That is a question that many of my readers ask me each week. The answer will certainly differ depending on whom you ask. When architects ask me how much it will cost to launch an architecture firm, I say, “as much as you need.”
Below I will discuss the very basics required to launch a sole proprietor architecture firm. Depending on your circumstance and the region in which you live, the numbers may vary for you.
There are also many other important decisions you need to consider before hanging your own shingle. I’ve written about many here at the blog before and many others will be covered in subsequent articles. Today, I’m talking about money and how little can we spend to get off the ground.
Let start by finding a place to work.
Location
When Annmarie and I launched Fivecat Studio, we did so from our home. The space we used as our first studio was a raw 1934 cinder block basement. The floor was a concrete slab and the joist structure from the floor above was fully exposed. With a week’s worth of effort, we framed a partition wall to separate the studio from the rest of the unfinished basement, painted the walls and floor, added a few electrical receptacles, track lighting and fabricated a work table into the corner. We extended the existing phone lines and internet cables to the new location and for less than $1,000 we were in business.
Not everyone has the good fortune to own their own home or have the available space for an office. Some may need to search locally for a small commercial space to call home. My recommendation, whatever your circumstances… keep it minimal and only take enough space to get yourself started. There will be plenty of time for you to grow into larger diggs as your workload increases and you begin to need help.
Location Start Up Cost
Home Office: $0 to $5,000 (It depends on how much work you need to do.)
Commercial Office: $300 per month to $1,500 per month (Unless you rent too much space.)
Equipment and Software
Again, to launch your new firm, keep your equipment expenses to a bare minimum. You don’t need top of the line workstations or a full seat of AutoCAD. As you grow, you will upgrade and purchase the items you need to efficiently service the clients you serve. It is likely that your current home computer is adequate to run basic versions of AutoCAD LT and SketchUP, and it’s possible that you already own an older version of the software you’ll need.
Of course, it would be nice to buy a new iMac and load it up with Parallels and Revit, but hold your horses cowboy. You don’t even have a business yet.
Equipment and Software Start Up Cost
Computer: $0 to $2,000 (Keep it simple.)
Design Software: $0 to $1,200 (DraftSight is free. AutoCAD LT 
Office Software: $0 (Google Docs is free.)
All-in-One Copier / Printer: $100 (There are dozens from which to choose.
Plotter: $0 to $2,000 (Your local FedEx Office will print on demand. HP offers inexpensive 24″ plotters.
Internet and Telephone: $0 to $100 / month (If you’re planning a home office, it’s likely your Internet and telephone connections are already waiting for you there. A second phone line for business, is an inexpensive upgrade.)
Furniture: $0 – $500 (You’ll need a desk, a chair and a small book shelf… That’s it! Check your attic.)
Marketing
Once you have a place to sit your bottom and some equipment on which to start working, you’ll need to let the world know you exist.
When Annmarie and I launched Fivecat Studio, we did it without any clients. Once we committed to the idea of launching our own firm, we told all our friends, family and anyone else who would listen to us. Eventually we found a project and with the ball rolling, we started to market our services.
We designed and published our own website using NetObjects Fusion, purchased our domain and hosted our site at 1and1.com
. We built our business from nothing using that first website. Today, Fivecat.com is hosted by liveBooks and its design is based on one of their many photo-friendly templates.
The tools available to us today have taken online marketing to a whole other level. Social media are free and with the right strategy (we’ll get into details another day) you can drive prospects back to your website and find your first client in no time.
Blogging is another great way to communicate and build relationships with your prospects. You can get started with a blog for free in minutes using WordPress.com, or you can host your blog elsewhere and use the more advanced software found at WordPress.org. The blog that I wrote for Fivecat was free and was very successful for helping people learn who we were and what we did. Today, most find us by word of mouth or through Fivecat.com. I dedicate all my writing these days to Entrepreneur Architect. This site is hosted at Blue Host. It’s design started life as the eleven40 Theme from StudioPress and runs on the full version of WordPress.
