner/investor that does. I'd never borrow money, though.
5 - a plan. make sure you have a solid plan on how you will make money. Not how you will win awards, or enter competitions, but how you will be receiving a pay check at least every month. No cash coming in means no business.
While I am not a traditional arch firm, my experience should still be relevant. I followed all of the above starting out.
This economy sucks badly enough that unless you have solid jobs lined up I'd make sure you didn't spend a penny on anything. Meet at coffee shops, work from home, do whatever you have to to keep expenses at next to 0 (business cards are about all you need).
If you can get an academic position, it will pay a (sometimes very good) salary for roughly 15-25 hours a week of work, and sometimes less. This leaves 30+ hours a week to work on your own projects without a need for income.
Plus you get summers off, and school holidays. Plus, your side practice is seen as contributing to your academic career and as a result is supported with resources and so on.
No wonder that so many starchitects get their start in academia. In some sense, you're being paid to develop a methodology of practice, free from the need for meddlesome clients.
I think so, too. The starchitects I am familiar with got their start by having the financial means to work only on what they wanted. Teaching was a part of that singular pursuit, but only a part.
Once they were a starchitect, though, they got paid tons to work very little (name sells).
lol, whistler. like philip johnson ever needed to worry about getting the job. the guy BUILT his master's thesis on his private estate!
being wealthy through no fault of one's own is definitely the best way to start a firm.
it worked for several of today's starchitects, including that professional boxer who never went to school, and never got a license, but still managed to win a pritzker ;-)
I actually think you're both wrong, trace and jump.
Steven Holl came from a working class family in Bremerton, Washington (of Sir-Mix-a-Lot's "Bremelo Girls" fame.)
Norman Foster came from a working class background, as far as I know.
A number of minor starchitects, one of whom I've worked for, came from working class backgrounds.
There's this myth that you have to come from wealth to make it in architecture. It's probably true in some cases, but certainly not all, not by a long shot.
And who wants to be Philip Johnson anyway. The guy was a rich copyist, latching on to whatever fad happened to pass through the architectural culture at a given time.
you missed the point he still had to get the job regardless of his personal wealth every architect has to get their first job / first client and the first order of business is getting the job / client. Everything else flows from that.
s. - i don't think you're listening too closely: no one posting so far has borrowed to start their firms. we all had work of some kind in the pipeline, scrapped like hell to get off the ground, and built on that. at least two of us have said, yes, we had a business plan.
Outed - I am listening, I just don't want this to devolve into a "this is what you should do" or "bash the starchitect" thread. I'm trying to veer it back to topic incase anyone has any different stories of their starting up.
I'm not looking for validation about borrowing money, or anything like that. I'm trying to compare real life experiences with the advice in the professional publications like "the architects handbook of professional practice."
The posts so far that have discussed how people started up have been really helpful and enlightening. This is the kind of information I wish was more readily available. Not popntification, but anectdotes.
farwest1 - I am sure there are cases, but those that I've been educated by and worked for were certainly starting well above the average (whether it be staring with cash or marrying into it).
Money is not the end all. It is simply an enabling factor. There has to be the talent and drive, too. I am not dismissing it at all, it is simply a factor in life.
Soooo....if you don't inherit it, marry it or win the lotto, then you gotta work for it and earn it the old fashioned way. Borrowing is a sure case for stress.
not all major players come from wealth, and it is not a requirement. but it really really helps.
actually, the fact of being wealthy has two benefits. if you are rich enough to just build stuff, like philip johnson or shigeru ban, then you can be your own client, which is very cool. even better, being born wealthy gives you contacts with people who have money. that is what makes it possible to shift from dilettante into professional.
i don't know any architects who got a loan to start their business. however in our case we did have support because my partner had backers for his developer-ing business. we could share his office space and more importantly use his contacts. i also had income as a phd research student, which is not teaching but kind of similar. downside was that i did not sleep in order to manage both. the people i know who are proper professors with a full teaching load and an office seriously do not sleep. it is a very very hard hall to manage both and not for the feint of heart.
heck steven holl did not build a damn thing for 10 years of his practice, and when he did it was a poolhouse. purely guessing but i have wondered if the long gestation period was not due to his teaching load. 10 years without a paying client is quite long otherwise.
