Starting Your Own Architecture Firm: A Step-by-Step Guide
Since architecture is a highly skilled field that necessitates proficiency in a variety of disciplines, including engineering, design, communication, management, information technology, and much more, it is critical to have a strong foundation in these areas as well as several years of experience before launching your company.
Who is this business best suited for?
If you have completed your architecture schooling, training, and licensure, or if you have worked as an architect for a firm and are ready to branch out on your own, starting an architecture firm might be right for you. It is the ideal business for those who not only possess the necessary skills, training, and creative expertise, but also have a strong desire to start their own business.
What is the demographic of the target market?
Architect firms work on projects for the local, state, and federal governments, as well as private clients’ design needs. They work on residential and commercial projects ranging from easy to complex.
Architect firms are concentrating on niche target markets as a result of an increasing concentration on market segmentation and emerging disruptions in technology, construction, and equipment. The following are some of the advanced segments:
- Landscape design
- Green or sustainable design
- Interior design
- Urban design
- Industrial design
- Commercial buildings design
- Residential design
- Restoration design
Under these large segments, architectural firms specialize in particular areas. Specializations of residential design, for example, may include historic home design, large residential complexes, smart home design, and open building design, to name a few. There are sub-segments within commercial buildings, such as energy efficient buildings, sports centers, and restaurants, and niche segments within each of these. An architect company that specializes in the construction of an indoor stadium or an aquatic center, for example. Another firm could specialize in zero-carbon hotel design.
The Architecture Industry’s Growth Prospects
Over the last decade, the architecture industry has seen steady growth. There has been a 5.0 percent increase in the last five years, with total sales of $47 billion in 2019. The demand for architects is expected to grow over the next decade, with an increase in both residential and non-residential construction.
Starting a Business in Architecture
When looking for information on how to start an architecture firm, one of the first things to keep in mind is that you must be a licensed, trained, and competent architect. Make sure you have the requisite knowledge and qualifications to start your own architecture firm.
The following aspects are good places to start if you want to learn how to start an architecture company. These questions will assist you in developing a plan for launching your own architecture firm:
- What types of projects and customers would you like to focus on?
- Whether you want to concentrate on architecture or business management,
- What are your financial and corporate objectives?
- If you want to sell the company in a certain amount of time?
- Do you want to hire people or go it alone?
- Will you be able to work from home or will an office be required?
- What licenses or permits do you need on a state, local, or national level?
- Where and how will you secure the finances?
The amount of money required to start your own architecture firm is determined by a variety of factors.
When calculating the total startup expense, consider the following factors:
- The business’s location
- Organizational structure
- Financial objectives
- The company’s size
- Furniture and appliances for the office
- Hardware and software for computers
- The internet site
- Expenses for branding and marketing
- Licensing and permit fees
- Professional liability insurance for architects
How to Begin a Company
After you’ve considered the criteria, costs, and target market, the next steps in starting your own architecture firm are as follows:
- Create a business plan: A business plan is a road map that outlines the company’s vision, purpose, and objectives, as well as the specifics of how you’ll accomplish them. Any information about the company’s structure, target market, initial and ongoing expenses, and when you intend to break even should be included in the plan.
- Establish the legal status of your company: If your company is legally recognized, you are shielded from personal responsibility in the case of a lawsuit.
- Make sure you’re tax-registered: If appropriate, register your company for federal and state taxes.
- It’s important to have a business bank account: When you start your own architecture company, you’ll need to open a business checking account to keep your finances coordinated and to give your firm a more professional appearance to your clients.
- Concentrate on accounting: Bookkeeping and accounting are important aspects of running a company. If you want to do your own accounting, you can maintain a clear record of all sources of income and expenditures.
- Obtain licenses and permits: If the company lacks the requisite permits and licenses, it may be shut down or face severe penalties.
- Obtain company insurance: One of the most important considerations for architects is professional liability insurance. Employment compensation insurance is a legal obligation if the company hires other employees. Such insurance policies, in addition to professional liability insurance for landscape architects, protect your business properties and personal liability in the event of injuries or incidents.
- Show the company’s identity: Your logo, letterheads, logo, website design, business cards, office design, and photography are all part of your brand.
- Have a website: When looking for the “best architect firm near me,” several customers turn to the internet. It is important for your company to not only be identified, but also to rank highly in search engines.
The mission, principles, priorities, and other aspects of your company are all outlined in the business plan. The following are some of the segments that a business plan would include:
- The industry overview section highlights crucial industry trends, the current local, state, or national market scenario, projected growth, and a competitor and target market analysis.
- Statement of vision, mission, and priorities: This section explains your core principles, short and long-term goals, and how you intend to achieve them.
- If you’re an LLP, you’ll need to explain the various divisions and staff the company may hire, as well as their positions and responsibilities.
- Competitive advantage: This section emphasizes how the company is distinct and what the main differentiators are.
- List the various marketing techniques your company will use to attract and retain clients in this section.
- Aside from the revenue projections for the first three fiscal years, describe in depth how you will charge your clients on an hourly, per design, and per project basis.
- Funding/startup capital: This section would detail whether the company can take out a loan, use cash reserves, or seek soft loans from family members.
Entity of Legal Status
A sole proprietorship, in which you are the sole owner of the company, a partnership, and a corporation are the three basic legal entities. A sole proprietorship is an unincorporated business enterprise in which the owner and the business entity have no legal distinction. You have complete control over all gains, but you are solely responsible for all losses, debts, and liabilities.
A partnership is formed when two or more parties form a company, and all assets are shared equally by the partners, unless the partnership agreement specifies otherwise. In this case, the partners’ liabilities are shared.
Imposition of taxes
Sole proprietors file their taxes with the regular Schedule C and Form 1040, which identify and pass company profits to personal income. In a partnership company, taxes are filed by filing a “annual information return,” which details the business’s deductions, losses, profits, and wages. Corporations pay taxes on their income, which are different from the taxes paid by their shareholders.
Licenses and Permits
A company providing architectural services should register with the state board of architects and obtain a Certificate of Authorization, which is required for practice in nearly 60% of firms. Firms that do not have the certificate can face steep penalties.
Professional liability insurance for architects
Architects professional liability insurance is a form of professional liability insurance for architects that protects them from claims resulting from their work.
Architect Professional Liability Insurance, also known as “errors and omissions insurance,” protects you against financial damage and personal injuries caused by flaws or negligence in your work. Professional Liability Insurance, for example, covers the expense of legal defense, judgments, and settlements if a plaintiff files a lawsuit alleging that the company failed to do a proper design job.