How the Smallest Architecture Firms Are Thriving in an Age of Accelerated Change
Some architects have a dream of starting and owning their own firm. Some act on this dream and others wait. Some hold off on making the decision because they believe that they don’t have small business acumen. It is not unusual to hear architects say they don’t have a clue about running a business, even a small shop or studio. While the risks of running a small firm often get more attention than the pursuit of understanding the rewards, there are hundreds of successful small (and very small) firms that are currently finding success. There are numerous considerations to running a small firm today. These include the tangible, such as monetary success and creative design independence, and the intangible, including professional satisfaction and emotional well-being.
But can the smallest firms survive?
Some say the cards have been stacked against the smallest firms. I recently heard a professor say that running a small architecture firm “would be unwise in the 21st Century.” This mindset seems to be widespread; one of today’s conventional wisdoms. However, it doesn’t hold up on closer analysis on a state by state study. Not that there aren’t plenty of examples to support a pessimistic mindset (e.g., the threat of technology and new software that is spreading its tentacles with 3D algorithms aided by emerging artificial intelligence). And there remains a worldview that in the architecture profession, the best days have come and gone, fueled by the belief that the acceleration of change and power shifts in the A/E/C industry will be great threats to the future of successful small firm practice.
What might all this mean for the future of the smallest firms? Who has insight into the limitations and the possibilities ahead for small practice? Is it possible that fresh value propositions portend that, in fact the best days for small entrepreneurial firms lie ahead?
Last November, with support from the AIA and the Design Futures Council, I began a national project to uncover the current realities of running a small firm. I limited this study to firms with a total of ten staff or less. I circulated a call for nominations and received a quality list of almost sixty firms. The list was collated from contacting AIA Chapters, checking with print and digital media, scanning recent award winners, and networking with firms active in the Design Futures Council.
Beliefs Are a Key to Small Firm Success
During my research, I discovered that some small firms that were perceived to be under ten employees in size were growing rapidly, thereby outgrowing our “ten under ten” definition. We put those firms in a different bucket for future study. Ten is somewhat arbitrary of course, but I knew there were firms that wanted to achieve success as a small and healthy firm and were sustaining this success year after year. It turned out that there was a lot of data and leadership insight to harvest.
I picked firms from a broad geography ranging from the east coast to Hawaii. I learned that in every part of the United States it’s possible to find the smallest firms who are doing good design, serving their clients with professional distinction, and who are finding success—not only as they define it, but as their clients do: delivered value and satisfaction. Moreover, I discovered that owners of small firms can achieve their financial planning goals, not unlike those leaders in the successful medium and large firms.
This study does not shy away from discussing succession, retirement and financial planning and the toughest emotional situations being encountered by today’s small-firm leadership. Firms in this study were selected not only because they are outperforming their peers in value delivery but they are experiencing real championship enthusiasm for the lifestyle and rewards of small-firm practice. Sometimes, they’re competing against the largest firms and winning.
Following the review of the sixty finalists we selected firms in the following states: California, Arizona, Hawaii, Minnesota, Georgia, South Carolina, Wyoming, Arkansas and Colorado. We also established a backup list, in case a firm was disqualified or decided not to participate. The metrics of the alternates were also quite exemplary and we hope to study them more closely in future research.
To help determine the ten firms, we looked not only for professional practice success but diversity and overcoming obstacles. Other than the obvious considerations of race, gender, geographic span and more, we chose firms that had to overcome a variety of roadblocks to find their own small-firm power niche. Obstacles that were overcome included:
• A firm founded by a young female architect who also decided to start a family and redefined the service objectives of the firm
• A firm founded by a middle-aged male who left a large Fortune 100 corporation and who had never been in private practice. It was the default choice rather than a lifetime ambition.
• A firm founded by an architect who never graduated from an architecture school but who started a small practice where he has achieved success. He recently received his FAIA, an NCARB certificate and a rare honorary doctorate from a big ten university.
• A firm in a rural area known for low commodity fees that now has a strong backlog and highly respectable profits. This firm communicates a relevant value proposition that expands the commodity definitions into new bespoke business territory.
• A firm founded by minorities seeking a foothold as a strong firm with an exemplary regional brand for service and design. They have achieved respectable financial goals, media recognition and peer respect.
