How Small Firm Architects Are Redefining Success: Key Insights from the EntreArchitect Small Firm Business Pulse Survey

Small firm architects, it’s time to redefine how we measure and understand the health of our industry. Today, I’m thrilled to introduce the EntreArchitect Small Firm Business Pulse Survey and Report, a groundbreaking initiative created specifically for small architecture firms like yours. Developed in partnership with Archmark, this new quarterly economic study provides the tools and insights needed to make informed, strategic decisions for your practice.

For too long, small architecture firms have been underrepresented in broader industry analyses. Our unique challenges and opportunities often get lost in aggregated data dominated by larger firms. The EntreArchitect Small Firm Business Pulse Report changes that by offering a dedicated platform to capture and analyze the metrics that truly matter to us.

Why This Report Matters

Small architecture firms are the backbone of the profession. Yet, we’ve lacked consistent, reliable benchmarks to track our economic health and business performance. The EntreArchitect Small Firm Business Pulse Report fills this gap by offering insights tailored to our community.

This report helps small firm leaders like you:

• Track Economic Trends: By understanding how your firm’s performance aligns with broader trends, you can make smarter business decisions.
• Anticipate Challenges: The report highlights potential risks, from cash flow instability to demand fluctuations, giving you a chance to prepare.
• Benchmark Performance: With data from firms of similar size and structure, you can identify areas where your practice excels or needs improvement.

Our goal is to ensure that small firm architects are empowered with actionable data to thrive in a competitive market.

Introducing the EntreArchitect Business Pulse Index (BPI)

A cornerstone of the new report is the EntreArchitect Business Pulse Index (BPI), a metric specifically designed to measure the economic health of small architecture firms. For Q3 2024, the baseline BPI score is 57.8, reflecting a cautiously optimistic outlook.

How the BPI Works

The BPI is a composite score derived from key indicators that capture the essence of small firm performance:

1. Billings (30%): Captures changes in quarterly revenue.
2. Project Inquiries (25%): Indicates demand and potential pipeline growth.
3. Contract Values (20%): Reflects the size and scope of active projects.
4. Economic Health Rating (15%): A subjective assessment by firm leaders.
5. Future Confidence (10%): Measures expectations for the next quarter.

A score above 50 suggests positive sentiment and growth, while a score below 50 indicates challenges. The Q3 score of 57.8 signals moderate growth, driven by increased project inquiries and stable billings for many firms. However, concerns around cash flow and fluctuating demand remain prevalent.

Using the BPI

The BPI provides small firms with:

• Quarterly Comparisons: Track changes in economic health over time.
• Trend Forecasting: Use the BPI as an early indicator of industry shifts.
• Strategic Planning: Benchmark your firm’s performance and adapt to market conditions.

The BPI will evolve into a trusted benchmark for the small architecture firm community, enabling us to navigate economic cycles with confidence.

Key Findings from the Q3 2024 Report

The inaugural EntreArchitect Small Firm Business Pulse Survey offers a revealing look at the current state of small architecture firms. Here are some of the key takeaways:

Lean Firm Structures

Small architecture firms operate with an average of 3.5 personnel, reflecting their resourcefulness and adaptability. This lean staffing model includes:

• Full-Time Employees: Nearly 44% of firms operate with only one full-time employee, and 18.4% have none at all.
• Part-Time Employees: Over 75% of firms report no part-time employees, reflecting a focus on managing fixed costs.
• Independent Contractors: While 48.8% of firms do not utilize contractors, others leverage these resources to scale capacity as project demands fluctuate.

This structure allows for flexibility but creates challenges in team cohesion, project consistency, and long-term strategic growth.

Mixed Business Process Effectiveness

The survey highlights strong project management and profitability awareness among small firms but uncovers weaknesses in sales and cash flow management:

• Sales Processes: Only 38.4% of firms rate their sales process as effective, with many struggling to qualify leads and close deals.
• Cash Flow Management: A significant variability exists, with 24.8% rating their cash flow processes as weak. This underscores the ongoing challenge of maintaining reserves in an unpredictable market.
• Profitability Awareness: Encouragingly, most firms (64.8%) rate their tracking of profitability as moderate to strong.

Financial Trends Reflect Stability and Variability

Financial indicators for Q3 2024 reveal a mix of growth and challenges across the industry:

• Billings: 37.6% of firms reported increased billings, while 31.2% experienced declines.
• Project Inquiries: Nearly half (46.4%) saw increased inquiries, a positive sign of demand, though 27.2% faced declines.
• Contract Values: A majority of firms reported stable contract values, but 32.8% noted an increase, suggesting opportunities for higher-value projects.

Economic Health and Confidence Vary

The report highlights a range of sentiments about current and future economic conditions:

• Current Economic Health: While many firms report a positive outlook, ratings range widely, reflecting diverse experiences across regions and sectors.
• Future Confidence: Firms expressing confidence cite strong demand and favorable contracts, while those feeling cautious point to cash flow instability, interest rates, and delayed payments as key concerns.

Regional Dynamics Play a Role

Economic trends vary significantly by region:

• Firms in the Pacific and South Atlantic regions reported strong demand and high confidence, buoyed by robust project inquiries.
• In contrast, the Mountain region displayed mixed results, with urban areas thriving and rural areas facing slower demand.
• Cash flow challenges remain a persistent concern across regions, regardless of geographic context.

How You Can Use This Report

The results from the EntreArchitect Small Firm Business Pulse Survey report are not just a reflection of where we are—it’s a tool for shaping where we’re going. Here’s how you can apply it to your practice:

1. Strengthen Cash Flow: Use the insights on financial trends to identify strategies for building reserves and stabilizing revenue streams.
2. Optimize Sales Pipelines: Benchmark your sales processes against best practices highlighted in the report to improve client acquisition.
3. Prepare for Economic Volatility: The BPI’s quarterly updates provide early warnings of industry shifts, helping you plan proactively.
4. Collaborate with Peers: Share the report’s findings with your team or peers to foster discussions about industry challenges and solutions.

The full report, including regional analyses and detailed recommendations, is available for purchase at EntreArchitect.com/report.

A Call to Action

To make the EntreArchitect Small Firm Business Pulse Survey truly impactful, we need your continued participation. Each response strengthens the data and insights we can provide, building a robust resource to help navigate the complexities of running a small architecture firm.

Thank you to everyone who participated in this survey. Your input has been invaluable, and we hope you’ll join us again for the Q4 2024 survey, coming this January. Your voice matters, and by sharing your experiences, you’re contributing to the success of your practice and empowering the entire small firm community.

For those who didn’t participate this time, we encourage you to join the movement. Sign up for the waitlist today, and we’ll send you a reminder when the next survey opens. Your insights are critical to shaping the tools and resources to drive our community forward… and you will receive a free copy of the survey report.

Together, we can make this initiative a cornerstone for supporting small architecture firms everywhere. Join us in shaping the future of small firm practice.

A Partnership for Empowerment

This report would not have been possible without the collaboration between Archmark and EntreArchitect. Archmark’s expertise in data-driven research and analysis perfectly complements EntreArchitect’s deep understanding of the small firm community. Together, we’ve created a program that delivers actionable insights to help you make informed decisions and achieve sustainable growth.

Our shared mission is clear: to empower small architecture firms with the tools, knowledge, and resources needed to thrive. This is just the beginning, and we look forward to continuing this journey with you.

Thank you for being part of the EntreArchitect Community. Let’s use these insights to build stronger, more resilient practices… together.