Introduction
Architects have a terrible reputation in the business. This stereotype is not entirely baseless: disdain for business is instilled in us throughout our education and professional lives. Besides infrequent mentions of clients in architecture schools, students are mostly denied business management and profit maximisation lessons. While this unfortunate state is gradually changing, there is no getting around the fact that the majority of our schools are still based on an outmoded educational model that is as disconnected from the reality of the AEC industry as most mainstream architectural practices are unwilling to adapt to cultural and technological shifts occurring in other industries.
The number of licensed architects is growing, and the average age of those achieving licensure is at an all-time low may appear to be encouraging at first. Still, it also means that far too many of us are entering the workforce each year. We compete for the same clients who can afford good design and seek jobs that will allow us to exercise our creative freedom and gain exposure. Most end up working for others for years, if not decades, gaining no significant insight into how businesses operate, attract clients, and negotiate.
Architects who take that route tend to stick to the outdated model of trading hours for dollars. One result of this mindset is that clients view architectural services as a cost rather than a value. Those willing to learn from others recognise the inherent problem of reinventing their services with each new client and adopting superior business models based on efficiency and speed. They understand the importance of well-defined value propositions, innovative branding, differentiation strategies, and marketing in the success of their businesses. Many automate significant portions of their workflow, design effective organisational and time-management systems like the JD Edwards EnterpriseOne ERP system, and take a proactive approach to client acquisition.
So, what are the options for architects to practice their craft autonomously while also making a profit? What kinds of architecture firms are there to suit the best business model for you? It is critical to consider your business model as you develop the business plan for your new architecture firm.
This includes preparing your company’s operations to answer the following questions:
How will you find new customers?
What kinds of projects do you want to create?
Why should clients select your firm over others?
How will you complete projects while remaining profitable?
How will you organise your workforce to deliver your services?
These and other questions are all related to your business model.
Understanding your options and potential challenges when forming your firm is critical so that you can be deliberate in how you set up your design process and market your company.
There are three business models for architecture firms that differentiate firms and how they run: efficiency-based, experience-based, and expertise-based offices. Depending on which you choose for your company, it will help you direct how you should manage marketing, staffing, and, ultimately, profitability.
Take your time to consider why you are starting your firm, what your goals are, what prior experience you have, and how you prefer to practice, and then choose the model that best fits your future goals. Be honest and deliberate about your choice early on, as switching to a different model can be difficult and costly once you have some projects under your belt and a reputation for your company. It is also critical to make hiring, management, and staffing decisions that support your architecture firm’s style.
Types of Architecture Firms
Efficiency Based.
This model is intended for architecture firms that can complete projects faster or for less than their competitors. Typically, this means that you have developed an efficient and streamlined design and production process and are constantly looking for ways to improve it. You’ve also chosen projects that are easy to implement and allow repetitive processes. Efficiency-based firms frequently do less complex projects or take on similar projects to those they have already completed, taking advantage of your design process efficiencies. Furthermore, these businesses typically provide a limited range of services or a standard scope of work that is familiar and reproducible. Limiting the type and complexity of work you take on allows you to reuse details, notes, and other documentation to keep work hours to a minimum while still providing quality documents. The goal is to be as efficient as possible in all aspects of your practice.
For example, if you’re working on a multi-family housing project, you can reuse unit layouts or make the bathrooms the same design, saving time and effort. If you do custom residential projects, you may have wall assemblies and foundation types that you can reuse on all of your projects, as well as standard window details that don’t require special attention. To keep your work hours to a minimum, look for places where you don’t have to reinvent everything from scratch. Your ideal client for this business model is someone looking for simple design solutions, has a tight deadline, and is budget conscious. Residential developers, retail chains, or even projects like accessory dwelling units could fall into this category.
The goal is to adhere to standards while delivering projects quickly and efficiently in a highly predictable manner. Using new technology or tools to improve standard project delivery is another approach for this business model. There is an opportunity to use new technology to give your firm an advantage over established architecture firms. Digital scanning, BIM, virtual reality renderings, or AI, for example, could be areas to focus on to make the design and documentation process faster and more efficient. This dedication to technology may help convince clients to choose a specific design more quickly. Practices should constantly look for new tools or methods to help reduce the time it takes to deliver work and thus increase profits.
This prototype lends itself to having larger production teams working under a relatively small team of highly experienced architects and partners due to the repeatable design process, relatively simple project types and/or standardisation of your deliverables. It can include hiring recent graduates or junior architects to assist with production, lowering labour costs, and providing them with valuable work experience to advance their careers. This approach also enables businesses to consider teleworking or even outsourcing some studio work to save money and increase the number of projects they can take on.
It is not the model that most architects envision when they begin their practice. However, if inefficiencies in the market are discovered, this business model has the potential to generate enormous profits. This business model fits one of the most profitable companies I know. What exactly do they do? They work on chain restaurants all over the country, adapting a standard kit of parts to fit whatever new space the restaurants are relocating to. Every project uses standard materials and details that are simple and repetitive. They’ve developed an amazingly profitable business while offering an excellent work/life balance for the owners and are capable of paying their staff slightly above the market price for their experience level by keeping their process super efficient, improving it, and retaining a large production staff of junior architects.
