ArchDaily | Broadcasting Architecture Worldwidethe world's most visited architecture website

Architect + Entrepreneur (Volume 2): How to Stabilize Your Revenue Streams With "Passive Income"

  • 09:30 - 8 February, 2016
  • by Eric Reinholdt
Architect + Entrepreneur (Volume 2): How to Stabilize Your Revenue Streams With "Passive Income"
Architect + Entrepreneur (Volume 2): How to Stabilize Your Revenue Streams With "Passive Income", Courtesy of Eric Reinholdt
Courtesy of Eric Reinholdt

In “Architect + Entrepreneur Volume Two”, we follow along as architect Eric Reinholdt scales his business, continuing the narrative begun in volume 1 and applying an entrepreneurial mindset to every facet of his work. The book chronicles his experiments  failures and successes  as he reinvents his architectural practice.

The primary innovation is a focus on passive income producing products and it involves a simple shift supplementing the standard consulting arrangement – hours traded for revenues earned – with an architecture-as-product revenue model. We discover how products, especially digital products, are nearly infinitely scalable. As compared with the limits of time, which govern the standard consulting arrangement, passive-income-generating products reinforce the brand message and create more freedom for the business owner.

Rather than wholly rejecting the individualized, high-touch service side of the business in favor of products, the book demonstrates how a line of products can actually nourish the consulting arm with only those clients best suited for the brand, while producing enough residual income to fully fund the practice.

The following is an excerpt from chapter 2, “A New Hope Model.”

Courtesy of Eric Reinholdt
Courtesy of Eric Reinholdt

Most architecture firms rely solely on a standardized client acquisition process that begins with a face-to-face meeting. The “service” revenue model secures a client, renders services, and the architect is compensated on an hourly or fixed fee basis. Yet, perpetually courting new clients is time-consuming, exhausting and it yields inconsistent results. It’s work that keeps us from the real reason we became architects, designing buildings.

But services aren’t the only way. By supplementing the “service” model with a “product” model, we can diversify earnings and the client base we’re able to serve. Rather than the singular service modality, a business can be retooled to include two distinct, but connected divisions. One preserves the high-end, high-touch, high-value service architects are accustomed to providing, while the other builds products: plan sets, specifications, books, worksheets, training courses, and visualization tools. The products of our service may be low-touch and low revenue by comparison but they’re still valuable to many.

Courtesy of Eric Reinholdt
Courtesy of Eric Reinholdt

The “Brand Revenue Model” is a holistic approach to building diverse cash flows and courting clients you might have otherwise ignored. The model is divided into two sections. One half consists of the standard consulting arrangement, where time worked is linked to compensation received. On the opposite are products: digital, physical and everything in between.

Adding product offerings to the standard consulting revenue model provides granular control over customer acquisition. You’ll be selecting the clients you’re best positioned to serve. Instead of turning away those who aren’t a good fit for your custom (active) services, you’ll convert them into customers of your (passive) products.

Courtesy of Eric Reinholdt
Courtesy of Eric Reinholdt

This structure fosters a stronger brand message, higher profitability and it’s a more efficient use of your time. By removing you from the tasks that don’t require active input and turning those into products, you’ll have more time to spend working with high-value, high-touch clientele; the ones you profit most from.

Recognize that your business can’t possibly work with every potential client. You won’t have the time or inclination to service every interested prospect. But that doesn’t mean you have to let them walk away without helping them. An entrepreneurial practice seeks ways to help as many of these leads as possible and use them to not only provide flexibility for the business but also to support the brand mission.

Courtesy of Eric Reinholdt
Courtesy of Eric Reinholdt

By diversifying - offering services and products - you’ll capture more revenues and more customers.

Products like ready-made plan sets can answer an uncertain prospect’s needs and turn a casual website visitor into a customer. Training courses or books can be the proxy for your expertise. Templates and resource toolkits can provide your guidance and insights at a price affordable to many, rather than a few. The added revenue from each of these products permits the services division to be more selective.

Products allow a business to diversify earnings. Initially, services will account for much of your profit. Personalized, high-end, bespoke design service can be quite lucrative. But working with clients can be risky. They can postpone a project or delay payment. They may make decisions more slowly than you had planned, changing your monthly receivables. Because clients of the service model pay for services after they’re rendered, slow payers force your business to finance their debt. Clients will always control the cash flow in a service business, and they’ll consume as much time as you’ll let them.

Courtesy of Eric Reinholdt
Courtesy of Eric Reinholdt

Ideally, the opposite is true of the product division. Products can be designed to divorce you from the time commitment services require. Once created, they provide a foundation of reliable monthly revenue. Product sales can be automated and positioned to capture a lead who wants what you do, but for one reason or another aren’t a good fit for personalized consulting.

These customers may not have enough time, or a large enough budget, or the willingness to invest in an extended custom design process. They may need less service than you can profitably deliver in a one-on-one consulting arrangement…

Throughout Architect + Entrepreneur Volume 2, concepts are illustrated with diagrams and case studies and the book instructs how Reinholdt and other architects have reimagined what an entrepreneurial practice can be. Volume one of the series provided the inspiration, volume two the precise instructions for executing the vision. New and established firms alike, even those who have yet to set out on their own will find this volume full of tactical, actionable information.

Architect + Entrepreneur Volume 1

Click here to learn more about the previous installment of the "Architect + Entrepreneur" series.

Cite: Eric Reinholdt. "Architect + Entrepreneur (Volume 2): How to Stabilize Your Revenue Streams With "Passive Income"" 08 Feb 2016. ArchDaily. Accessed . <http://www.archdaily.com/781719/architect-plus-entrepreneur-volume-2-how-to-stabilize-your-revenue-streams-through-passive-income/>