Starting an Architecture Firm? Follow These 6 Steps to Success

11

Min Read

Tom Smery

It's the dream of many ambitious designers and young architects; being your own boss, having creative autonomy, financial freedom, and great professional flexibility. But starting an architecture firm is very different from practicing or studying the profession. A successful firm requires the proper architect business development abilities, which are rarely taught in architectural education programs.

Being a licensed architect is not enough to get started. In fact, there are many potential risks, not to mention legal repercussions of starting your own firm without proper planning. For this reason, we have put together this step-by-step guide which will hopefully help put you on the right track and take off confidently.

Note: Scale and grow your freelance architect business with Bonsai's online tool hub. Access the best proposal, contract and invoice templates. Plus, you'll get expense trackers and even your own checking account to start doing business like a pro. Come on board, we've got your back!

6 Steps to Start Your Own Architecture Firm

Before you start giving out your business cards, you must ensure your architecture firm is properly established, which requires following a few basic but vital steps. To give you the best head start, let's look at the main aspects you should take care of.

1 - Have a Clear Business Plan

It doesn't matter if your are starting out or if you've been in business for a while. You must have a solid and detailed business plan to map out your company's specifics and identify some unknowns. This includes knowing what your startup and ongoing expenses will be, defining your target market, as well as pricing and profit margins. You must decide things like whether you're starting the business from home or you'll be renting a professional office, the types of clients and projects you want to focus on, or if you want to do business management or focus more on designing.

Additionally, anticipate the costs of hardware, software, utilities, licenses, website development, marketing expenses and the many other tools needed when running the firm. You must adjust these to your financial goals and the size of your business.

Write a business plan to layout your future projects and finances.

2 - Build Your Team

Being a successful business owner requires anticipating your need for support and knowing just what that need will be. You must build a team around specific skill sets where you may be lacking and focus more on your strengths. It's worth having a dedicated crew on speed dial (even if you're not fully employing them), so they can quickly help out in case you need it.

Figuring this out could take some time, especially in the beginning when everything seems to be happening at once. But you'll get there, you just have to know what you're looking for. Of course, you will have to take on many of these roles at first, but try to have as much support as you can afford to get. These are some of the main aspects of the business you will eventually need to cover.

Project Management

Project managers are essential to meet client's expectations and streamline processes once those new projects start coming in. You'll probably be able to tackle all aspects yourself at first (budgeting, time tracking (check out our TSheets alternatives), meeting deadlines, updating clients, etc...), but as your workload increases it's important to have a dedicated project manager to take these time-consuming tasks off your plate.

A great alternative is to use project management software similar to Deltek Ajera that provides you with the tools you need to achieve better results.

Here's an example of an architecture project schedule you can use to stay on top of deadlines.

Business Development

Architect business development refers to a broad range of strategies, plans, and projects aimed to improve the company. It's always a great idea to have someone in charge of making strategic decisions and can identify potential threats, emerging markets as well as growth potential for the business.

All aspects of your architecture firm, such as sales, marketing, human resources, accounting, finance, product development, and vendor management, will be positively impacted by effective business development. There are plenty of architect apps to help you run your business's workflow.

Financial Planning

Financial planning involves revenue projection, staffing, overhead expense, and profit planning. Proper financial planning is just as vital as your excellent design skills to keep the show running. This might be time-consuming, but not giving it the attention it deserves can cost you your whole architecture firm. Bonsai's accounting software for architects can help you organize your finances and plan for projects.

Marketing

Your architecture firm needs to have a consistent stream of potential clients in the pipeline to succeed. This is why marketing is of the utmost importance. While at first you may not have enough budget or staff for it, make sure you have this aspect covered by developing a marketing strategy yourself and building your networking skills.

Human Resources

This might not be an immediate necessity in the early stages of your business (especially if you're registered as a sole-proprietorship), but keep it in mind if you are planning on expanding soon. Every corporation with employees needs human resources to help find and retain skilled employees to increase your business productivity. Additionally, HR makes sure that all company, state, and federal regulations are followed.

3 - Get Your License and Permissions

Without the required permissions and licenses, architectural firms will risk paying heavy fines or even the closure of your architecture business. State-specific legal requirements may differ, but generally speaking, architecture companies must employ a minimum number of licensed architects, at least one of whom has a license from the state.

A certain amount of schooling, professional experience, and passing an exam are often requirements for obtaining an architect license (check with the National Architectural Accrediting Board for requirements). Some states demand the acquisition of a separate license for an architecture business. Check with your city, town or clerk's office to make sure you meet all the requirements to run your own architecture firm.

4 - Register as a Business

Registering your business might differ depending on how big it is and what state you live in. But in general, these are the basic steps you'll need to follow.

Choose a business structure

First, you must decide on a business structure (also known as a business entity). This will determine the way you file taxes, how your firm is run on a day-to-day basis, and how much of your personal assets are at risk if your company fails. The most common business structures are sole proprietorship, limited liability corporation (LLC), partnership, and C-Corp. A legal entity will separate you from the business and help you mitigate litigation from your personal assets.

Register a business name

The next step is to register your name for your own business. Typically, the process of forming different entities like LLCs and corporations includes registering a business name. However, you might need to submit a DBA (a "doing business as" name) if you're creating a single proprietorship or a partnership and choose a company name that isn't your own.