It is also an easier business model for new firms to market, as they may lack the portfolio or reputation to pursue complex projects but can compete on price or market their knowledge of emerging technology or a streamlined design process—areas where younger architects may be more skilled than older practitioners.
Experience-Based
It is most likely the most common model used by architects who want to start their firms. Experience-based practices strive to provide clients with design services while solving unique problems. These firms can take on more complex project types and market themselves as knowing what they are doing to meet the needs of their clients by relying on their previous experience and expertise. Some of these companies continue to specialise in specific markets. When you start a new firm and want to be an experience-based architectural practice, you rely on your and your business partners’ reputations and past portfolios. You must demonstrate that the experience you gained before starting your own business will translate into the ability to deliver similar projects.
The challenge is convincing clients that, despite the firm’s inexperience, the partners have a proven track record, the design staff is capable, and the firm possesses all of the design experience required to solve complex design challenges by managing the team required to deliver significant projects on time and budget. It can be difficult at first, but the firm could increase with a few projects under your belt. These firms’ staffing structures differ from those of efficiency-based firms. When marketing to clients for more complex and one-of-a-kind projects, you must demonstrate that your team possesses the necessary skills and experience. When you’re getting started, this often means that your first few hires should be more experienced architects working on projects in your target markets. It also means that as your company grows, you will require a significant proportion of project managers or architects with this experience level. These employees will, of course, be more expensive than less-experienced production staff, so finding the right balance of experience and production is a challenge to maintain profitability. Thus, project management and staffing are critical to the success of this business model and the firm’s profitability.
Expertise Based
This business model is for architects with extensive knowledge of a specific project type or topic or who have demonstrated exceptional design abilities. The ” starchitects ” have built a reputation based on their award-winning designs and consulting firms for specific technically challenging projects. For example, these could be Pritzker Prize-winning firms that specialise in the design of acoustically challenging performing arts buildings, technically challenging research science laboratories or even code consultants. Firms that develop and master new technology
Frank Gehry’s office is an example of a firm that has done both: he is sought after for his eye-catching design aesthetics, and his firm has introduced innovative software to allow his complicated curving forms to be designed and fabricated. He also takes on cultural projects that require a high level of expertise.
Other companies may publish research on a specific topic or have a consultant who is up to date on the latest innovations. In any case, these firms have some unique knowledge or talent that makes them in demand and allows them to charge higher fees for their services.
The financial model for these offices is that if you become a sought-after expert in your field, you can charge higher fees or hourly rates. Although many starchitect offices grow into large companies with many employees, this business model can also be lucrative for sole practitioners or small partnerships with a unique skill set or knowledge base. In both cases, the staffing requirements are typically top-heavy, with the principal or partners in high demand and thus required to work directly on billable projects. There would be some support staff below them to help with the execution of the work, but the principals are more focused on the work itself than on managing the firm or finding new clients.
These firms frequently seek to collaborate with other architectural offices to complete the full scope of architectural work. They can act as design architects, with an architect of record brought on to assist with production, or they can be consultants brought on by another firm to help navigate complex technical problems. These firms will often hire administrative staff to support the principals earlier in the firm’s growth than the other business models. However, if you keep the firm small and act as a speciality consultant, you may be able to avoid management overhead entirely. It could be an excellent option for sole practitioners with a solid client base.
Instead of relying on personal relationships and traditional business marketing and development strategies to drive new business, these firms rely on their prestige and innovations. Their portfolio, design awards, publications, research, and portfolio sell their services and attract new clients. It also necessitates ongoing education to maintain your knowledge, skills, and reputation.
Conclusion
Each of the business models has the potential to be profitable for an architecture firm. However, it is critical, to be honest and deliberate in your decision about setting up your practice. Not everyone can or should start a business in the hopes of becoming a celebrity architect or landing projects solely based on their design abilities. Finding a better way to deliver projects or utilising new technology to improve the design process can result in a fantastic business that is extremely rewarding and profitable, even if it does not fulfil your design dream. Other architects may be passionate about a particular project type and strive to be experts in that field.
Irrespective of which approach you take, it is essential to consider where your firm fits, then manage and market to capitalise on the challenges and opportunities you will face as the company grows. Create a section specifically for your business model in your overall business plan and describe how you want to operate and your clients. Take stock of your specialised knowledge and skill set and develop a model to show your strengths.
References:
- | Architectural Record [online], (no date). Architectural Record | Building Architecture, House Design & Products. [Viewed 28 November 2022]. Available from: https://www.architecturalrecord.com/articles/13462-why-the-field-of-architecture-needs-a-new-business-model
- Monograph, (2022). Types of Architecture Firms and Their Business Models [online]. Project Management Software for Architects – Monograph. [Viewed 28 November 2022]. Available from: https://monograph.com/blog/types-of-architecture-firms
- Lee, E., (2018). 5 Innovative Business Models for Young Architectural Practices [online]. ArchDaily. [Viewed 28 November 2022]. Available from: https://www.archdaily.com/887308/5-innovative-business-models-for-young-architectural-practices
- Architecture Career Guide: 4 Modern Business Moves for Architects – Architizer Journal [online], (no date). Journal. [Viewed 28 November 2022]. Available from: https://architizer.com/blog/practice/tools/new-business-models-for-architects/
