Business planning is similar to creating design iterations and drafting drawings before starting construction, in the sense that it is the blueprint for a firm's future success. Having a strategic plan provides a basis to evaluate what is happening in real-time against what was expected, make adjustments as necessary, and have a guide to help make better business decisions. Without a plan, how can you coordinate all of the elements and timing required to achieve the desired result? How can you navigate an unpredictable business environment?
Let's review how the business plan with a whole-systems approach can guide us to successful results, as developed by Charrette Venture Group (CVG).
Having a vision and a holistic view of how all the parts fit together can help anticipate problems, avoid mistakes, and is more likely to produce an outcome that works, no matter what is being built. Viewing a business plan with a whole-systems approach helps architectural firm leaders understand how each component of their practice is interrelated, and therefore equally important.
“Too often we focus on what we enjoy – or are good at – while neglecting problem areas. In a whole-systems approach, a weak link is detrimental to the health of the whole firm,” notes Rena M. Klein, FAIA, Vice President of Investment Partnerships at Charrette Venture Group, a business consultancy that guides small and mid-sized architecture firms’ growth.
What’s in a Plan?
The primary elements of a strategic business plan are purpose, finance, marketing, business development, and operations.
Purpose: “Why Does My Firm Exist?”
A firm’s purpose is expressed in mission, vision, and core values. It helps to define differentiators and market positions.
Creating a clear mission statement requires principals to think about why they are in business, who their clients are, and what unique talents and skills they bring to serve them. Vision is about the aspirational quality and imagination of what a firm is now, and also what it could be in the future. Core values speak to what is most important to the firm's culture, which is critical in the authentic formulation of mission, vision, goals, strategies, and action plans.
Finance: “How Will My Firm Earn Revenue and Profit?”
“While concerns about profitability may not be high on the list for many architects, businesses need to make money beyond paying the bills and providing market-rate salaries for owners and staff. Profit allows a firm to take advantage of new opportunities and technologies, engage in marketing and sales initiatives, plan firm growth and stability, and create a ‘rainy day fund’ to protect against future cash shortfalls,” says Charrette Venture Group CEO, Todd Reding.
A business plan should include a financial pro forma, typically looking out to about five years. These financial plans can become the basis of annual financial goals and should be reviewed and revised on an annual basis. The pro forma are essentially budgets that outline expectations for revenue, expenses, and profit over a given period of time. Five-year pro forma for design firms are often based on growth in the number of people working at the firm, coupled with assumptions about revenue and expense per person.
For example, in four years of collaborating on business planning with Charrette Venture Group, Mayor + Kennedy Architects in Hanover, New Hampshire nearly tripled their revenue and grew their profit margin from 11% to 24%. Mayor + Kennedy is an eight-person firm focusing on sustainable commercial, institutional, and residential architecture.
Lindsay Schack, AIA, and Lindsey Love, AIA, Founders of Love | Schack Architects with offices in Bozeman, Montana, and Driggs, Idaho, nearly quadrupled their profit in a four-year period through collaborative business planning with Charrette Venture Group (CVG). The firm was a finalist in CVG’s 2016 Architecture Business Plan Competition.
Marketing and Business Development: “How Will Your Firm Bring in Work?”
Aspects of strategic marketing planning include setting goals, understanding the needs of the target audience, brainstorming ways to reach them, making a plan for executing marketing tactics, and then measuring effectiveness.
The complementary planning activity is structuring the business development process.
“How will you convert leads to clients?” says Emily Hall, Vice President of Marketing at Charrette Venture Group. “Equal attention should be paid to two things: letting your target audience know you exist – and what value you bring to the marketplace – through marketing efforts, and establishing and nurturing relationships that result in new projects. Successful firms have interrelated plans for each."
Operations: “How Will Your Firm Get The Work Done?”
This involves thinking about organizational design. Who is responsible for what? Who has the authority to make what decisions? How is accountability enforced? How does project delivery flow from phase to phase, and from person to person? Operations plans often include an organizational design diagram and an outline of roles for firm leadership and management, along with clear assignments of authority and responsibility.
In a project-based environment, operations also involve project management systems. How are projects tracked against budget and schedule? How are clients managed? How can a culture of attention to project profitability, as well as design excellence, be instilled?
How Are These Elements Interrelated?
Although these business plan components may seem as if they are separate and distinct, they are all decidedly interconnected. Each aspect is a part of a whole firm system and as such, they impact each other continuously. For example, marketing efforts must link closely with aspirations, which often determine operational choices; operational effectiveness will impact financial growth, and the market position may determine what is possible financially.
Design firms can benefit from considering the elements of purpose, finance, marketing, and operations that live within each major decision area. Effective business planning balances the attention paid to all aspects.
Firm owners can use the above diagram to plan and track their firm development activities over time, ensuring that they are viewing their firm through the lens of a whole system.
Regardless of how formally or informally a final plan is presented, the goal is to create a living document that can evolve as new opportunities and challenges arise. In order to keep this planning process dynamic (as opposed to creating a document that sits on the shelf), developing an action plan for the short-term is also necessary, along with the continuous checking of progress towards stated goals. That can happen quarterly, or during an annual strategic planning process.
Business planning is an essential tool whether tasked with starting a firm, growing or stabilizing an existing firm, or contemplating a transition to new leadership. Business planning should be a regular part of a practice. It requires merging strategic thinking with creativity and pragmatic action plans. At the end of the day, no viable architect or designer would recommend building anything without a plan. Applying similar thinking to business practices could be the big secret to success.
Learn more about design firm business planning and how to effectively lead your firm's growth.