I'm just about to start my own practice and I'm curious about what the common problems you're likely face whilst running a practice.
I'd love to hear from practices of all sizes, not just new ones!
I think if any common problems emerge they could be worth solving.
chigurh
Jun 2, 15 11:12 am
getting work
Larchinect
Jun 2, 15 11:30 am
For our tiny, little landscape practice I would say the first year or two was getting work and marketing. Now, about three years in it's getting 'better' work and cash flow. We are fairly busy, but if we dont stay on top of invoicing, things get a little precarious at the end of the month. Taxes are also a huge downer. We write off everything and put a fair amount of time into our bookkeeping--we use freshbooks, cloud based accounting. Its always a hustle for us every month as our projects have been relatively small--I have been told that never really goes away. All this on top of actually doing the work and trying to stay current.
haruki
Jun 2, 15 12:12 pm
Cash flow!!!
There are two distinct types of clients. Those who pay right away and those you need to beg and pester for payment every single time you invoice. The slow to pay ones can throw things out of whack whether the office is small or large.
Lightperson
Jun 2, 15 1:25 pm
Being too awesome
gruen
Jun 2, 15 1:52 pm
All of these ^^^ are issues. I don't struggle so much w/cash flow, because I don't have employees or rent or much of any overhead, and my wife is the main breadwinner (even though I usually make more than her each year, her steady income gets my business over the slow times).
I struggle with contractors who do a crap job building what's on the drawings.
I struggle with clients without much vision or money - low quality projects.
cash flow is helped by requiring a large retainer - often 50% of the job and getting final payment before delivering drawings. I've run into trouble with larger projects where I didn't include monthly billings (required final payment only, for example) AND the design process went WAY overboard in terms of time.
So, I suppose sometimes I struggle with completing the design process - often with homeowner type clients who aren't motivated to complete the process.
I'm VERY careful with overhead though - I don't spend $ unless VERY necessary and I don't know if I'll ever hire.
Donna Sink
Jun 2, 15 2:39 pm
Ryan, this is an old thread on this topic but full of really good info and opinion.
Larchinect
Jun 2, 15 3:50 pm
My wife joined me in our business about a year ago. That (small) regular paycheck she got every two weeks made a HUGE difference. Not having a second income to fall back on is a little freaky.
Jeremy
Jun 2, 15 4:26 pm
I'll bite: its been about a year and a half I have been on my own exclusively (instead of moonlighting). Things have smoothed out since 2015 started, but it was rough getting through the first year.
Problems I ran into so far:
Getting contracts right. Basically had to run through projects with the terms I wrote, see what was working and what wasn't and adjust. Still adjusting a bit from project to project. getting CA terms written right was key, also making sure any add services get billed as such and not just taken on as part of contract. I have very tight payment terms and follow up on them. You could use AIA contracts, but I found my own less daunting to clients unless its a large project.
Getting fees right, gave some deep discounts to friends early on, almost put myself out of business. Careful with work for friends and discounts. Now I have fees pretty much representing what I need to be self supporting. No more discounts, hurts me too much.
Getting schedule right. A set fee means you really only have a set amount of time to do the work, make sure they make decisions, get it permitted and bid without reducing your overall rate. Make a realistic schedule with the client and then stick to it. This above all else has made projects succeed. Letting early projects drag on with already low fees is what almost killed it for me.
Trimming overhead. My overhead was pretty big when I started, used to the lifestyle of working for a good paycheck, and had staff and my own space. Have now moved into a shared space with my wife, not using any regular staff, just freelance as needed until I build up some projects. First goal then will be to get more permanent staff again. Challenge with this is doing all your own production takes up so much time, hard to get out to bring in new work. Or the other way around, going out to a lot of meetings leaves very little time to come back and do the work.
