You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your architecture firm. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an architecture firm?
Costs to start an architecture firm vary. You can start from home for about $5,000. Renting a professional office will cost between $300 and $1,500 per month. A computer will set you back about $2,000. Design software costs up to $1,200. Something like Draftsight is free, while AutoCAD LT will have an upfront cost.
A printer will cost between $100 and $500. Plotter will cost up to $2,000.
What are the ongoing expenses for an architecture firm?
Ongoing expenses for running a firm are minimal and essentially include just utilities and replacement computers as needed.
Who is the target market?
Ideal customers are large clients with deep pockets. Some of the best clients for an architecture firm will be local and state governments. Alternatively, a large company that needs extensive planning and design work done will be an excellent client.
The worst or non-ideal clients are those that have relatively small or multiple overlapping projects where the architecture firm will not be able to complete the entire project due to scheduling conflicts. These types of projects are usually designed to be taken on by multiple firms so that no one firm has control over a single project. However, they also make it difficult to profit from the work.
How does an architecture firm make money?
Architects make money by charging a fee for designing buildings, permanent and temporary structures, and for design consultations on construction projects. Some architecture companies also assist civil engineers on city planning.
How much can you charge customers?
Architecture firms charge clients one of several ways and, depending on the number and skill level of the architects you have working for you, the fees can vary considerably.
The principal of the organization can make $135-$175 per hour. Project managers earn up to $100 per hour. An Intern Architect II with up to 8 years experience can earn up to $80 per hour. Intern Architect I with between 3 and 5 years experience can earn $65 per hour.
Overall, fees range from $60 to over $100 per hour for a typical residential project. If the firm charges a fee as a percentage of the total project cost, this will range from between 15% to 20%. If the firm wants to charge per square foot of the project, then anywhere between $0.75 and $4 per square foot is reasonable. The exact per square foot charge depends on location and local market rates.
How much profit can an architecture firm make?
Profit targets vary by company and location, but generally a firm should be able to achieve a 15% to 20% or more profit margin.
How can you make your business more profitable?
Making the firm more profitable usually involves partnering with larger firms, working more closely with contractors, and increasing the firm’s advertising budget.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your architecture firm is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
The U.S. General Services Administration maintains policies and criteria regulating architecture and engineering design practice and building technology, building systems, products, and materials.
State & Local Business Licensing Requirements
Legal requirements vary by state, but architecture firms are typically required to employ a certain number of licensed architects, at least one of which has been licensed within the state. Obtaining an architect license typically involves some degree of education, work experience, and an examination. Some states require the obtainment of an additional architecture firm license.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market an architecture firm
Marketing your architecture firm requires patience. One of the best ways to take on bigger projects in the first year is to work with larger, more established firms. Many architecture firms try to drum up business with large corporate clients directly. However, without the experience in the industry, larger clients are unlikely to trust you with their project. Smaller clients are fine, but they won’t bring in a lot of revenue.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Choose a niche and get good at that type of design. For example, you might be interested in designing apartment buildings or skyscrapers. Choose one and specialize. If you bill your company as a general or “all purpose” architect, you’ll command lower fees and won’t make as much money.
High-paying clients look for specialists.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start An Architecture Firm In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
This business is perfect for individuals who love to work with their mind and have good attention to detail. Long hours are part of the job and companies that put in proposals for major projects don’t always hear back right away so business owners need to be good at managing cash flow.
What happens during a typical day at an architecture firm?
Day-to-day activities of the company include designing for new projects and meeting with construction crews on current projects. Some architectural firms are very involved with the construction side of a project while others focus primarily on design.
Answering emails is also a big part of the job. Clients today often relay messages and send project details as email attachments. Another aspect of the job is meeting minutes and managing project scope. Because some clients may attempt to exceed the scope of their project, the architectural firm needs to maintain scope integrity and become de facto project managers.
What are some skills and experiences that will help you build a successful architecture firm?
Architecture firms need skilled architects and a strong marketing department to make money. In short, they need design talent, engineering ability, social awareness for new LEED projects, legal knowledge and awareness for designing under current building codes, and business aptitude.
While you do not need a degree, it helps.
Educational programs vary, but in general cover several aspects of engineering with varying levels of expertise attained with each degree or certification.
Get a professional degree from an accredited institution, like the National Architectural Accrediting Board (NAAB). These degrees include Bachelor of Architecture (BArch) and Master of Architecture (MArch) degrees.
The BArch is given to students who have studied for at least 5 years in an accredited architecture school. High school graduates who haven’t earned an undergraduate can apply, however. You will need “core” classes to get this degree, like math, social science, science, and humanities.
The MArch for Students With a Non-Architecture Bachelor's Degree is given to students who have undergraduate degrees in other disciplines but want to switch to architecture. It takes 3 to 4 years to earn their professional MArch this way.
The MArch for Students With a Pre-Professional Bachelor's Degree allows students to earn pre-professional degree in architecture like a Bachelor of Science or Bachelor of Arts in Architecture or in Architectural History. From there, you may apply to a MArch program to get your degree in architecture.
What is the growth potential for an architecture firm?
You can start an architecture firm with just one employee: yourself. However, some firms hire as many architects as they can afford so that their company can take on additional and larger projects. A larger firm may also partner with smaller firms to take on large projects and to remain flexible.
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One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting an architecture firm?
Hire interns. They are great for reducing the amount of busywork in the office. As long as you’re not using interns as unpaid employees and following IRS guidelines, you’ll avoid violating minimum wage laws. Work for another firm before starting your own or hire a mentor. Work with a contractor and build a house. Every architecture firm dreams of landing a big corporate client. However, when you’re first getting started, it helps to understand the basics of construction and the best way to do that is to work on jobsites with developers building residential homes.
How and when to build a team
Building a team isn’t necessary if you want to remain small. However, if you want to grow your firm, you should hire as many architects as you can afford as soon as you can afford them. Since design and marketing drive your business, focus on these two departments first.