The best marketing though, may be the least expensive. Volunteer in your community. Get to know the people living and working in your area. People want to work with people they know, like and trust. There is no better way to make that happen than to get out there and meet the people in your neighborhood.
Marketing Start Up Costs
Website Development and Hosting: $19 per month (liveBooks offers 3 tiers of pricing. My site costs me $39 per month, but you can get started for less.)
Blog Development and Hosting: $0 to $100 per month
Networking: $0 to $400 per year (Volunteering is free. Local networking groups and chambers of commerce may charge annual dues.)
A Few Other Thoughts
Before you commit to launching your own firm, you’ll want to consider your life plan and develop a business plan. Be sure to review the Entrepreneur Architect Resource Guide, which may be found over at the new Entrepreneur Architect Academy and read my post on running a Debt Zero Business.
As you can see from the numbers above, it’s very possible to launch on a shoestring budget and bootstrap your way to success. You don’t need to spend much to get started. Your success will come as a result of your talent, your hard work and lots and lots of patience, not how much money you spend on a fancy new conference room (trust me… we learned this lesson the hard way.)
At it’s simplest form, your new firm needs a place to be, some basic equipment and a way to let the world learn about your talents. Of course you could spend more (or less) and I am certain that I forgot a few things. The idea that I want you to take away from this post is, “start small and grow as needed.”
So, what are your thoughts on the cost of launching an architecture firm? Do you agree with my suggestions for starting lean? Tell us your story. How much did you spend to launch YOUR firm.
UPDATE 09/17/13: Be sure you catch the comments on this post. My friends here at Entrepreneur Architect have listed many additional expenses that should be considered before launching your firm. I appreciate the support, encouragement and contributions to this site.
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photo credit: josef.stuefer via photopin cc
This is a great post. I too started with minimal expenditures. Using what would have been the formal dining room in my house as my office, i built a desk out of an old entertainment center that was falling apart, co-opted the home computer and spent $400 on a CAD package (HighDesign by ilexsoft). I developed my own website and spend about $100/yr for hosting and web domain.
As i have seen some business come in, i spent another $500 on bonzai3d and ended up purchasing AutoCAD LT to facilitate some contract work i have been doing for other Architects.
I was also fortunate that my previous employer allowed me use of his office, computer, and AutoCAD when i first started doing the contract work. So i did not need to purchase AutoCAD right away.
Thanks for sharing Matthew. How long ago did you launch your firm?
Nice summary. I’ve been at it (on my own) for about 14 months and started with similar costs, except for a couple of variations:
I use Revit LT, which leverages my time better than other software, and was available for only $1500. Only meaningful trade-off was loss of multi-users, which is moot for a one-man shop.
Professional liability insurance, a requirement if you’re doing non-residential work, is $1,600 to $3,000 per year. Commercial liability may be optional, but is more in the $500 range.
Letterhead and business cards. I spent way too much on the former (most of what I need is sent in PDF or printed with the content) but way too little on business cards (a critical artifact, especially if your primary marketing method is networking).
Telephone: My life and work are pretty much inseparable. The same cell phone serves both.
Renovations and furnishings: Instead of fancier stuff, I found folding tables at Walmart for less than $35 each. We’ll use them for the buffet at the relocation party.
Thanks for the tip on Revit LT. I think many new sole proprietors may go that route.
I hope I’m invited to the relocation party : )
Thanks for sharing.
Oops. Forgot a couple of other items:
State incorporation, license and resident agent fees, which can be a couple of hundred dollars per state, and
Quickbooks (or other bookkeeping software) which helped me develop a fairly sophisticated financial rigor that has already paid off.
Quickbooks was a quick acquisition for us as well.
Hi Mark, you beat me to the punch. I’ve been wanting to write about how much it cost me to run my own firm over at Business of Arch (my current office setup). I enjoyed the article, thanks.
Don’t let me stop you Enoch. I’d love to read your story. Looking forward to it.