Bringing in work is a bit of a challenge, but somehow it always works out (so far). I have partnered with a couple of other solo architects on some projects, which helped a lot. not doing real marketing yet as I don't have time, but that's another goal this year. Did a big consulting gig, which took time away from some of my early projects but was steady hourly fees.
I didn't start with a lot of cash saved up, and my wife helped with more than her share of bills at home for the first year - took about 5 months until I could pull my own weight financially, which I guess is pretty good. Survived first tax year, and now am profitable moving forward.
Managed to also become a dad during this past year, and that has added some time and money challenges but has been great too!
My take is, have some money saved up and dive in. You will likely make either the same or other mistakes and nearly crash the business. Get used to living on the edge and don't give up. Keep at it, and learn from the mistakes and it should be able to turn around. How long that takes might depend on the savings you start with. I just happened to (almost) run out of savings right when I turned it around, but I really was impatient and didn't save a lot before jumping out of my old office.
Also - don't quit your job until you have signed one or two contracts. Work on the side until at least that point. I stared with two projects, which kept me in design fees for a while while I landed some others.
Carrera
Jun 2, 15 7:15 pm
There are really only 2 things to be concerned about:
#1 Getting work.
#2 Getting paid for the work you get.
Miles Jaffe
Jun 2, 15 8:50 pm
^ Which can actually be summed up as a single thing: clients.
boy in a well
Jun 3, 15 1:43 am
clients dying tragically.
Larchinect
Jun 3, 15 3:37 am
Jeremy--Thats a great summary. 'Living on the edge' resonates with me. We are a small landscape practice, so its not nearly as complicated as building architecture, but I think the sentiment of grinding through less than profitable projects month to month to make about the same, sometimes more, sometimes less, than what you made as an employee and with all the extra headaches and uncertainty is universal.
geezertect
Jun 3, 15 7:21 am
^^^ Clients dying without you having had the pleasure of pulling the trigger :-)
TIQM
Jun 3, 15 9:50 am
Getting our staff to understand that using BIM software is not just about creating a cool model, but that you actually need to produce usable, readable, beautiful 2d documents with it. The general contractors don't give a crap about the model. They want drawings they can read and use.
Thank you for the opportunity to vent.
Miles Jaffe
Jun 3, 15 10:16 am
^ I once had a builder tell me that the cardboard model I gave him was really helpful.
gruen
Jun 4, 15 1:25 pm
I can't say enough about keeping overhead LOW. It's much easier to make money if you don't have to pay any out. Employees and rent will be your two biggest expenses, and employees are FAR and away the most expensive. Telephone, transportation comes in next, marketing too. Yes, it's hard to both market and produce the work. Business is hard.
proto
Jun 4, 15 2:02 pm
getting work is the number one priority
after that is doing good work
after that is getting paid
the other stuff will fall in place if these three can be repeated regularly
x-jla
Jun 4, 15 2:17 pm
^agree 100% Keep things small...keep overhead low as possible. Most important, Dont put all your eggs in one basket at first. lots of small projects are way more stable than 1 big gig that could erase months of income if the client evaporates. Also, advertisement is not effective. Connections and referrals are everything! I spend 0 on advertisement...Instead, I buy small gifts for good clients, books, cristmas baskets, etc...Bring coffee and Doughnuts to the construction crew, etc. Hook people up! I drove a day laborer who was working on my project across town to his doctors apointment...The guy was very grateful and refered me to a client that he was doing side work for...Turned out to be a great lead and project. Small investment and it will reap a return far greater than any expensive ads...
Miles Jaffe
Jun 4, 15 4:12 pm
Intern turnover.
boy in a well
Jun 4, 15 4:17 pm
titles and names in direct address should be separated by a comma, Miles.
Miles Jaffe
Jun 4, 15 4:57 pm
boy, in a well - thanks.
SneakyPete
Jun 4, 15 5:17 pm
getting work is the number one priority
after that is getting paid
after that is doing good work
If you do it the other way you'll end up doing good work for free.