But in those 10 years Holl did some seminal conceptual projects that established his vision. He's been feeding off those early projects ever since.
As have Rem Koolhaas (Exodus, Delirious NY, etc) Hadid, Libeskind, Eisenman, and many other transformative architects. Most of them began with theoretical work (whether academic or financed in some other way) which then gestated into built work.
It's not often that you have a great architect who began with building for clients. Most of them began with years and years of sketches and writing. Only after those years did a client come along who was visionary enough to hire them based on nothing more than paper.
It's not often that you have a great architect who began with building for clients. Most of them began with years and years of sketches and writing.
i think that is more a reflection of the times than it is a model for starting a practice, even a more progressive practice. sadly, building did not become "fashionable" until the early aughts. the upside is that recent grads are starting out in an atmosphere that embraces practice and building within more progressive models. i don't think young architects want to base their career paths on libeskind or eisenman anymore.
i very much appreciate your view farwest, but tend to agree with jafidler.
remember that book with holl and zaha and gehry called the end of architecture? or something similar...they were lamenting that they couldn't build and gehry basically told them to grow up. i think those days are over, just as jafidler says...
anyway, my point is not about how to become a good architect, just that teaching takes up a serious amount of time and that makes a practice more difficult. i would be interested if someone one here was indeed managing the economics of a practice by having teaching income to lean on.
how about you archi? will you have a full-time practice and full-time teaching, or do you think you have to do pt for one to make it work?
s.selophane
it would appear you have lost this thread... unfortunately... there is some really interesting stuff in here, and many many architects both young and old who are clamoring for the information some have provided
so in this economic environment the rich survive without necessarily having to evolve more progressive modes of practice, while the poor and scrappy are forced to reinvent, at least temporarily?
What about the latest economic boom which produced (seemingly) innovative models for practice like Shop? Would they have had those ideas if the real estate market was not begging to be taken advantage of?
The innovation in an economically sour time, if not much is being built, we assume is theoretical? In which case the rich have been able to do this since the beginning of recorded time.
I know it is off-topic but all I could think about reading this thread is "What if... Frank Gehry had designed the entire Magic Kingdom?"
I'm thinking... short answer... there would be children crying everywhere and things spontaneously catching on fire.
Other than that, I think creativity-- and being a major dick-- would be key during a time like this. Ultimately, I think specialization rather than generalization can work if you're specializing in the general. I think the best bet would probably be a plan, design and build firm.
The market crash has left a lot of smaller communities around here without very much money and with the standing legal obligations to fulfill completing their planning requisites. It'd be a great time to start doing small jobs if you had an architectural license.
- are you a professor with a design consulting business on the side
- a builder / developer type ie Design / Build mould
- specialist ie interiors, residential, planning etc
- generalist
- etc ( what kind of work do you want to do and who is your client base )
each of the above has a very different mode of operation, not to say it couldn't evolve, but how you develop your network could be very different and the work streams ( where your work comes from ) are all very different.
Although I would never consider it part of a formal business plan, its pretty important to ask yourself... wtf going to pay the rent and put food on the table. I expect that you should have a pretty good answer for that and it shouldn't just be the first job it should be for about a 6 month period to start at least.
As a rule I have always had at least 1 years work lined up or in the books at any one time, ( this assumes that some work will come and go, some gets delayed and several new projects will come on board with short notice ) this last 6 months has seen it dip to about 4 months but in the last month we are back up to about 10 months.
After 15 years of business it wasn't without a few sleepless nights, I'm a pretty conservative business person and view the profession as a process built upon successful relationships. I keep things in perspective, basic principles of family, fun, work in that order and try to align ourselves with clients that have the same principles. You won't see me with my face on the cover of a magazine but I won't be found in the soup line either. Look after your family, your friends, your associates and employees, the rest will take care of itself.
I've seen many architects in my region fall into a trap as they started their careers of accepting every tiny traditional kitchen remodel for a difficult client that came through the door.
Ten or twenty years later, they were stuck doing that kind of work. Maybe at a larger scale, but not very interesting. And, since these kinds of jobs can be all-consuming, they had no time to develop any theoretical ideas that would propel their careers to greater heights.
