Entrepreneurship for architects: Strategies for creative practice

Three-quarters of all U.S. architectural firms have fewer than 10 employees, according to AIA's 2024 Business of Architecture report. Small and emerging practices are essential to the health and vitality of our profession, thanks largely to those willing to take a risk on entrepreneurship. Architects leading these firms face substantial challenges and a long road before seeing anything resembling profit or growth. 

Armed with clarity of mission and an assessment of risk grounded in experience and learning, the architect-entrepreneur can successfully launch and nurture a fledgling design practice. This is our chosen profession because we love the work, so starting a design firm should be about navigating to the sweet spot where professional recognition, monetary reward, and creative fulfillment all intersect.

Learn the business side first 

Working for others, the architect often hits a ceiling with respect to financial, professional and creative achievement. Starting one's own business venture, however, comes with greater risk. In architecture school we are trained as individualists and taught that having your name on the door is a path to getting our preferred projects to shine. For those who decide to pursue entrepreneurship, it’s critical to become familiar with the steps to take to mitigate that risk. Take it from someone who learned most lessons on the go, through trial and error: you don’t know what you don’t know. Each mistake that your firm survives is another class in practice management that you have passed.  

Even the best architecture programs barely touch on business topics beyond outlining how firms are structured. Looking back on my own experience, I would encourage aspiring architects to take business classes while still in school. You don’t need another degree, but learning foundational principles will help smooth your path. The basics of finance and management, for example, would probably have saved me several missteps in my early entrepreneurship days. I knew enough at least to build up savings first, but I was flying blind in several areas, such as: 

• Should you borrow money to cover costs?
• How many people should you hire? How many designers vs. administrative?  
• How many projects do you need in order to make payroll?  
• How do you maintain positive cash flow? 

Let’s start with borrowing. A line of credit provides flexibility, but interest accrues while you wait to get paid. To avoid being in the position of essentially financing your clients’ projects—great for them, bad for you—factor loan interest into your fee structures. Your first clients will be choosing to work with a young firm for the reduced fees, so there should be room to negotiate along the margins to ensure you’re managing debt appropriately. Also, be careful not to negatively impact your personal credit. Our strategy to offset debt was to apply our savings, depositing as collateral the full amount of the line of credit. While financially painful, after two years the firm had developed a positive, independent credit history, and the collateral could be released. 

As for hiring, be mindful of your own strengths. I knew I would need help to manage time and administrative tasks, so my first hires were an office manager/bookkeeper and a draftsperson, enough to manage our project load and operate effectively. All our early revenue went into making sure they got paid while I put off drawing my own salary and lived on savings instead, a painful decision for sure. Remember, by not taking a salary you should be building equity, so you’ll want structure the business to track that investment so you can reap the earnings later.  

Generalized vs. specialized practice 

Starting a practice that specializes in a single typology (or a narrow range) can leave your startup vulnerable to factors outside of your control. Some building sectors are prone to big swings, especially those where the projects are tied to the economy. Recessions and high interest rates will put the brakes on hospitality projects, for example, so specializing in boutique hotel designs could put you in a financial bind with long periods of no revenue. Diversifying your portfolio is usually a good idea, but especially when you’re just starting out. 

Taking on projects in different sectors can lead to more dependable revenue streams, ensuring a reliably positive cash flow. That stability will permit you to pursue the work you desire. Also, I’m a firm believer that working across sectors makes you a better architect and designer. As ideas, methods and strategies cross-pollinate, you and your practice become nimbler and more responsive, leading to enhanced outcomes for all your clients.  

One emerging practice paradigm for specialization is the firm-within-a-firm structure. My own interest in architecture began with my synagogue, where I took inspiration as a kid attending services. After putting my practice on a solid footing, I partnered with a respected synagogue architect and formed a DBA (“doing business as”) arrangement under the umbrella of my firm. Outwardly the boutique firm is a separate entity, so clients see us as specialists while we continue leveraging the power of generalized practice. As partners, we enjoy creative freedom and a burgeoning reputation for high value, inspiring works, including successful renovations and new builds. Starting out focusing on synagogues would have made it hard to put food on the table, much less grow a practice, but now I’m able to pursue a passion and give back in ways that hopefully inspire the next generation. 

The "architect-also-developer"

For those willing to take on greater risk for a long-term reward, taking on real estate development for some of the projects you design is another alternative practice approach. As architects, we typically earn a fee paid once at project completion, while developers take a fee plus annual earnings from the property and/or a lump sum from selling. So, imagine designing a project and earning the architect’s fee plus a developer’s fee, plus annual income. Frankly, architects work too hard to not benefit financially from our creativity and skill!

Meanwhile, the risk-reward ratio doesn’t have to be intimidating. To get started, we offered reduced architect fees in lieu of an upfront cash investment. Architects make valuable partners for development: Lenders love that the professional shepherding the project to completion is invested in a successful outcome, and architects are best placed to provide accurate data for the pro forma, which will speak volumes when presenting to potential investors. 

Our approach has been to focus on the community where we live and work (Princeton, NJ) because we understand the market and which projects are most likely to be earners, and we also know how to navigate the local approvals and construction processes while tapping a reliable network of investment partners. By taking investor-level control in the projects we design, we can put forward positive, sustainable, smart-growth developments for our community. At the same time, we are building the kind of generational wealth that makes it possible to get the most out of life, whatever that means to you, and maybe one day transition out of practice management into an optimally rewarding retirement phase—with income.  

Small firms have the ability to collaborate, create and build, as long as their founders have the confidence and knowledge to apply either personal resources or investments for developing stable financial and business platforms that can support growth.

Joshua Zinder, AIA LEED AP is founder and managing partner of JZA+D and Landau Zinder Architecture.