I am doing small commercial work, not residential, so I feel that I need an AutoDesk Design Suite with the full profile of AutoCAD and Revit. I had a desktop that previously worked ok, but was sorely lacking when I actually needed to “produce” work, so I added a high end Asus laptop, and couldn’t be happier, for around $2500 which included a switch that handles two monitors, so I don’t need two desk and monitor sets. I now have that important backup system.
I also incorporated, which was not very expensive with LegalZoom. That LLC designation can provide some status, as opposed to someone who is “looking for work”.
Do not let you AutoDesk subscriptions laps. I worked for a company for over 7 years and during the 6th year decided it would be forever (as I was also told) so I did not renew the subscription. It cost me about $3500 to get back that subscription, with a lot of deals coming into play.
I also bought an Epson WF-7510 that prints 13″x 19″ paper in color and scans 11″x17″ paper. Very functional and helpful. I have a cheap laser printer that does 2-side BW printing. I recently bought an Epson WP-4540 that does 2-sided color printing. One thing about inkjet printers, is that they will eat you alive in ink costs – so I always verify that I can purchase a continuous ink supply system CIS or in the case of the WP-4540 replacement ink tanks that can be refilled. You can also get brand new laser jet cartridges that are classified as remanufactured at the rate of 6 for the price of one manufacturers cartridge.
Thanks for sharing David. Your tip on the AutoCAD subscription is a valuable one.
Yes, you covered many of the start up expenses, but a large expense you did not mention was cash flow capitalization. Hopefully when you begin a new firm you already have your first project, but it may be 30,60, or 90 days before you see any cash flow. And then if you are lucky you will have a constant flow of receivables each month, but chances are your receivables will be more erratic. Some months you will have a lot of money flowing in and other months not. Having cash on hand to pay the mortgage, groceries, and the utilities is very important. You should have at a bare minimum at least a month’s cash in savings, preferably three months. This becomes very critical when you begin hiring employees.
Excellent advice Donald. Cash flow is critical. In previous posts, I’ve written much about the importance of cash flow for a healthy business. You absolutely correct.
I agree with your strategy and incurred expenses. But here’s the biggest start-up cost of all: how are you going to live before you get things up and running (i.e. how are you going to pay yourself)? And what about health insurance (also I don’t agree with the implication that E+O insurance is optional depending upon project type)? I have spent tens of thousands of dollars from savings to pay myself while building my business. Luckily my wife’s job provides us with health insurance. I wouldn’t change what I’ve done, but when I look at the numbers required I realize starting my own business while helping support a family of five has been tremendously expensive and eaten up lots of resources. Don’t be fooled into thinking an initial $10K-$15K is all it’s going to take. Or, do it before you start a family and can tolerate eating ramen every night!
Great comments Sasha. Thanks for sharing.
Mark–always enjoy your posts! Keep it up!
Thanks for the encouragement Greg.
Hi Mark,
Great post and I definitely agree! I’m working in my home office and have learned to use what I’ve got til I can afford the new and shiny stuff…. having said that, I did finally get to the point where I needed to have the full version of AutoCAD so I figured out how to lease (really a finance/mortgage sort of scenario) it for only a bit more than an internet/phone cost per month. I think its a great option – at the end of 2 years I’ll own a full version of the very latest software.
Great tip Marica. Thanks for sharing.
Ditto to all of the above. I have been on my own for just over 4-years and have gone from working out of the dining room to now a small bedroom in our house. I still use AutoCADLt and Google Sketch-Up. 90% of the work I do is residential. My website is through Vista Print for $19.99/month, not fancy but clean and easy to update. Regardless of your focus, incorporation & professional liability insurance is a MUST, I pay around $1300/year.
Yes. I agree. Professional liability insurance and incorporation is a must ASAP.
Thanks for mentioning the insurance, Ann – who do you get insurance from for under $2000? I could only find it at just under $3000.