An older architect friend of mine started twenty years ago, charging bargain basement rates and taking on every crappy remodel. Now he complains of not being able to break out of those kinds of projects. He's known locally as good at traditional remodels—even though what he really wants is to be designing cool modern projects. But no one will hire him to do it.
Moral: be a bit careful that the projects you take will advance your career. I think it's really important to screen your clients and be willing to pass on a project if a client seems difficult or unreasonable.
A difficult client on a small residential renovation with no budget can ruin your mental health.
And those projects don't pay. The fee for a kitchen remodel, at least where I am, is a couple of thousand dollars. But once you're done dealing with client design changes, permitting, selecting a contractor, and site supervision, you'll find you've poured a few months into the job. Maybe not every hour of every day. But I guarantee you won't have made any money.
I did a residential remodel project for a client about 6 years ago. That lead to a second remodel of another part of his house. That lead to renovations for his neighbor. That lead to a modern condo building for his father. That lead to tenant work for the development company he owns. That lead to a new building for his development company. That lead to doing all his local development work. That lead to medical work for a tenant in one of the buildings. That lead to having the hospital I did the tenant work for as a client. That lead to a new cancer center, a corporate headquarters and relocation of 600 administrative people into a new building.
And so it goes. I think that remodel job paid off in the long run. (and oh, by the way, I made money on the original remodel project too. )
right on, archie. turning down a paying job because you think it is somehow beneath you is crazy. no offense to your friend, farwest, but it sounds like the fact that he is still only doing kitchen remodels after twenty years may be more a reflection of him rather than the initial job.
Nice story, Old Fogey. I totally understand the insane work schedule you can get yourself into when you are in your own business especially working out of your house as a start up. I had a very, very similar start, (are we married????)and also brought my spouse into the business. We didn't end up giving it up though. I got some professional business advice through a peer to peer adviser group. I learned to delegate, train employees to give the same level and quality of service I was giving my clients,and weaned clients off of my and onto the COMPANY and as my company grew, things actually got easier, not harder. It has been rewarding to see the company grow, but mostly it has been rewarding to see the young employees I helped to develop into really capable architects/designers. You are right, no magic though. Lots of hard work that gets you repeat clients, then even more hard work keeping them happy is the "secret".
Back to the earlier questions I started with two house designs ( one that I ended up being the project manager for ) then pulled in a one new house design that was well received and that got me a few more renos and small houses. Marketed a bit then took on a part time roll for a local planning outfit that needed a bit more architectural / planning help which lasted about 2 years and probably ate up about 20 hrs a week and still did my own work on the side. It was good as a filler but in the meantime I got busier doing my own work and eventually I left just to do my own stuff. Ever since I've been busy.
Since the last time I wrote above I've gotten a large seniors housing project, and another new house so I'm busy for the next year.
Totally agree with what Archie and Old Fogey have to say above, I've got a great staff and as of this last year the company has been busier but I have less stress and more time for my family .... and of course fun.
In the first years I only did a bit of cold calling to groups who I knew were builders / developers, read the news paper and business sections to see which groups needed "funding" for a new building ie I got a daycare and an animal shelter through similar means. Simple introductions that I would follow up on or recommendations of friends, I always talk to builders as they often are the first person a client will talk to about doing some work. Builders need work on an ongoing basis and therefore its a bit of mutual marketing, ie he builds and I'll design it for you. Once you earn their trust I would get jobs every year from the same guys. I've done 6-7 jobs with the same 4 -5 guys. Its a good stream of work and often I'll give them work as well .... it works both ways.
I don't have a web site, although my daughter may take it on as a summer job. I turn down lots of work that I feel is not right for me or fits our skill set, or that I want to do, bad projects / clients can drag you down.
Good work, good service is your best bet. do what you say, and over deliver they'll love you.
Starting a firm
2 colleagues of mine and I are in the process of starting our own firm, and i was wondering how some of you who have your own firms found financing. Were you able to get bank loans/sba loans? Or did you rely on personal savings/credit cards/family?
I know the credit crunch we're in now makes borrowing hard to do, but I was just wondering what other's experiences were like.
Also, how formal of a business plan did you write up?
Loans to start an intellectual property business?
FORGET IT!
You get that AFTER you've proven your cash flow...
I would create a home office and work from home untill you have enough income to go out and get an office, etc...
