Part 2: The Amount of Work An Architect Needs to Find to Make $100,000

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In my previous post, we looked into the cost of setting up a solo-practitioner architecture firm. Let’s say you picked the “Medium” Plan, and now you are on the mission to make the money back.

This is just a thought-exercise, so we are going to assume and ignore a few things. We are going to ignore the fact that business costs are tax-deductible. And we are not going into the idea of cash-flow and growth – we assume you just want a zero-sum game, one where you make all your money back plus the profit to match your original life-style, in a year.

We assume you are currently making $94,500 a year at an architecture firm. So, as calculated in our previous post, you are looking to make a gross income of $94,500 + $5,500 = $100,000.

How much work is $100,000?

For discussion, we assume you are starting small. We are going to look into three options:

  1. Any work that pays you hourly
  2. Residential kitchen/bathroom renovations
  3. Single-family homes

Hourly work

According to this great resource on Architectural Fees, an average architect charges anywhere between $100 to $250 per billable hour. You can do anything from drafting, to reviewing drawings, to any kind of consulting. We assume you charge somewhere in the middle, at $150 per billable hour. To make $100,000, you need to work:

$100,000 ÷ $150/hr = 667 hours

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For reference, if you work at an office which gives you 10 paid days off per year, you would have worked about 2,000 hours in 2018 ((261 working days – 10 paid vacation days) x 8 hours/day). If you are lucky to really only work 8 hours a day!

Now the biggest keyword here, of course, is “billable”. You have to find 667 billable hours – all the time spent looking for clients, drafting proposals, negotiating etc, is time you spend for free, and at your own risk.

Residential Renovations

Residential renovations are a good place to start because a lot of them require permits, and clients are relatively easy to find by being active in your community or circle of friends.

We assume a low-end/simple renovation costs $30,000. Moving a fixture, re-tiling, maybe moving one wall or replacing a door. What you charge depends on how involved you are, but let’s say you charge 15% of the construction cost. So you make $30,000 x 15% = $4,500 per renovation. To make $100,000, you need to find:

$100,000 ÷ $4,500/renovation = ~22 low end/simple renovations

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We assume a high-end/complicated renovation can cost up to $100,000. Relocating an entire room, new millwork, lighting, electrical upgrade etc. Let’s say again you charge 15% of the construction cost. So you make $100,000 x 15% = $15,000 per renovation. To make $100,000, you need to find:

$100,000 ÷ $15,000/renovation = ~7 high end/complicated renovations

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Single Family Homes

Last but not least let’s look at single family homes. The average size of a single-family house in america is about 2,600s.f., but we are in New York, so houses are somewhat smaller. Let’s say each house is 2,000s.f.

Again according to Architectural Fees (check that website out, it has so many helpful resources), a custom home costs about $250 per square foot to build. So the construction cost of a 2,000s.f. home is about $500,000. If you charge 10% of that, you make $500,000 x 10% = $50,000 per home. To make $100,000, you need to design:

$100,000 ÷ $50,000/home = 2 homes

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That’s it! Full of assumptions and generalizations, I know, but it’s just an overview, some food for thought. Any combination could work – two billable hours here, one small renovation there, and hopefully if you did a good job, the referrals will slowly make this sustainable. One thing I realized though, is that I used to think the cost of business is very high, but after seeing all this math, the $5,500 buy-in cost isn’t so bad in the grand scheme of things. (That is , until you start renting a “real” office and hiring full-time staff.)

If you can find this amount of work, then you can afford having a similar life style as an architect who gets an annual salary of $94,500… minus the stress, and uncertainty, but also minus the pride and sense of satisfaction, if that’s what you are after.

I am in no way suggesting anyone should charge their time by hour or by a percentage of the construction cost – if anything, I think we should all challenge it!

I am all about being creative – when you do not have a job-job, how you spend your time is really up to you. You can spend half your time pursuing architectural work, and half your time selling handmade crafts on Etsy or walking dogs for people in your neighborhood. But I digress – that’s a topic for another article.

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Part 1: The Cost of Setting up an Architecture Firm in New York

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There was an article on Archdaily a while ago called “21 Careers You Can Pursue With A Degree in Architecture”. I liked it a lot. I like to think that with the education and training that architects get, licensed or not, we have many options when it comes to making a living, from being an artist, to being a professor, to being a politician. And that list is not even close to being exhaustive!

But let’s say you, like most people who got licensed, want to be a somewhat traditional architect, one who sets up an office the way the ARE’s taught us. And you are ready to make it on your own. What are the next steps? How feasible is that? Most importantly, is it worth it?

Money is not the only thing that matters, but it is one of the biggest hurdles. So, I want to look into the numbers, and spell them out in two posts: Part 1, how much you have to put in, and Part 2, how much work you have to find to make that money back.

Assumptions

All of these are of course very complicated, so we have to assume a lot of things. First, we will assume you want to do it alone – it’s a whole other topic to talk about starting a business with one or more partners. Then, we assume you have a spouse whose employment covers your health insurance so we don’t have to address it. (That’s a big one, I know! But I need to keep this relatively simple for discussion’s sake) We will also assume you are licensed in the state of New York (because I am, and so many things are state-specific :P)

 

The “Low” Plan

In a way, the absolute bare minimum to start a business can really be nothing – assuming you have a decent computer, a “magical” way of finding all the softwares, you work from home, and you set up a sole proprietorship. Most people start moonlighting this way.

Low Plan

For marketing, you can use social media services that are free, like facebook and instagram. You can host your website for free on Wix. You can find clients by attending free meetups or sitting at a bar. For printing you can send out the prints and get the client to reimburse you.

