Reason

it all depends on the type of work you are going to be doing? Do you need actual office space? Ground floor commercial in Capitol Hill is going for +/- $28 sq ft...you could also work out of your house/apartment if you dont need the physical presence of an office.

I currently have a restaurant design/consulting business that I just set up (in Seattle) that I run out of my apartment. I have a computer ($2500) and a large format printer ($300). Ink is expensive. Other than that, I dont have any expenses.

3 contract suckers, er, i mean interns that work for free: $0...

also, glad to hear you've got a consulting gig up and running, mdler.

one million dollars!

and 99 cents for the interns.

If you pay each of your 4 employees an annual salary, add to your budget another 1/3 of each of their salaries for the unemployment and social security benefits you'll be required to pay for them.

Plus a bazillion other costs you never expect.

For a one person start up I'd budget about $85,000 + whatever salary you intend to pay yourself....

~ $10,000 to buy a healthy amount of software
~ $5,000 for a computer and backup server
~ $1,500 for printers/scanner/copier
~ $60,000 for operations (rent, insurances, dues, marketing, website, utilities, office furniture, etc.)
~ $10,000 for contingency

So, say you wanted to make $50,000 your first year, you are looking at needing about $135,000 in fees to break even...So you need projects that add up to at least a $2 million dollar construction budget...

Unless you are starting a firm with a large project in hand, it is very difficult, if not impossible to start a firm with 3-5 people..not if you all want to eat every day and have a roof over your heads.

Someone weigh in if any of my numbers seem totally off...

All those numbers are assuming you are doing everything legit...

@tagalong: the basics seem right to me - although I'd assume that for starting up you'd like to keep the costs for operations (your 60.000) as low as possible. Either by working from your own home in the beginning, renting a desk in another office, having your website done by afriend for little money etcetera - all to keep the total in fees you'd need to start up as low as possible.

tag - rent and health insurance will be your biggest variables there.

reason - startup costs can wildly vary. if you're starting a branch office (no matter where you're coming from), plan on needing to generate about 100-120K per employee, per year in fees.

without knowing the experience level of the employees you're hiring, i'd budget about 300K a year to run an office of 5 people, assuming about 2,000/mo in rent (yes, that could be a small space, but 1000sf would hold 5 people fine if it's laid out well).

contact me offline if you need any serious help.

let me clarify a few numbers: the 120k per is a gross billing for your firm, not inclusive of any consultant fees.

we have 5 fte and get by on much less than 300k a year, but we're in an area where some of the costs of running a firm are structurally less. our overhead is about 180k a year, including full health benefits and 401k matching. our rent is lower than the norm, though. overall, we don't buy new computers every single year and we don't do long term financing on almost anything. if you were to lease computers, for example, you could avg. out that cost much more effectively the first 2 years. same if you finance the software purchases (which we had to do way back when).

so, you could get off the ground for less than 50k, it's just going to take some creativity in your set up...

It seems to me that all of the posts above are aimed as keeping startup costs as low as humanly possible. I could be wrong, but the statement I paste at the beginning of this post doesn't necessarily suggest that your Chinese client is looking for a bare-bones situation. Reason, if you have not already done so, you ought to clarify with your client his precise intentions.

One of the first firms I worked for (back in the day) was a start-up operation. That firm had grand expectations - since realized - and they definitely did not start on a shoestring. From the very beginning they invested in corporate offices in a corporate location with sufficient overhead staff to operate efficiently. They set up as a serious business and started as they meant to go forward -- and they never looked back. Subsequently, they grew to enormous size and a few years back were named AIA Firm of the Year.

Sometimes underinvesting in facilities, equipment and people can be as huge a mistake as overinvesting. To me, this decision really depends on the investor's expectations and the resources he is willing to make available to ensure success.

Thanks for all the responses.
First I have to have an office not operate at home, which I already did now. But lease or share an office is still a question.
I am doing this budget thing to work with investor in China with different options basic and premium cost to test the water and see how it may work out.
Outed, I will send you an email seperate to discuss more Thanks!
Mdler, I have a friend has a restaurant project, maybe we can team up to do it. Let me know how to contact you.

I think software costs a lot too, Autodesk CAD or Revit, I heard very expensive.
Mdler, I wonder how you get away with that?-)
Quizzical is right, it is not about as cheap as possible, but have to set up correctly and has potential to grow and also good way to show to the investor the result of his investment.

tagalong, your number makes a lot of sense. What about 3-4 person firms. Asuming,myself, a senior designers and 1-2 interns. Can you lay out an estimate for that?

Look into office sharing. It might work out for you at the moment as I'm sure many firms over expanded and are now stuck in their 5-, 10-, 15- year leases.