Register for taxes

In order to file taxes, you will also need to register your business with the IRS (Internal Revenue Service). First, you must obtain your Employer Identification Number (EIN), which is like your business's social security number. If you're registering as a sole proprietorship, this will not be necessary, however, there are certain benefits of getting your EIN anyways.

State and Local Registration

After completing all federal registrations, you'll probably need to register your company with one or more state or local entities, such as the revenue offices. You might also need to register with your state agency to file payroll taxes if you intend to handle payroll.

5 - Open a Business Bank Account

When you don't keep your business and personal finances separate, all your personal assets (home, vehicle, etc...), are at risk if your firm is sued. This is known as "piercing your corporation veil" in business law. But the benefits of a dedicated business bank account go further than just protecting your money.

Establishing corporate records (and credit) can help you secure loans, credit cards, and other funding under your company's name rather than your own, as well as get better terms and credit limits. Plus, keeping your business finances separate can make accounting and tax filing much easier. It's recommended to open an architect bank account online.

6 - Get Business Insurance

Business insurance is just as necessary as your licenses and permits. It protects the financial stability of your business in case of covered losses. There are many insurance policy types, and the one you choose will depend on the different risks your architecture firm might face. If you're not sure about what you will need in the future, getting a General Liability Insurance is a great place to start. This policy usually guards architects from third-party harm, third-party property loss and theft, as well as third-party harm from advertisements.

If you have employees, another common option is Workers’ Compensation Insurance. Employees who have work-related injuries can use this coverage to assist cover their medical costs and missed income. These plans typically include an employer's liability insurance which shields business owners from litigation relating to workplace injuries. Remember that specific contracts, especially when working in larger projects, might require you to obtain additional coverage such as professional liability insurance.

How Bonsai can Help Architecture Firms

If you're ready to start your own architecture company, you'll need some help. And Bonsai's all-in-one product suite is your best bet. Using our platform you'll be able to handle the majority of your administrative tasks in the same place, saving you valuable time and money.

Take a look at how Bonsai can help you start your own architectural firm.

Bonsai Cash

Bonsai Cash is an online checking account specially designed for freelancers and small businesses. This will significantly help you manage your business finances, receive payments, track expenses, and it's the perfect way to keep your company's assets separate from personal transactions. You will also have the option to create different 'envelopes' which act as sub-accounts for your savings.

By assigning a specific percentage to each, your money will automatically be transferred to them, helping you save up for taxes, equipment, vacations or anything you see fit. Bonsai Cash also allows you to make free ATM withdrawals, and does not charge any fees for transactions or monthly account maintenance. It's a fuss-free option with a super simple set up and no hidden charges. Our bank account also connects with our architectural payment platform at the lowest fees so you can get paid faster.

Bonsai Tax

Bonsai offers you complete accounting and tax software that allows you to keep track of all of your business finances. By automatically importing the information from your bank account, or manually adding it to the platform, our software will immediately categorize your expenses, provide you with tax estimates, identify possible deductions and pretty much make tax season a bliss.

Forget storing all those receipts and manually going through your expenses with your accountant. With Bonsai's online storage, you can scan your bank/credit card receipts and access them anytime so you never miss any important deduction. Stay on top of your taxes with our accounting program for architects.

Invoicing

Stay one step ahead with Bonsai's invoicing software for architects. With our fully-customizable free invoice templates you can quickly create professional invoices that help you get paid faster and maintain a healthy cash flow. You can integrate multiple online payment options and link your business checking account for instant access to your funds and a simplified payment process. Plus, you can schedule automatic payment reminders, late fees and get viewing notifications to make sure your clients never miss an invoice.

Plus, our task and time tracking tools will provide you with an automated timesheet so you can import the details of your billable hours and get paid properly for your professional services. This will also help you maintain more transparency with your clients and reduce errors in your billing process.

Proposals

You're starting your own practice, so you will now be in charge of pitching prospective clients for work. The best way to convince your clients that you're the right person for the job is to present a high-quality proposal that sets you apart from the rest and covers all the key elements. Bonsai helps you stay on top of your architect proposal drafting with a wide gallery of free proposals, scope of work and quotes templates so you never miss any important details.

You can add multiple packages to our proposal templates so your clients can choose the one that best fits their project, maximizing the close rate and your earnings. Once you send out your proposal, you'll get notifications when it is viewed and your clients will be able to accept it on any device. With so much efficiency, landing your first client will be a piece of cake.

Contracts

Ready to start a new project? Before you go any further, you'll want to seal the deal with a professional contract that protects your clients and your architecture business. To make sure all essential elements are carefully outlined in every single contract you draft, use Bonsai's free contract templates.

Our architecture contract templates have been legally reviewed by top lawyers and many freelancers in the industry, which ensures your architectural practice will stay protected. Plus, you can streamline all the formalities by using a legally-binding e-signature and sending automatic reminders and notifications when the contract is viewed and signed. We help you onboard clients in the most efficient way so you can get started with the project in no time.

Take advantage of all these tools and take your new business to the next level. We help you save time to focus on your passion, not your paperwork. Start your 14-day free trial today and see for yourself!

Tom Smery
Tom Smery is a certified CPA for over a decade. In his free time, he writes articles to pass on his expert knowledge on taxes and accounting. Thomas has a wide range of deep knowledge on 1099 taxes, and finance topics. You can find him fishing when he is not preparing taxes for his clients or writing about accounting.

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