Miles Jaffe
Jun 4, 15 7:04 pm
Turn it over and look at it the other way: what do you want to get out of your career?
For me there are three things.
I want to have fun.
I want to do great work.
I want to get paid.
For me, 1 & 2 are the same thing. If I do those, 3 typically follows as a matter of course.
gruen
Jun 5, 15 11:57 am
I agree that many small projects are better than one large one. My biggest dollar projects also end up not paying the bills so well, because it's a long time between paychecks. I've heard of offices being stiffed for tens of thousands after months of work when the one project they had evaporates. Meanwhile, I'm turning out a project a week or two and getting regular, but smaller, paychecks. My office is in the black, which is huge.
Larger projects need to have lots of little ones orbiting around them.
won and done williams
Jun 5, 15 12:22 pm
I put away three months operating expenses soon after starting the business and in the three years since have only once had a cash flow problem (that I had to plug with my personal savings). You need to keep a cash reserve and not depend on a line of credit for your operating expenses.
I HATE the hr/operational side of running a business. I hate constantly having to submit tax forms to federal, state, and local governments. I hate stupid, poorly designed, bureaucratic government websites and dealing with incompetent government employees. I hate government clients that require twenty different types of insurance, notarized documentation, six copies of every form, etc.
I equally hate dealing with insurance companies whether they be health insurance or business insurance. Same as government, too bureaucratic and often just dumb.
Banks tend to be as equally bureaucratic and dumb as insurance companies and government.
Otherwise, I like my clients. Yes, they tend to be slow to pay, but I think it falls on the business owner to work that into the operational model of the business to not allow it to have a negative impact (i.e. keep cash reserves, invoice regularly, etc.).
Last, I wouldn't call it a problem, but rather a challenge - you constantly need to keep the business feeling fresh. That means finding new clients, broadening the skills within your business, identifying ways to improve, expanding into new markets, etc. It's actually the most fun and stimulating part of running a business, but something you constantly have to be paying attention to.
snooker-doodle-dandy
Jun 5, 15 7:26 pm
"Hector the Inspector"....he was my problem today. Showed up late (must have been having his morning coffee). Created building code regulations out the his passing gas...Then told me it was my ass on the line. So I have to go dig thru a UL drawings to in order to tell him to go sit on it. Architecture this is not, business it is.
Miles Jaffe
Jun 5, 15 7:46 pm
Show me the code or STFU.
You have to wonder if civil servants start with a shitty attitude or develop it on the job.
won and done williams
Jun 5, 15 8:33 pm
They are paid to be obstructionists. I might actually feel sorry for them, if they weren't so damn difficult to work with.
Miles Jaffe
Jun 5, 15 9:00 pm
Not fair to paint them all with the same brush, but there are some really bad ones. You have to wonder if they are trying to position themselves for a handout.
I'm just about to start my own practice and I'm curious about what the common problems you're likely face whilst running a practice.
I'd love to hear from practices of all sizes, not just new ones!
I think if any common problems emerge they could be worth solving.
getting work
For our tiny, little landscape practice I would say the first year or two was getting work and marketing. Now, about three years in it's getting 'better' work and cash flow. We are fairly busy, but if we dont stay on top of invoicing, things get a little precarious at the end of the month. Taxes are also a huge downer. We write off everything and put a fair amount of time into our bookkeeping--we use freshbooks, cloud based accounting. Its always a hustle for us every month as our projects have been relatively small--I have been told that never really goes away. All this on top of actually doing the work and trying to stay current.
Cash flow!!!
There are two distinct types of clients. Those who pay right away and those you need to beg and pester for payment every single time you invoice. The slow to pay ones can throw things out of whack whether the office is small or large.
Being too awesome
All of these ^^^ are issues. I don't struggle so much w/cash flow, because I don't have employees or rent or much of any overhead, and my wife is the main breadwinner (even though I usually make more than her each year, her steady income gets my business over the slow times).