Nice post. I’ve got a different take on the costs for hardware and software:
http://www.shoegnome.com/2013/05/05/software-costs-when-starting-an-architecture-firm/
I’m more of a tech-head, so I ask questions like “why would you ever waste money on AutoCAD???”
I love reading posts like this and look forward to more like it. I think there are a lot of interesting questions surrounding how and why one starts an architecture firm.
Excellent post Jared. Thanks for sharing.
Great post, Mark. Thanks, as always.
I’d add, as others already have, the costs of incorporating and getting professional liability insurance. You also will need local licenses ($300 in Philadelphia, for the privilege of getting a tax account) and you’ll need to keep your state registration current ($100/year in PA). I was able to get liability insurance for under $1,000/year from a good company.
Don’t forget about bookkeeping software (Quickbooks costs around $200, I think) and the time it takes to learn it or to pay someone else to handle it for you and get you set up for payroll taxes, etc.
And Sasha is right on with the cost of paying yourself–it could be several months before you have enough work to pay for the business itself, and then there’s the lag in billing. Realistically, it could easily be a year before the business starts generating any income above your operating expenses!
Gotta love paying for the privilege of paying taxes. : )
Really enjoyed the article as I started working on my own 3 years ago. Your costs are similar to mine though I went a slightly different route.
$25 per month for website at first but now $5 per month with Bluehost and WordPress
I’m using my existing cell phone and home internet
Work space is Dining Room table with a $35 month business address that also offers conference rooms on an as-needed basis.
Printed my own business cards from stock purchased at Office Depot and they look as clean as anything from a printing company.
$69 per year for on-line backup of documents.
Using Openoffice.org for software.
Haven’t listed everything, just the highlights that vary slightly from your list above. It’s worked out very well for a tight budget.
Your comment about volunteering is right on. It feels at first like your wasting your time but it will get you involved in the community where people will get to know and trust you and you’ll feel better about yourself while enjoying the activity. The hardest thing I had to get over was the fact that not everything I do will be generating immediate income and sometimes that’s okay. That’s a tough pill to swallow when you’ve spent the last couple decades filling out a timesheet.
How do you like OpenOffice?
These are comments I made when I shared this on linked in. I am amazed how few people realize they have to pay themselves. First rule of business, Pay Yourself First. I am 7.5 years in and I would have to say these costs are very low and incomplete.
“This is a great post. One flaw is that you fail to pay yourself anything. Also, licensing, insurance and certificate of practice for me is $427/month to do residential and commercial projects. The costs of the IDP and ARE should also be listed (may not have been covered by your employer). You will also need a business bank account, small line of credit or overdraft protection, business license or you should incorporate right away for better tax scenarios. These are not free. There is also “the cost of doing business” contingencies which can be your first proposal, RFP, or client meetings. Turning away bad clients still costs time and money even if you don’t pay yourself to do them.”
Chris;
Good points. Leaving out the part about paying myself since that rarely happens the other items of cost are license, liability insurance, AIA membership, health insurance for myself and family, and NCARB, etc. I estimated a couple of years ago after the startup costs I spend about $10,000 a year in business costs which include the above mentioned items plus a chamber of commerce membership. So I’m going to go with an estimate of $50,000 to start up a new one man firm if you can live on a shoestring budget.
Mark, You should revise this post in the future and include the feedback. It would be interesting to see a complete summary since you have put in all the work. Keep it up.
C
It’s been a crazy week at Fivecat Studio, so please forgive me for not participating in the comments above. I love all the feedback for this post and I will update the post later this week to include the many suggestions.
The intent of this post was to show the cost of a firm at it’s absolute simplest form. Many of the suggestions are highly recommended, but not absolute requirements (and I know that’s debateable).
When Annmarie and I first launched Fivecat, we did not have insurance, nor were we incorporated. Depending on the state in which you practice, these items are optional. We launched with nothing more than what I described above.
As you all know, I am an advocate for professional liability insurance and paying yourself first. I encourage you all to review the articles posted in the Entrepreneur Architect Academy by clicking the “Academy” link in the top menu.
