The inherently dry subjects of business development, marketing, P+L reports, taxes, and insurance are less likely to feed the intellect of the architect than discussions of materiality, parallax, articulation and form. Yet the reality of what it means to practice architecture, by necessity, requires reconciling these two divided worlds. Nowhere is the need to unify them as great as with the startup design business.
Author, award-winning architect and founder of the firm 30X40 Design Workshop, Eric Reinholdt, explores these topics in "Architect + Entrepreneur: A Field Guide to Building, Branding, and Marketing Your Startup Design Business." Part narrative and part business book, Reinholdt advocates new approaches and tools that merge entrepreneurship with the practice of architecture and interior design. The book offers a framework for starting a design practice in the 21st century which leverages the lean startup methodology to create a minimum viable product and encourages successive small wins that support a broader vision enabling one to, “think big, start small, and learn fast.”
Read on after the break for an excerpt from Chapter 2 - Getting Started.
Define the Business Model. This is simply your plan to earn revenue. Historically, design practices have been solely based on the consulting model. Although the means of compensation differ under this structure - hourly, fixed fee, percentage of cost - at its core, consulting links time (billable hours) directly to revenue. It’s still a very popular choice among new business owners because it works and clients expect it.
But, there are some real disadvantages to pursuing the consulting model. Chief among them is that trading time for dollars is the least effective way to scale a business. This is because time is a finite resource; you have a fixed amount of time in a week you can invoice for. To scale your revenues, you must do one of two things: increase billing rates or hire (lower wage/higher margin) employees.
With the hourly consulting model, you’ll reach a point where you can’t increase your hourly billing rate without pricing your service out of the market. Worse yet, this model will keep you working for the business rather than on the business. If you don’t show up to do the work, the revenue stops.
Entrepreneurial thinking can transform the way you choose to design your practice. The constraint of the consulting business model is arbitrary. Look to other businesses in the world for inspiration and ways around tying your time to income. To unhitch your business from the hourly consulting model requires thinking about the deliverables of your service through a different lens. We’ve grown so accustomed to providing one-off, bespoke consulting services, tailored to an individual – typically wealthy – client’s needs, that we’ve neglected to see what the rest of the market has already noticed.
People buy products.
Why? Because there’s an immediate value judgment we can make when we look at a product, it’s a binary decision. Yes the value is clear, or no it isn’t. I’ll gladly pay $1,200 for a Gary Fisher mountain bike because I know what I’m getting. I can take it for a test ride, it feels comfortable, I like the geometry – it’s a physical product with tangible, known qualities.
Contrast this with an unfamiliar service – hiring an interior designer or architect. How can we expect a client to place a value on that? We can’t. The client inherently looks at your service as a "cost" rather than "value." They typically have no frame of reference. Design as a service is intangible; couple that with its high cost and it’s no wonder the value proposition is unclear to the average consumer. That’s the trouble with a consulting business model and it’s one you’ll bump up against continually if you choose this route.
Knowing this, what are some alternative business models? How about products? Or productized services (a fixed-fee service with defined deliverables) with monthly recurring revenue streams.
Think about design products that can be created once and sold in the market repeatedly. Businesses create products for sale all the time. The bakery offers doughnuts for sale each morning and the selling price reflects a sensible (baked-in) overhead and profit. With this model we have to make the value proposition clear, but assuming we’re able to move product the business is guaranteed to survive because the price is set in a way that rewards our efficiencies.
Unfortunately, I don’t have a solution or an answer as to what will work for you, or even whether this is the right model for your business. What you should sell or how much to sell it for is a decision that only you can make. There is no one-size-fits-all solution for our profession. Yet the business model for practicing design professional has remained unchanged for too long; it hasn’t evolved with the consumer economy. If your business can connect with a consumer, you’ll thrive. Your new business can capitalize on this opportunity.