Types of Architecture Firms and Their Business Models
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What types of architecture firm exist to suit the best business model that works with you? As you are developing the business plan for your new architecture firm, it is important to consider what your business model will be.
This includes planning for your firm’s operations to respond to the following questions:
How will you acquire new clients?
What types of projects do you want to design?
Why should clients choose your firm over other options?
How will you deliver projects while being profitable?
How will your staffing be organized to deliver your services?
These questions and others all relate back to your business model.
Understanding your options and potential challenges when first forming your firm is important so you can be intentional about how you set up your design process and how you market your company.
For architecture firms there are three common business models that differentiate firms and how they are run: Efficiency based, Experience based, and Expertise based offices.
Depending on which you target for your company it will help you direct how you should manage the company for marketing, staffing, and ultimately profitability.
Take your time to think through why you are starting your firm, what your goals are, what your previous experience is, how you like to practice, and then select the model that best fits your future goals.
Be honest and intentional about your choice early on, as it can be difficult and costly to transition to a different model once you have some projects under your belt and a reputation for your company.
It is also important to make hiring, management, and staffing choices that support the mode of your architecture office.
Types of Architecture Firms
This model is for architecture offices that can deliver projects faster or for less money than the firms you are competing with for work.
Typically this means that you have developed a design and production process that is efficient and streamlined and are constantly looking for ways to improve upon it to make it more efficient.
You have also selected projects that are simple to execute and allow for repetitive processes.
To take advantage of your design process efficiencies, efficiency based firms often do less complex projects, or take on similar projects to those they have already completed. Further, these firms tend to offer a limited range of services, or standard scope of work, that is familiar and repeatable.
The advantage to limiting the type and complexity of the work you take on is that you can reuse details, notes, and other documentation to keep the work hours to a minimum while still delivering quality documents.
The goal is to be efficient in every aspect of your practice.
For example, if you are working on multi-family housing projects you may reuse unit layouts, or make all the bathrooms the exact same design, saving a tremendous amount of time and work.
If you do custom residential projects there may be wall assemblies and foundations types that you can reuse on all of your projects, or standard window details that don’t need additional attention.
Find the places where you don’t have to reinvent everything from scratch to keep your work hours to a minimum.
For this business model your ideal client is one that is looking for simple design solutions, may have a tight timeline, and is budget conscious. This could be residential developers, retail chains, or even small projects like Accessory Dwelling Units.
The goal is to stick to standards and deliver projects quickly and efficiently in a very predictable process.
Another approach for this business model is taking advantage of new technology or tools to improve upon standard project delivery. There is potential to leverage new technology to give your firm an advantage over established architecture companies.
For instance, digital scanning, BIM, virtual reality renderings or AI may be places to focus on that could make the design and documentation process faster and more efficient.
This dedication to technology might make convincing clients to go with a particular design faster. Practices should constantly look for ways or new tools that can help reduce the time it takes to deliver work and thus increase the profits for your firm.
Due to the repeatable design process, the relatively simple project types, and/or the standardization of your deliverables, this model lends itself to having a large production staff working under a smaller group of experienced architects and partners.
This can include giving recent graduates or junior architects jobs to help with production, thus keeping your labor costs down and providing them with much-needed work experience to help advance their careers.
This approach also allows companies to consider remote working or even outsourcing some of the production work to further save on costs and expand the number of projects you can take on.
The goal with this staffing structure is to have the partners focused on acquiring new projects and have the more affordable staff leading the design and production of those projects.
You are really looking for a large quantity of projects that you can deliver seamlessly.
This isn’t the model that most architects dream about when starting their firm. However, if you find an inefficiency in the market, this business model could lead to tremendous profits.
One of the most profitable firms I know fits into this business model. What do they do?
They work on chain restaurants across the country and adapt a standard kit of parts to fit whatever new space the restaurants are moving into.
The work deploys standard materials and details on every project that are simple and repetitive. By keeping their process super efficient, improving upon it and maintaining a large production staff of junior architects, they’ve developed an incredibly profitable business while providing a great work/life balance for the owners and actually are able to pay their staff slightly above the market rate for their experience level.
This is also a business model that is easier for new firms to market for, as they may not have the portfolio or reputation to go after complex projects, but can compete on price or market their experience with new technology or a streamlined design-process - places that younger architects may be more adept than older practitioners.
This is probably the most common model that architects pursue when setting out to start their own firms. Experience-based practices aim to provide design services to clients and solve unique and challenging problems.
By relying on their past experience and expertise, these firms can take on more complex project types and market themselves as knowing what they are doing to address the needs of their clients.
Some of these firms still focus on particular markets. For example, I worked at a firm that I would put in this category that specialized in higher education projects, community centers, and performing arts centers.