• A tiny firm that has become the residential architect of choice to celebrities in the western United States. This firm has a large backlog of business with a most unique business model: All contracts begin with a week of residence in the client’s home to chart behaviors, use of space and to co-develop design options with clients’ families. One unintended consequence is a phenomenal referral rate attracting celebrities around the world.
• A design-build firm of eight founded by an architect and an interior designer who are now redefining design-build success with profit metrics that surpass many large firms
• A firm founded by an educator/studio advisor who is pushing a design agenda and is getting global recognition for design excellence
• A firm with roots in modernism that has defined a refreshing regional vernacular transcending past design categories in a resort geography
• An entrepreneurial firm that almost failed twice in the early years but now has consistent depth of commissions and enjoying a position of significant respect in the region
What do these successful small firms do that makes them different? What sets them apart? How do they have time to build relationships? How do they balance the delivery of design excellence with business performance? How do they achieve hands-on competency plus selective delegation? How resilient are they given new threats that are on the horizon?
The Most Likable and Engaging Human Qualities
One of the first things we learned is that each of these firms are led by the most likable people. They tell stories. They laugh a lot. They are humble. They are all consummate professionals. These leaders really love design. They articulate its value both in physical form and in process. They also see effort as a pathway to mastery. They all work 50+ hours a week. They develop energy by exercising willpower even in the face of setbacks. And they don’t shy away from criticism.
If I were to tell these leaders that they have “made it” in this profession, they would each be critical of the whole concept. They don’t live on past glory. They expect to achieve their goals but they also see potential setbacks around every corner. Their preferred view is to see opportunity in the challenges. They have an outlook that values candid and critical feedback. They aspire to resiliency knowing that at their scale, they will be tested. They have high expectations for their own work and that of their employees.
These firms taken together have achieved distinctive metrics. The average age of the firms is 15.9 years old. They will collectively bring in $12.3 million dollars or more this year and have invoiced on average $9.8 million in each of the last five years. Revenues over six years will be approximately $62.7 million. Eighty percent of the firms have a strategic plan that they follow and update every year or two. On a scale of 1-5 their satisfaction with the architecture profession is at a 4.75 level. When asked: would you choose to run a small firm of under ten if you were starting out today? All said yes except for one who still remembers favorably his experiences in a large corporate design environment. The oldest person in the study is 72 and the youngest is 34. Gross revenues per full-time equivalent staff (FTE) are just over $241,597. They all have good to great backlogs and respectable balance sheets. They keep cash reserves to cover three to five months. And while few of these leaders would boast about it, they all have learned to fulfill their potential in the architecture profession and continue to do so.
The finalist firms selected for this 10 Under 10 Study are:
• BLDGS: David Yocum, Brian Bell
• 4RM+ULA: James Garrett, Erick Goodlow, Nathan Johnson
• HLDB: Ryc Loope, Lynne Beyer
• Hollander Design: Jeffrey Hollander, Viveca Bissonnette
• Marlon Blackwell Architects
• Rick Ryniak, Architect
• David Salmela, Architect
• Shepherd Resources: Doug DeChant, Charlotte DeChant
• Vera Iconica: Veronica Schreibeis Smith
• Williston Enterprises: Williston Dye
The white paper featuring these firms will incorporate their year-end projections on financial metrics, their updated list of clients, and their breakdown of market sectors along with photography that shows off their newest work.
One of the great discoveries of this research project is the number of “youthful” architects who are having fun in their profession, day after day, in the smallest firms. They have proven that the smallest architecture firm can be a dynamic going concern. They have all won awards, with several collecting the top national honor awards.
No matter how you define good design, these “10 firms under 10 employees” are each defining and practicing it thoughtfully. I have come away with a belief that strong small firms can have a bright future. Will they become obsolete? It is unlikely. But that won’t stop them from worrying about the potential pitfalls to the degree that it keeps them on their toes and with an everlasting resilient point of view.
James P. Cramer is the founder, chairman emeritus and a Senior Fellow of the Design Futures Council.
Photo by Len dela Cruz on Unsplash.
Excerpted from DesignIntelligence Quarterly.