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Big Risk for Bigger Reward in Small Architecture Firms, Part 2

Mar 19, 2015 | By Steven Burns, FAIA | 0 Comments

Topics: Business Development

Take a risk and gamble your chances for receiving a reward. That’s the game entrepreneurs sign up for. As a new business owner navigating the minefield of potential pitfalls, you may be handsomely rewarded for your efforts.

Newly-formed architecture firms face similar hurdles that start-up companies in other industries struggle with. In Part 1 of “Big Risks for Bigger Rewards in Small Architecture Firms,” we looked at three areas that new firm owners need to consider when starting their own firm – competing for the best employees, actively selling and marketing your services, and managing projects efficiently.

This article focuses on three actions that if properly executed, can provide significant rewards to you.

  1. Competing for Future Managers

Part 1 of this article focused on hiring architects who are the best and brightest. These potential employees have the highest GPA, have a degree from an Ivy League institution, and have the technical skills needed to become a junior or senior designer.

What these “best and brightest” workers may not have, however, is an aptitude to become a manager or business owner. Oftentimes those who are gifted with the technical aspects of a profession are less proficient when dealing with people.

Guess what the two most important tasks are for a business owner? Hint: They both involve people skills. The Answer: Getting (and retaining) clients and managing employees.

While there’s obviously nothing wrong with hiring a recent graduate with a 4.0 GPA, a better hire for your firm may be an architect who isn’t as accomplished on the technical side but displays an aptitude for managing people and projects well.

You’ll have to put in more time and effort on the front end to train this type of employee, but the end result of this strategy could be…

  1. Promoting Designers to Managers

Passing down as much technical work to your junior and senior designers will be a primary objective during the first few years of your firm’s existence. If you’ve done the job of properly training new employees over the past several years, you may now be in a position to promote your first senior designer to the role of manager.

This is where the fun really begins. You can now delegate not only technical work, but also your duties as project manager and business owner.

Sounds easy, right? Hire a recent college grad, train for five years, promote to manager, and then rake in the profits. Rinse and repeat. So what’s the catch?

It’s incredibly, unbelievably hard to scale a service-based business. For architecture firms, law firms, accounting firms, public relations firms, it’s tricky to replicate your A+ technical, managerial and rainmaking expertise in others. But you know what? It can be done.

Invest in your employees. Train your employees. Promote your employees. The payoff could be substantial.

  1. Begin with the End in Mind

Business owners should begin to plan their exit strategy from the moment they think about starting their own firm. However, planning for the transition of your architecture firm, which may not take place for several decades, may be the last thing you want to think about after opening your firm's doors for the first time.

But, the consequences of not planning for your eventual successor ahead of time could be very expensive. If you can't find a motivated buyer for your firm when you're ready to retire (or cash out some of your equity), you may be forced to accept substantially less than what you were hoping for.

So where do you find a motivated buyer who understands the value of the firm you spent 10, 20 or 30 years to build? It's certainly possible to find an outside buyer, but the best bet is a current manager or partner who you've been grooming for the past 5 or 10 years.

What's the key to a lucrative sale of an architecture practice? Human capital.

Heavily invest in your employees. When you finally need a manager, you'll have a junior or senior designer ready and qualified to be promoted. When you need someone to take over your firm, you'll have a manager or partner ready and qualified to take control. You'll also have someone willing to pay you a fair price for the sweat equity you contributed to building a world-class architecture firm.

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The Author

Steven Burns, FAIA

Steven Burns, FAIA, spent 14 years managing his firm Burns + Beyerl Architects. After creating ArchiOffice®, the smart office and project management solution for architectural firms, Steve brought his management expertise to BQE Software, where he is perfecting the business strategy and product development.

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