I struggle with contractors who do a crap job building what's on the drawings.
I struggle with clients without much vision or money - low quality projects.
cash flow is helped by requiring a large retainer - often 50% of the job and getting final payment before delivering drawings. I've run into trouble with larger projects where I didn't include monthly billings (required final payment only, for example) AND the design process went WAY overboard in terms of time.
So, I suppose sometimes I struggle with completing the design process - often with homeowner type clients who aren't motivated to complete the process.
I'm VERY careful with overhead though - I don't spend $ unless VERY necessary and I don't know if I'll ever hire.
Ryan, this is an old thread on this topic but full of really good info and opinion.
My wife joined me in our business about a year ago. That (small) regular paycheck she got every two weeks made a HUGE difference. Not having a second income to fall back on is a little freaky.
I'll bite: its been about a year and a half I have been on my own exclusively (instead of moonlighting). Things have smoothed out since 2015 started, but it was rough getting through the first year.
Problems I ran into so far:
Getting contracts right. Basically had to run through projects with the terms I wrote, see what was working and what wasn't and adjust. Still adjusting a bit from project to project. getting CA terms written right was key, also making sure any add services get billed as such and not just taken on as part of contract. I have very tight payment terms and follow up on them. You could use AIA contracts, but I found my own less daunting to clients unless its a large project.
Getting fees right, gave some deep discounts to friends early on, almost put myself out of business. Careful with work for friends and discounts. Now I have fees pretty much representing what I need to be self supporting. No more discounts, hurts me too much.
Getting schedule right. A set fee means you really only have a set amount of time to do the work, make sure they make decisions, get it permitted and bid without reducing your overall rate. Make a realistic schedule with the client and then stick to it. This above all else has made projects succeed. Letting early projects drag on with already low fees is what almost killed it for me.
Trimming overhead. My overhead was pretty big when I started, used to the lifestyle of working for a good paycheck, and had staff and my own space. Have now moved into a shared space with my wife, not using any regular staff, just freelance as needed until I build up some projects. First goal then will be to get more permanent staff again. Challenge with this is doing all your own production takes up so much time, hard to get out to bring in new work. Or the other way around, going out to a lot of meetings leaves very little time to come back and do the work.
Bringing in work is a bit of a challenge, but somehow it always works out (so far). I have partnered with a couple of other solo architects on some projects, which helped a lot. not doing real marketing yet as I don't have time, but that's another goal this year. Did a big consulting gig, which took time away from some of my early projects but was steady hourly fees.
I didn't start with a lot of cash saved up, and my wife helped with more than her share of bills at home for the first year - took about 5 months until I could pull my own weight financially, which I guess is pretty good. Survived first tax year, and now am profitable moving forward.
Managed to also become a dad during this past year, and that has added some time and money challenges but has been great too!
My take is, have some money saved up and dive in. You will likely make either the same or other mistakes and nearly crash the business. Get used to living on the edge and don't give up. Keep at it, and learn from the mistakes and it should be able to turn around. How long that takes might depend on the savings you start with. I just happened to (almost) run out of savings right when I turned it around, but I really was impatient and didn't save a lot before jumping out of my old office.
Also - don't quit your job until you have signed one or two contracts. Work on the side until at least that point. I stared with two projects, which kept me in design fees for a while while I landed some others.
There are really only 2 things to be concerned about:
#1 Getting work.
#2 Getting paid for the work you get.
^ Which can actually be summed up as a single thing: clients.
clients dying tragically.
Jeremy--Thats a great summary. 'Living on the edge' resonates with me. We are a small landscape practice, so its not nearly as complicated as building architecture, but I think the sentiment of grinding through less than profitable projects month to month to make about the same, sometimes more, sometimes less, than what you made as an employee and with all the extra headaches and uncertainty is universal.