At least thats what I did and I think in these hard finacial times its best.
this is an interesting twist to an otherwise over-asked question. I don't own a practice but really wish I did.
Banks require collateral and I am assuming no one is likely to give up their house to finance a partnered business - I could be wrong. Try your neighbourhood credit union, although it would require you to borrow off money already banked. Find a venture capitalist - increasingly hard in these times. Piggy back off an existing company - whatever it may be Dry Cleaners and Architects?
we did it by having 2nd jobs that were flexible. partner was in real estate, i was doing research.
the normal route based on 3 offices run by friends is to get a job and use that money to start, and then spend the rest of your time finding more work. design takes place mostly in the time between finding work.
most of our time lately is spent networking to find new clients, starting projects and pushing to get things through banks. until recently (actually, today) most of those projects were being stalled at the bank door (we are in japan).
if you are going to start an office i absolutely recommend that you start right now looking for work and do not stop. it took us a while to understand how important it is, and even more so in this climate.
which is to say the best way to finance your office is to have work. anything else frankly does not make sense to me unless you are going to try to do something non traditional?
you don't need loans; you need income. and while it may be nice to have two partners, that also means that whatever start-up (i.e. small) jobs you get will be divided by three. i would definitely take a close look at your finances before you get in too deep. to me, it doesn't sound like you are ready to start an office.
s. - there is a surprising amount of information about this in past posts - it'd take some wading to get through, yes, but there's probably a lot in there you might find useful as well.
i'll echo jafidler - don't take out any loans, especially to pay yourselves. the banks won't really 'allow' that - they're going to want to see anything they loan against being used for harder/more recoverable assets.
if you don't have any real income coming in yet, forget a loan, even through sba. this isn't a very scalable business type (meaning it could expand quickly and exponentially if done right). that makes it much harder for anyone to write you a check, especially on the front side.
throw in the fact that the banks are super skittish about doing risky loans of any kind (and startups are the riskiest), and you can probably forget that route.
i'd recommend doing everything you can to avoid taking on real debt, as mentioned. get used equipment, go low on software, forgo a plotter, work out of someone's house until cash flow begins to really happen, and plan on lower salaries (or no salaries) for a while until work happens.
with regards to a business plan: very, very helpful, especially with partners involved. you all should be taking a hard look at where you want to be in 5-10 years - if you're not on the same page with most things, i'd say your chances of getting to that milestone are very, very slim. look at each person's financial situation -do all of you have other means of income? is one person 'independantly wealthy'? if so, do they really understand the financial needs of the other two partners? (as one example). you all need to do some basic cash flow projections, budgets, and legal work.
sounds like one of you needs to be the operations guy and figure out how to get all this stuff figured out before you all get in too deep.
Yep, all good advice above. My partner has been in business for 12 years and has never taken out a loan. When I came along I personally borrowed a couple thousand from my parents to buy in, but we've still never had an office, plotter, etc. Low overhead is key.
A large firm in my city - 30-ish employees - started with a loan from one of the partner's dad. There's nothing wrong with borrowing money to start, but the first question is do you really need to borrow money at all?
You most likely won't need to hire employees for awhile, so you won't need a physical office space. CASE, who was profiled here on Archinect recently, dosn't have an office; the four of them work from their own apartments and use cell/email/skype to do ALL their business.
If you do need to hire someone for drafting, do it on an open contract basis so they can work out of their home as well. if things go well enough that you need to hrie someone fulltime, consider the office move then.
The other benefit to no office is working in a cafe, where potential clients are to be found...
The policy that I am familiar with is that banks will offer you a line of credit equal to 10% of your revenues. It is now much more difficult to secure this. Most other business loans are to buy equipment or inventory. You need collateral to secure these. Since architecture is an intellectual property business, there is only need for capital equipment like computers or printers. Again, it is difficult to do this because of the credit crisis.
Bringing in enough revenue to support 3 partners is not impossible but it's a lot of work. Larger projects with a client need for multiple points of contact can make this work financially. House additions probably aren't enough to make this work. Schools and other larger government work can.