If not, choose a better address over a better office. Neighborhood matters. Not just for image sakes... but employees and clients too. If you can't buy a sandwich, a beer or a pack of smokes within walking distance, you'll end up with a lot of employees taking two-hour lunch breaks.

You also might find a better deal on space and size if you rent a compatible but atypical property-- things categorized as warehouses, repair shops et cetera will give you more square feet for your buck.

And while we're on this subject, you need to set aside between $10,000 and $15,000 for office decorating. If you think you can do it for cheaper... by all means do it.

But there's nothing more than a bigger turn off, as an employee and as a client, of walking into a dingy 1980s corporate-esque office. You know, the kinds with a lot of verdant marble, wires hanging everywhere and 6 different kinds of furniture with tacky brass trim.

As far as the other expenses... that would require you to really think about what you want to do. I second mdler, you can get buy with a few computers and a really nice printer.

As for software costs... that will come down to the employees you hire and what you want to put out. If you're doing just restaurants, interiors et cetera... you maybe able to swing ACAD, SketchUp and Vray.

But, also think about having to create a legitimate stock files... you're going to have to spend a lot of time and a bit of money acquiring a lot of superfluous components... especially if you're doing renders.

So, you might want to set aside an additional $2-3,000 to buy things like card trees, entourage, bits of furniture, HDRI files and various intermediate software packages if you're going to do rendering.

Unicorn, Thanks very much for your input. I think we mostly will work on sketchup models. Our past experiences are the rendering will be done in China, cheaper with better quality. Think about that, maybe we only need 1-2 copy of CAD and revit, then just sketch up.
How about salary?
I recently saw a salary survey shows in 2010 the average salary for architect is $80,000 which is a bit lower than 2009. http://www.architectmagazine.com/compensation/less--the-new-more.aspx
I am not sure if that is true. I don't know a lot of people make over $80,000 now.
For Intern, I heard the start salary is $40,000. Any other people has ideas about Seattle area salary expectation?

reason - saw your email and i'll put some info in it that might be tedious for a discussion post.

will say, for the general discussion, though, that you're getting two very reasonable, defensible points of view on this: quizz has great advice about establishing a professional image on day one and spending what's appropriate to get there. bootstrapping it is another way, whereby you do start out in the proverbial attic and move on from there (btw, that's exactly what the johnsen schmalling guys did starting out - attic the first year or so, saved like crazy, and as they grew, they expanded outward).

in terms of identity, a lot may depend on who/what kinds of clientele you're aiming for. if it's large scale developers or super high end residential, you'll probably pay more to get the office in shape, etc.

from what you've described, i think you could get away with the following: find a sublease somewhere in a nicer neighborhood (ug is spot on), with only a 2 year commitment or a yearly renewal. budget 10-30k to build it out to suit where you're going- you won't get a t.i. allowance on such a short term. how it's laid out will be up to you, but 1200sf or so would be just fine for most people. people in denser cities may consider that way too much...

for software - i'd do 2 year financing for the really expensive stuff (revit/bim software, maybe the adobe suites). smaller pieces could be paid out of pocket or just done on a credit card if you need to be 'revenue neutral' early on. figure anywhere from 400-1000 for business stationary, cards, letterhead, envelopes, etc. personally, i'd get heavyweight cards from a true offset printer, but...

finally, i'd offer full benefits to your early staff. the worst thing early on is to have people jump ship because you're too bootstrap. you really want people to be there consistently those first 2 years so you can establish a dialogue about how the office works, what standards will be, etc. plan on paying them a bit above average - again, it'll keep them around, which is worth more than a few dollars a month in the long run.

Since you're going to be outsourcing a lot of in house design work (and by extension, I'm assuming you'll be outsourcing a lot of other things too), you might want to spend the money you save on hiring a full-time administrative assistant and a part-time bookkeeper/archivist.

A secretary will run you between $30-40k (if you open up in downtown, you may want to pay them a little more so they can live uncomfortably close to work). And part-time help is part-time help.

These two little people will save you and the 'important people' from having to do a lot of extraneous tasks that eat up your productive drawing time.

Are you starting a rendering company?

@outed "we have 5 fte and get by on much less than 300k a year, but we're in an area where some of the costs of running a firm are structurally less. our overhead is about 180k a year, including full health benefits and 401k matching."

Im assuming the 180k overhead includes all the salaries EXCEPT the partners which are taking a piece of the remaining 120? Do you have 5 fte splitting that 180k?

paulo - the 180 does not include any salaries. it's everything else - rent, utilities, marketing, insurance of all sorts, reimbursables, parties, software, license renewals, software, hardware, etc.