^^^ Clients dying without you having had the pleasure of pulling the trigger :-)
Getting our staff to understand that using BIM software is not just about creating a cool model, but that you actually need to produce usable, readable, beautiful 2d documents with it. The general contractors don't give a crap about the model. They want drawings they can read and use.
Thank you for the opportunity to vent.
^ I once had a builder tell me that the cardboard model I gave him was really helpful.
I can't say enough about keeping overhead LOW. It's much easier to make money if you don't have to pay any out. Employees and rent will be your two biggest expenses, and employees are FAR and away the most expensive. Telephone, transportation comes in next, marketing too. Yes, it's hard to both market and produce the work. Business is hard.
getting work is the number one priority
after that is doing good work
after that is getting paid
the other stuff will fall in place if these three can be repeated regularly
^agree 100% Keep things small...keep overhead low as possible. Most important, Dont put all your eggs in one basket at first. lots of small projects are way more stable than 1 big gig that could erase months of income if the client evaporates. Also, advertisement is not effective. Connections and referrals are everything! I spend 0 on advertisement...Instead, I buy small gifts for good clients, books, cristmas baskets, etc...Bring coffee and Doughnuts to the construction crew, etc. Hook people up! I drove a day laborer who was working on my project across town to his doctors apointment...The guy was very grateful and refered me to a client that he was doing side work for...Turned out to be a great lead and project. Small investment and it will reap a return far greater than any expensive ads...
Intern turnover.
titles and names in direct address should be separated by a comma, Miles.
boy, in a well - thanks.
getting work is the number one priority
after that is getting paid
after that is doing good work
If you do it the other way you'll end up doing good work for free.
Turn it over and look at it the other way: what do you want to get out of your career?
For me there are three things.
For me, 1 & 2 are the same thing. If I do those, 3 typically follows as a matter of course.
I agree that many small projects are better than one large one. My biggest dollar projects also end up not paying the bills so well, because it's a long time between paychecks. I've heard of offices being stiffed for tens of thousands after months of work when the one project they had evaporates. Meanwhile, I'm turning out a project a week or two and getting regular, but smaller, paychecks. My office is in the black, which is huge.
Larger projects need to have lots of little ones orbiting around them.
I put away three months operating expenses soon after starting the business and in the three years since have only once had a cash flow problem (that I had to plug with my personal savings). You need to keep a cash reserve and not depend on a line of credit for your operating expenses.
I HATE the hr/operational side of running a business. I hate constantly having to submit tax forms to federal, state, and local governments. I hate stupid, poorly designed, bureaucratic government websites and dealing with incompetent government employees. I hate government clients that require twenty different types of insurance, notarized documentation, six copies of every form, etc.
I equally hate dealing with insurance companies whether they be health insurance or business insurance. Same as government, too bureaucratic and often just dumb.
Banks tend to be as equally bureaucratic and dumb as insurance companies and government.
Otherwise, I like my clients. Yes, they tend to be slow to pay, but I think it falls on the business owner to work that into the operational model of the business to not allow it to have a negative impact (i.e. keep cash reserves, invoice regularly, etc.).
Last, I wouldn't call it a problem, but rather a challenge - you constantly need to keep the business feeling fresh. That means finding new clients, broadening the skills within your business, identifying ways to improve, expanding into new markets, etc. It's actually the most fun and stimulating part of running a business, but something you constantly have to be paying attention to.
"Hector the Inspector"....he was my problem today. Showed up late (must have been having his morning coffee). Created building code regulations out the his passing gas...Then told me it was my ass on the line. So I have to go dig thru a UL drawings to in order to tell him to go sit on it. Architecture this is not, business it is.
Show me the code or STFU.
You have to wonder if civil servants start with a shitty attitude or develop it on the job.
They are paid to be obstructionists. I might actually feel sorry for them, if they weren't so damn difficult to work with.
Not fair to paint them all with the same brush, but there are some really bad ones. You have to wonder if they are trying to position themselves for a handout.