Good luck!!!!!
selophane: there's an old saying to goes something like this - "start as you mean to continue"
just to play 'devil's advocate', you might want to consider what you want your practice to become and start off in a manner consistent with that aim. for example, if your expectation is to become a mainsteam "corporate" practice, you're going to find it very hard to attract corporate clients working out of your garage - corporate clients just don't award very much work to "Mr. Ed" practices. they want confidence that the firm they hire has the capacity to do the work and will still be in business when the certificate of substantial completion is issued.
yes -- this strategy requires substantially more money at the beginning and if you don't already have it in the bank, then you'll need to figure out a way to borrow it. you probably will be required to provide personal guarantees for any money you borrow from a bank, and those personal guarantees will put your house, car, retirement savings, etc. at the bank's disposal should you default on the loan.
this strategy involves more risk -- but, a case can be made that a stronger investment also helps you manage, or minimize, that risk.
I feel that this topic is getting away from what I asked, which was not how should "I" finance a firm but rather how did "you" (meaning existing practitioners) finance the start of your firms.
oh -- okay.
we saved prodigiously for several years, salting away every penney we could -- we basically had about 18-months of living expenses squirreled away before we made the leap. about 6-months into the new firm, I began to think I should have put away 24-months of living expenses.
we did rent some class B office space to start out in, and we didn't pay ourselves for nearly a year - only after "cash-in" started to reliably exceed "cash-out". during the period before paychecks started, we supported our families out of savings. we didn't buy anything that wasn't absolutely necessary - either at home or at the office.
in short - we self-financed.
s - we had project income coming in from projects lined up before we opened the doors. we didn't have to borrow until year 4. some of the out of pocket expenses (initial laptops, etc.) i paid for out of personal savings. my salary was artificially low the first year (meaning i took home less than i could have) so i wouldn't have to borrow.
so, financing came out of my pocket. it was the initial capital investment in the firm. amount was roughly 5,000 for the first 6 months (that paid for the laptop, cards, phone, etc.). we operated of my house the first 6 months, until cash flows started to stabilize. our first place was a 7th generation sublease, which was basically renting 2 rooms in a huge open office area. worked, though, and the price was right...
should qualify that the number out of pocket does not reflect the non-salary i wasn't taking home. meaning, that was direct, literal expenses we had. we weren't quite as hard up as fogey, but let's just say i wasn't making minimum wage either.
now, flip side is that i know of a few firms, very well connected in their areas of expertise, who could make the jump and ramp up very quickly, with 10+ employees after year one, minimal self-investments, and grew very quickly to 40+. those guys made very good money but have also fallen the farthest in the current marketplace.
i'll extrapolate one general rule from their situation: they were a very 'commodity' driven firm - low fees, did a lot of chain retail and restaurant work (repeats of a carmax or something like that) - where they had clients giving them lots of repeat, lower fee work. have no idea what they had to finance to ramp up, but that's an easier sell for a bank than 'hey, i have a high concept firm and no work'. which is closer to what we were saying at the time.
Self-financed based on income, computers, CADD software, etc accumulated through after-hours work. Built the start of our referral network and happy clients through moonlighting and basically transitioned into our firm.
Worked out of the apartment until we grew out of it. This was a bit tricky, because we would basically dodge clients requests to come to our office to meet and would go out of our way to meet them at their house/office/local Starbucks. Gotta be scrappy!
1 - don't borrow
2 - no office space. This will kill you. Unless you have a ton of money coming in and need a place to meet daily, then forget it. Coffee shops work wonderfully.
3 - partners are good if they bring somethign to the table you don't have: money, money, money is a good place to start. Or business experience. 3 guys dreaming with nothing different to offer will just be, like noted above, 2 more pieces of the pie gone.
4 - cash flow is king. you need money to make money. No money? Then you need to save or find a partner/investor that does. I'd never borrow money, though.
5 - a plan. make sure you have a solid plan on how you will make money. Not how you will win awards, or enter competitions, but how you will be receiving a pay check at least every month. No cash coming in means no business.
While I am not a traditional arch firm, my experience should still be relevant. I followed all of the above starting out.
This economy sucks badly enough that unless you have solid jobs lined up I'd make sure you didn't spend a penny on anything. Meet at coffee shops, work from home, do whatever you have to to keep expenses at next to 0 (business cards are about all you need).
Good luck.
anybody go the academic/teaching route to starting a firm? that seemed to work for many starchitects.