We all went to architecture school – we know how to make things work when we have to.

The “Low” Plan costs: $0

 

The “Medium” Plan

But we know there is no free lunch in this world and even though our “Low” Plan might be doable, it’s not that sustainable. So let’s look at a slightly more realistic and practical way to do it in our “Medium” Plan.

Insurance and Business Entity

There are risks associated with every business. Even if we try our best, there are always things that can go wrong. So, to start a company, especially if you are putting your stamp on projects and therefore putting your license on the line, it’s good to be protected.

To protect your personal assets, you can set up a PLLC business entity (Professional Service Limited Liability Company). You can also form a PC, LLP, or a DPC (read more here), but they are less common. (Interestingly architects are not allowed to set up a regular LLC (Limited Liability Company) in the state of New York.)

To set up a PLLC in New York, it costs:
Filing Articles of Organization – $200 (one-time)
Publication Fee – $50 (one-time)
(Then you pay $9 every two years to renew afterwards.)

For insurance, the most standard ones are General Liability, Professional Liability, and Worker’s Compensation Insurance. The cost is highly dependent on your experience and the state you are in, among other things, so I can only tell you what I could find. For my first year, I got the quotes (rounded numbers):
General Liability + Professional Liability – $1,350/year
Worker’s Compensation – $480/year

To protect your home address and privacy, you might want to open a P.O.box. The cost of a P.O. box varies by location, but a rough ballpark goes:
P.O. box – $100/year

Equipment & Softwares

Even though the world is moving towards being paperless, and you see architects making punch lists on ipads all the time, you will still need paper to practice architecture in the foreseeable future. I found this HP DesignJet that can print 24”-wide drawings, which should satisfy most architects’ printing needs:
Large-Format Inkjet Printer – $650 (one time)

Let’s say you only draft in 2D and you haven’t caught up with Revit yet. For software you pay:
Autocad License – $1,260/year

Office

I like working from home, but if you need an office, with the new co-working trend there are a myriad of shared-office options out there. One of the cheapest thing to do is to sign up with companies like Spacious, which gives you exclusive access to their locations with free coffee all day (think members-only Starbucks). You will have to bring and work on your laptop though:
Shared Office Membership – $1,428/year

Medium Plan

The “Medium” Plan costs: ~$5,500

 

The “High” Plan

If you want to go all in and use money to save yourself some time and some headaches (which a lot of times is the smart thing to do), you can invest some more in your business.

Softwares & storage

On top of 2D line drawings, it’d be nice to be able to model things in 3D, render them, and post-process the images after. If you want to access your file anywhere from the cloud, you can pay for Dropbox Plus. Prices are:
DropBox Plus (1TB storage) – $99/year
Adobe Creative Cloud License (All Apps) – $600/year
Rhino 6 License – $995 (one-time)
and/or
Sketchup Pro – $695+tax (one-time)

Office

If you want your own desk, you can sign up for a “dedicated desk” or “private office” at one of the coworking offices like WeWork. New York City is one of the most expensive cities in the states, so it’s not cheap; but it’s still cheaper than your traditional rented office space. Plus there is no commitment:
Dedicated Desk at a Shared Office – $8,400/year

Website and Domains

Although websites like Houzz can help you generate a professional portfolio, it’s still nice to make your own and have a  unique domain in your email address. You can use services like Squarespace with Google’s G Suite:
Website – $216/year
G Suite (For Business Email) – $60/year

High Plan

The “High” Plan costs: ~$15,870 (yikes)

 

Other Costs

I didn’t include the cost of renewing your architect license, because you have to renew it whether you start your own business or not. Anyway, let’s keep that in mind too:
NY State Architect License Renewal – $287/3 years = ~$96/year

That’s all I have! There are so many other things to pay for too, like business cards printing, continuing education, account fees, lawyer fees…etc. But in these “plans” I included the things that stick out most to me as a start-up costs. Everything else can come later. I summed them up here:

Cost of setting up an architecture office - the three tiers

(click to enlarge)

Let me know if I missed anything in the comments!

In the next post, we will talk about how we can make that money back.

 

 

 

Begin Again

Hello again world, long time no see!

After I got licensed, I left my job at a 100-person office, and started my new job at a 15-person office, working on small retail projects. While I was there, I started Project Subway NYC, studying New York City’s subway stations by creating 3D drawings of them. Then, a year and a half later, I went to work for a transportation company as an urban designer, learned a lot about wayfinding, infrastructure and urbanism. While I was there I moved from New York to New Jersey. Another year and a half later, I quit and now I am “fun-employed” – taking a break while trying to make it on my own. Also doing some freelance work.

That’s the gist of what I have been doing since getting licensed! All over the place ain’t I?

As I navigate the scary world of entrepreneurship while trying to apply what I have learned from the exams in real life, I suddenly felt the urge to start writing again. (I thought about saying “blogging”… but who blogs any more? It’s 2018!)

To quote Atul Gawande, one of my favorite writers, one way of being a positive deviant is to write something. In this book “Better: A Surgeon’s Notes on Performance“, he wrote:

It makes no difference whether you write five paragraphs for a blog, a paper for a professional journal, or a poem for a reading group. Just write… It need only add some small observation about your world.

… by offering your reflections to an audience, even a small one, you make yourself part of a larger world.

So here I am! I shared snippets of my world with you when I was taking the exams, and now let’s see what I can actually do with the license. Bottom line, this blog has always made me feel less alone, and I hope it does the same to you!

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Architecture, Capital A!