For those who have “no choice” but to start their own firms (as many of our readers are), launching from scratch requires some risk and lots of determination to succeed and ultimately grow into the many additional costs proposed.
Stay tuned for updates on the post.
Thanks, as always, for the enthusiasm and encouragement. You guys rock!
Interesting take. I think as architects our idea of starting a firm usually generates from having either existing clients unhappy with the current firm or side clients who you can no longer handle just on the side. Then we just jump off without asking any pertinent questions, like getting paid or actual start-up costs.
Probably the best piece of advice in the entire post is to have a business plan. It’s tedious and time-consuming, but let’s be honest – when did any of us have a business class in architecture school? Going through the process should help lay out what you really will need for start up.
That being said, a couple of notes:
Office space – we can’t all work from home. And there’s something to be said about not meeting your clients at the local Starbucks. Look for an office in an executive suite. You can get the added perks of receptionist, copy room, conference room, etc.
Plotting – skip the FedEx printing, it will cost you a fortune. Shop around for a local reprographics company that can print for 5 or 6 cents per square foot. We had a client who was spending $30+ to print out her 5 or 6 sheet set at FedEx that we could get printed for $10. She was quite happy with that change.
Marketing – web site is great. But don’t be afraid to try any avenue you think will work. Social media is free (but budget your time wisely). And definitely get out there and get involved in your community. Look at your local chambers of commerce. Odds are most of them have never had an architect participate or join, which can create a unique opportunity for you.
I won’t say what we spent to start our firm. However, I will say it was reflective of the clients we had at the time of start up. Who knew the economy would tank 8 months in?
When Annmarie and I moved from our home office to our current studio, we spent way too much on space and improvements. My intent with this post was to encourage architects considering a launch of their own to keep their costs to an absolute minimum. There is plenty of time to spend money in the future.
Thanks for sharing Larry.
Mark,
You have a unique perspective because you produce and can digest so much info. Some of the key topics like this could be revised or revisited periodically. You are the best person to distill the essence out of the feedback for your readers since you are an expert on blogs and architecture, etc. It is much appreciated by your audience!
I am sure I will revisit this and many other topics in the future. Business is in constant flux and I enjoy learning new things. Thanks for your contributions here Chris.
Hi from Toronto. Land of free healthcare. Sorry Pres Obama.
My startup concept is different in some ways from your baseline shoestring startup: Its a single Mac Laptop based firm.
*After my first laptop blew up, a PC, I invested in a $2400.00 Macbook Pro 17″, with all the Mac software. I did this while still employed. This was the critical difference for me for many reasons, not obvious at first. The layoff with benefits was coming soon, as I had worked for 20 years in the industry for very large firms, SOM, HOK, IBI.
* With the Macpro I bought a 2 terabite “time capsule” wireless backup drive for $300.00, to guard against the data loss of my first PC backup system, a little Maxtor, that I still use to backup the PC side of my mac, uh..when I remember.
* I learned to bootcamp my mac, so I can run all my PC cad software on that side, Like REVIT. Works great.
* I bought the new AutoCad for Mac for $5,000. Yes OUCH! It works almost as well as on the PC, besides no etransmit. I saw it as a one time lifetime purchase, best made in one lump, with upgrades included.
+ I bought the adobe creative suite, with indesign, Photoshop and Illustrator. I use these every day to create multiplatform docs. For example I link PDF’s of all my drawings, and integrate them in Indesign, a great layout program, where I apply my seal and spreadsheets in “Numbers”, macs version of Excel. Both AutoCad and Revit have poor spreadsheet tools, vital in my scheduling heavy practice. We like to give contractors and clients great database work of all kinds.
*with a purchase of an iphone 5, when the cord of my iphone 4 died (thanks Steve), my ArchFirm on a Mac was complete.