If you can get an academic position, it will pay a (sometimes very good) salary for roughly 15-25 hours a week of work, and sometimes less. This leaves 30+ hours a week to work on your own projects without a need for income.
Plus you get summers off, and school holidays. Plus, your side practice is seen as contributing to your academic career and as a result is supported with resources and so on.
No wonder that so many starchitects get their start in academia. In some sense, you're being paid to develop a methodology of practice, free from the need for meddlesome clients.
Bank loan ..... I guess you've learned nothing over the last 6 months.
-First rule as stated by Philip Johnson, .... get the job.
-Second rule as stated by Philip Johnson, .... get the job.
-Third rule as stated by Philip Johnson, .... get the job.
So go get the jobs, get paid ... repeat!
i think your opinion of how much teachers work is grossly under-rated.
I think so, too. The starchitects I am familiar with got their start by having the financial means to work only on what they wanted. Teaching was a part of that singular pursuit, but only a part.
Once they were a starchitect, though, they got paid tons to work very little (name sells).
lol, whistler. like philip johnson ever needed to worry about getting the job. the guy BUILT his master's thesis on his private estate!
being wealthy through no fault of one's own is definitely the best way to start a firm.
it worked for several of today's starchitects, including that professional boxer who never went to school, and never got a license, but still managed to win a pritzker ;-)
I actually think you're both wrong, trace and jump.
Steven Holl came from a working class family in Bremerton, Washington (of Sir-Mix-a-Lot's "Bremelo Girls" fame.)
Norman Foster came from a working class background, as far as I know.
A number of minor starchitects, one of whom I've worked for, came from working class backgrounds.
There's this myth that you have to come from wealth to make it in architecture. It's probably true in some cases, but certainly not all, not by a long shot.
And who wants to be Philip Johnson anyway. The guy was a rich copyist, latching on to whatever fad happened to pass through the architectural culture at a given time.
you missed the point he still had to get the job regardless of his personal wealth every architect has to get their first job / first client and the first order of business is getting the job / client. Everything else flows from that.
So, back to my question, how did you get your firm started and did you have a business plan?
s. - i don't think you're listening too closely: no one posting so far has borrowed to start their firms. we all had work of some kind in the pipeline, scrapped like hell to get off the ground, and built on that. at least two of us have said, yes, we had a business plan.
Outed - I am listening, I just don't want this to devolve into a "this is what you should do" or "bash the starchitect" thread. I'm trying to veer it back to topic incase anyone has any different stories of their starting up.
I'm not looking for validation about borrowing money, or anything like that. I'm trying to compare real life experiences with the advice in the professional publications like "the architects handbook of professional practice."
The posts so far that have discussed how people started up have been really helpful and enlightening. This is the kind of information I wish was more readily available. Not popntification, but anectdotes.
farwest1 - I am sure there are cases, but those that I've been educated by and worked for were certainly starting well above the average (whether it be staring with cash or marrying into it).
Money is not the end all. It is simply an enabling factor. There has to be the talent and drive, too. I am not dismissing it at all, it is simply a factor in life.
Soooo....if you don't inherit it, marry it or win the lotto, then you gotta work for it and earn it the old fashioned way. Borrowing is a sure case for stress.
tk
we can always be the precedent
I have 15 hours teaching, and need 20 hours for 12 months to take my registration exam - what will I do with extra hour a day??
farwest you are right.
not all major players come from wealth, and it is not a requirement. but it really really helps.
actually, the fact of being wealthy has two benefits. if you are rich enough to just build stuff, like philip johnson or shigeru ban, then you can be your own client, which is very cool. even better, being born wealthy gives you contacts with people who have money. that is what makes it possible to shift from dilettante into professional.
i don't know any architects who got a loan to start their business. however in our case we did have support because my partner had backers for his developer-ing business. we could share his office space and more importantly use his contacts. i also had income as a phd research student, which is not teaching but kind of similar. downside was that i did not sleep in order to manage both. the people i know who are proper professors with a full teaching load and an office seriously do not sleep. it is a very very hard hall to manage both and not for the feint of heart.
heck steven holl did not build a damn thing for 10 years of his practice, and when he did it was a poolhouse. purely guessing but i have wondered if the long gestation period was not due to his teaching load. 10 years without a paying client is quite long otherwise.