Within these project types they would design custom solutions based on the specific needs of the client, responding to site context and budget, and the technical requirements of the building’s program.
They developed a strong reputation as being able to successfully deliver significant, complex, and technically challenging projects.
At the same time, they utilized their reputation to expand into new markets and go after a variety of projects beyond their core focus as the economy shifted.
To achieve this, they leveraged their past relationships and their portfolio to acquire new work, often through the public RFP/Q process.
When you are starting a new firm and want to be an experience based architectural practice, you will have to rely on the reputations and past portfolio of you and your business partners.
You will need to clearly demonstrate that the experience you have gained before starting your own business will translate to being able to deliver similar projects.
The challenge lies in convincing clients that although the firm is new, the partners have a proven track record, the design staff is capable, and the firm contains all of the design experience needed to solve complex design challenges by managing the team needed to deliver significant projects on time and on budget.
This can be hard when first starting out, but after a few projects under your belt the firm could grow quickly.
The structure for staffing these firms also differs from the efficiency based firms.
Marketing to clients for projects that are more complex and unique, you have to prove that your team has the skills and experience to match the project’s needs.
When just starting out this often means the first couple of hires should be more experienced architects that have worked on projects in your target markets.
This also means that as you grow you often need a larger proportion of project managers or project architects that can bring this level of experience to your office.
These employees will of course cost more than less-experienced production staff so balancing the right mix of experience and production is a challenge that must be overcome to maintain profitability.
There is also the obstacle to avoid having the partners or experienced staff getting too involved in the design process and thus blowing through the fee too quickly, when junior staff could handle the work and gain valuable experience.
Thus project management and staffing is vital for this business model to be successful and for the firm to remain profitable.
This business model is for the architects who have a great depth of knowledge about a specific project type or topic, or for those who have demonstrated exceptional design abilities.
These firms are the “starchitects” who have built a reputation based on their award-winning design abilities or consultant firms of specific technically challenging projects.
For instance, these could be firms that won the Pritzker Prize, or specialize in the design of acoustically challenging performing arts buildings, or maybe the technically challenging research science laboratories, or even code consultants.
Another example would be firms that are developing and mastering new technology.
Frank Gehry’s office is an example of a firm that has done a combination of these - he is sought after for his eye-catching design aesthetics and his firm has developed new software to allow his complex curving forms to be designed and fabricated.
He also takes on challenging cultural projects that necessitate a certain level of expertise to execute.
Other firms might publish research about a particular topic, or be a consultant that knows the latest innovations in a particular building system or requirement.
Either way, these firms have some special knowledge or talent that makes them sought after and allows them to demand higher fees for their work.
The financial model with these offices is that by becoming an in-demand expert in your field you can demand higher fees or hourly rates.
Although many starchitect offices grow into large companies with many employees, this business model is also potentially lucrative for sole practitioners or small partnerships who offer a unique skillset or base of knowledge.
In both of these cases, the staffing needs tend to be very top heavy, where the principal or partners are in high-demand and thus need to work directly on the billable projects. There would be some support staff below them to assist with the execution of the work, but the principals are really engaged in the work itself, rather than being focused on managing the firm or finding new clients.
These firms also often look to partner with other architectural offices to execute the full scope of architectural work. They can either act as the design architects - with an architect of record brought on to help with production or they may be specialty consultants themselves brought onto a project by another firm to help navigate particularly challenging technical problems.
Often these firms will look to bring on administrative staff to support the principals earlier in the growth of the firm than the other business models, although if you are keeping the firm small and acting as more of a specialty consultant you may be able to avoid management overhead altogether. This could be an ideal option for sole practitioners who have a valuable base of knowledge.
Rather than rely on personal relationships and traditional business development and marketing strategies, these firms rely on their reputation and their innovations to drive new businesses. Design awards, publications, research, and their portfolio is what sells their services and attracts new clients. This also requires continual education to maintain your expertise and reputation in the field.
Each of the business models can lead to great success for an architecture practice. However, it is important to be honest with yourself and intentional with your decision on how to set up your practice.
Not everyone can or should start a business with the hope of being a starchitect or get projects solely based on your design talents.
Finding a better way to deliver projects, or taking advantage of new technology to improve the design process can lead to a great business that is extremely rewarding and profitable even if it doesn’t fulfill your design ego.
Other architects may have a passion for a specific project type and strive to be the expert in that niche. Regardless of which approach you take, it is important to recognize where your firm fits, then appropriately manage and market your firm to take advantage of the opportunities, the challenges you will face as the company grows.
As you are writing your overall business plan, create a section specifically for your business model and describe how you want to operate, the types of clients you want to work for, take stock of your unique knowledge and skillset, and develop a model that will take advantage of your strengths.