*I bought my townhouse type condo in a luxury business Hotel, the Thompson Hotel in 2008, the pit of the recession. My firm is in the second storey den, and I use the 24 hour diner for meetings, as well as the lobby bar and rooftop pool lounge overlooking the city. The perks were free with condo ownership. My clients like it.
*Unconventional but vital, I moved my surviving dad in the ground floor. He had some heart problems and a stroke, and was in a wheelchair. He loves the hotel, and they have adopted him as dad in residence. The hotel/condo is completely accessible. He showers in his wheelchair in the gym. His pension pays the mortgage, after I got him handicap status with the tax department. So far affordable. I suggest bringing your aging parents home, as the care issues can be better done daily yourself. Set up your place early for it, and you can save on expensive care.
*as for Marketing, I am aligned with you as a e-commerce model. The difference with me, is that I use a Mac program, called Sandvox, for website development, that has some good features. It links well with Google and the iPhone. I buy $100/mo of Google express pay per click ads, with keywords such as “architect toronto”. This works out to 1 to 2 live small jobs a month., without a lot of cold calling or marketing time.
*Speaking of time, who has time for accounting? I use Accountedge, a Mac version of MYOB. It is made for architects. I can invoice, do statements, track anything. It imports bank visa and checking data perfectly.
* I have a group of free lance technologists around me that will extend my workforce without incurring “office’ costs. Another benefit of working in the core of a Canadian city, lots of great talent around. And you won’t get shot.
* The downtown location and volunteering has NOT worked out for me. I have a few jobs from networking, but they are not repeating. One can only think your acquaintances are going to provide just a little business. Marketing is more important, as your catchment needs to be much wider.
*I know most of your are in the US, so tossing your car may not be an option. But for me, a combo of Zipcar, Car2go and my mountain bike with its rear carrier can reduce costs in the first years. A parking spot in my building is $40,000. Anyway, sitting for extended time is going to kill your back, as it has done in mine, and the bike ride between meetings is a vital cure all.
*Finally I suggest, if you have some time, reading a few books on SEO, to improve the visability of your site on google search. I bought “Market Samarai” for $100.00, an SEO tool, that allows me to look at my online competition and their back links. I’m half way down on the first page on Google Search for ‘architect toronto” even without paid ads, against much more established international firms, my ex-employers. This has more to do with the relative innocence of my industry when it comes to SEO, as well as weakness in computer technology and marketing in general. Backlinks are sites that link to yours, as I will demonstrate next:
* to improve SEO I’ve created some pages for my clients. This addresses their needs for construction “tips”. Here is the backlink to “drive” you to my site, as they do when clients (in this case a large downtown developers tenants) are needing information: http://ericksong.com/aura-owners—tips-for.html. More backlinks equal more Google ranking, so always put a link in your blog comment.
*To sum-up, a mac oriented firm, with Google and SEO tools, can not only survive, but with the latest CAD software like Revit, take the old 1% by surprise.
Anyway, the Mac looks cool in cafe’s, with my Logitech wireless gamer mouse on its side.
GARY ERICKSON ARCHITECT
http://ericksong.com
Lots of great tips there Gary. Thanks for sharing your story. Looks like you’ve pushed your firm to the cutting edge, experimenting with technology and limits of efficiency. Inspiring!
Thank you for asking me. Good luck with your firms everyone.
My firm is expanding. With the death of my beloved father last week I’m taking over my ground floor space. I’m making space for some friends to help.
Update 2019. Firm incorporated. Project types widening and broadening.
Profitability in a long slow economy still an issue even with minimal overhead. Fees have shrunk due to international competition and deregulation of small building applications in Ontario.
I’m looking into extending my computer services to non-construction, and keep Architecture right-scaled to market.
Now I run a custom PC setup hand built with a youtube channel studio on all things architecture.
MacPro died but PC’s on Windows10 is now amazingwith a Macmini on the office side.
Like any investor the business architecture is more important than the architecture architecture.
Sub to my new channel at: https://www.youtube.com/channel/UCMrWhigxsZkykeojP2_44-A