But in those 10 years Holl did some seminal conceptual projects that established his vision. He's been feeding off those early projects ever since.
As have Rem Koolhaas (Exodus, Delirious NY, etc) Hadid, Libeskind, Eisenman, and many other transformative architects. Most of them began with theoretical work (whether academic or financed in some other way) which then gestated into built work.
It's not often that you have a great architect who began with building for clients. Most of them began with years and years of sketches and writing. Only after those years did a client come along who was visionary enough to hire them based on nothing more than paper.
i think that is more a reflection of the times than it is a model for starting a practice, even a more progressive practice. sadly, building did not become "fashionable" until the early aughts. the upside is that recent grads are starting out in an atmosphere that embraces practice and building within more progressive models. i don't think young architects want to base their career paths on libeskind or eisenman anymore.
i very much appreciate your view farwest, but tend to agree with jafidler.
remember that book with holl and zaha and gehry called the end of architecture? or something similar...they were lamenting that they couldn't build and gehry basically told them to grow up. i think those days are over, just as jafidler says...
anyway, my point is not about how to become a good architect, just that teaching takes up a serious amount of time and that makes a practice more difficult. i would be interested if someone one here was indeed managing the economics of a practice by having teaching income to lean on.
how about you archi? will you have a full-time practice and full-time teaching, or do you think you have to do pt for one to make it work?
I think theoretical work as the focus of a practice may return because the opportunities today are limited. We'll see...
s.selophane
it would appear you have lost this thread... unfortunately... there is some really interesting stuff in here, and many many architects both young and old who are clamoring for the information some have provided
so in this economic environment the rich survive without necessarily having to evolve more progressive modes of practice, while the poor and scrappy are forced to reinvent, at least temporarily?
What about the latest economic boom which produced (seemingly) innovative models for practice like Shop? Would they have had those ideas if the real estate market was not begging to be taken advantage of?
The innovation in an economically sour time, if not much is being built, we assume is theoretical? In which case the rich have been able to do this since the beginning of recorded time.
I know it is off-topic but all I could think about reading this thread is "What if... Frank Gehry had designed the entire Magic Kingdom?"
I'm thinking... short answer... there would be children crying everywhere and things spontaneously catching on fire.
Other than that, I think creativity-- and being a major dick-- would be key during a time like this. Ultimately, I think specialization rather than generalization can work if you're specializing in the general. I think the best bet would probably be a plan, design and build firm.
The market crash has left a lot of smaller communities around here without very much money and with the standing legal obligations to fulfill completing their planning requisites. It'd be a great time to start doing small jobs if you had an architectural license.
Well first off I think you need to decide;
- are you a professor with a design consulting business on the side
- a builder / developer type ie Design / Build mould
- specialist ie interiors, residential, planning etc
- generalist
- etc ( what kind of work do you want to do and who is your client base )
each of the above has a very different mode of operation, not to say it couldn't evolve, but how you develop your network could be very different and the work streams ( where your work comes from ) are all very different.
Although I would never consider it part of a formal business plan, its pretty important to ask yourself... wtf going to pay the rent and put food on the table. I expect that you should have a pretty good answer for that and it shouldn't just be the first job it should be for about a 6 month period to start at least.
As a rule I have always had at least 1 years work lined up or in the books at any one time, ( this assumes that some work will come and go, some gets delayed and several new projects will come on board with short notice ) this last 6 months has seen it dip to about 4 months but in the last month we are back up to about 10 months.
Whistler, you always sound oddly organized... for an architect.
I, on the other hand, couldn't even find my keys this morning.
Thanks Kurt,
After 15 years of business it wasn't without a few sleepless nights, I'm a pretty conservative business person and view the profession as a process built upon successful relationships. I keep things in perspective, basic principles of family, fun, work in that order and try to align ourselves with clients that have the same principles. You won't see me with my face on the cover of a magazine but I won't be found in the soup line either. Look after your family, your friends, your associates and employees, the rest will take care of itself.
and enjoy what you do.
did you have a year of work when you started too whistler?
I've seen many architects in my region fall into a trap as they started their careers of accepting every tiny traditional kitchen remodel for a difficult client that came through the door.
Ten or twenty years later, they were stuck doing that kind of work. Maybe at a larger scale, but not very interesting. And, since these kinds of jobs can be all-consuming, they had no time to develop any theoretical ideas that would propel their careers to greater heights.
An older architect friend of mine started twenty years ago, charging bargain basement rates and taking on every crappy remodel. Now he complains of not being able to break out of those kinds of projects. He's known locally as good at traditional remodels—even though what he really wants is to be designing cool modern projects. But no one will hire him to do it.
Moral: be a bit careful that the projects you take will advance your career. I think it's really important to screen your clients and be willing to pass on a project if a client seems difficult or unreasonable.
A difficult client on a small residential renovation with no budget can ruin your mental health.
And those projects don't pay. The fee for a kitchen remodel, at least where I am, is a couple of thousand dollars. But once you're done dealing with client design changes, permitting, selecting a contractor, and site supervision, you'll find you've poured a few months into the job. Maybe not every hour of every day. But I guarantee you won't have made any money.
I did a residential remodel project for a client about 6 years ago. That lead to a second remodel of another part of his house. That lead to renovations for his neighbor. That lead to a modern condo building for his father. That lead to tenant work for the development company he owns. That lead to a new building for his development company. That lead to doing all his local development work. That lead to medical work for a tenant in one of the buildings. That lead to having the hospital I did the tenant work for as a client. That lead to a new cancer center, a corporate headquarters and relocation of 600 administrative people into a new building.
And so it goes. I think that remodel job paid off in the long run. (and oh, by the way, I made money on the original remodel project too. )
right on, archie. turning down a paying job because you think it is somehow beneath you is crazy. no offense to your friend, farwest, but it sounds like the fact that he is still only doing kitchen remodels after twenty years may be more a reflection of him rather than the initial job.
archie and jafidler,
ok, maybe you're right. come to think of it, it may just be that my friend doesn't know how to parlay the work into bigger and better projects.
Nice story, Old Fogey. I totally understand the insane work schedule you can get yourself into when you are in your own business especially working out of your house as a start up. I had a very, very similar start, (are we married????)and also brought my spouse into the business. We didn't end up giving it up though. I got some professional business advice through a peer to peer adviser group. I learned to delegate, train employees to give the same level and quality of service I was giving my clients,and weaned clients off of my and onto the COMPANY and as my company grew, things actually got easier, not harder. It has been rewarding to see the company grow, but mostly it has been rewarding to see the young employees I helped to develop into really capable architects/designers. You are right, no magic though. Lots of hard work that gets you repeat clients, then even more hard work keeping them happy is the "secret".
Back to the earlier questions I started with two house designs ( one that I ended up being the project manager for ) then pulled in a one new house design that was well received and that got me a few more renos and small houses. Marketed a bit then took on a part time roll for a local planning outfit that needed a bit more architectural / planning help which lasted about 2 years and probably ate up about 20 hrs a week and still did my own work on the side. It was good as a filler but in the meantime I got busier doing my own work and eventually I left just to do my own stuff. Ever since I've been busy.
Since the last time I wrote above I've gotten a large seniors housing project, and another new house so I'm busy for the next year.
Totally agree with what Archie and Old Fogey have to say above, I've got a great staff and as of this last year the company has been busier but I have less stress and more time for my family .... and of course fun.
whistler - what kind of marketing did you do?
In the first years I only did a bit of cold calling to groups who I knew were builders / developers, read the news paper and business sections to see which groups needed "funding" for a new building ie I got a daycare and an animal shelter through similar means. Simple introductions that I would follow up on or recommendations of friends, I always talk to builders as they often are the first person a client will talk to about doing some work. Builders need work on an ongoing basis and therefore its a bit of mutual marketing, ie he builds and I'll design it for you. Once you earn their trust I would get jobs every year from the same guys. I've done 6-7 jobs with the same 4 -5 guys. Its a good stream of work and often I'll give them work as well .... it works both ways.
I don't have a web site, although my daughter may take it on as a summer job. I turn down lots of work that I feel is not right for me or fits our skill set, or that I want to do, bad projects / clients can drag you down.
Good work, good service is your best bet. do what you say, and over deliver they'll love you.
bump - any updates out there?
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