Starting a Design Firm - help?

[sethdamien]

Hello, im a graduate of Architecture and a recent passer in our board exam. As i found out, starting my own firm isn't as easy as college made it out to be,lol. but i already drafted out plans on expanding my network.

For now however, i need referrals from people who are directly connected to prospective homeowners - these are real estate brokers/agencies.
In return for their referral, im planning a 20% or higher commission rate for their referral depending on the size of a project.

I also consider this an investment on the real estate broker as land value is only going up and construction is booming and i need as much referrals as i can get...

Is it too aggressive? The conventional way of architects getting clients is too passive - waiting for someone to refer them without any prior action, or until someone notices them.
Sitting and waiting is simply not an option for me.
Sorry for being a little bit too idealistic on this, but what is your take on the matter?

[Fulcrum]

You need to market, but a 20% commission seems a little steep.


... as land value is only going up and construction is booming

I think 2007/2008 disagrees with this statement.

[Harold Mansfield]

My suggestion is that you first work for someone to get a lay of the land and learn what you're doing before striking out on your own. It's one thing to watch other people do it, it's another to do it yourself. Working for someone elses gives the opportunity to learn what to do and what not to on someone elses dime. And you get a chance to make connections that you otherwise will not make fresh out of school with no experience.

[sethdamien]

My suggestion is that you first work for someone to get a lay of the land and learn what you're doing before striking out on your own. It's one thing to watch other people do it, it's another to do it yourself. Working for someone elses gives the opportunity to learn what to do and what not to on someone elses dime. And you get a chance to make connections that you otherwise will not make fresh out of school with no experience.

I have been working in a firm for a year now. i spent my internship there and after passing the exams, they re-hired me... the pay's good but still not enough to pay bills and still have some for myself.
Im not planning to leave either. My venture is just a sideline and im just testing the waters for now. If the flow of projects is slow, at least i'd still have a stable income to rely on...

I've been googling ways to get clients - but it always ends up in the 'waiting' category (brochures, webpages, networking--like joining orgs to be known)... i think its dull and takes too slow...

I think it's high time to look for the clients instead of waiting... and the only way to do so is to have other people market my business motivated by a large commission.

[Harold Mansfield]

I have been working in a firm for a year now. i spent my internship there and after passing the exams, they re-hired me... the pay's good but still not enough to pay bills and still have some for myself.
Im not planning to leave either. My venture is just a sideline and im just testing the waters for now. If the flow of projects is slow, at least i'd still have a stable income to rely on...
This is smart since it will take time to get a business going well enough to produce an income that you can actually live on.


I've been googling ways to get clients - but it always ends up in the 'waiting' category (brochures, webpages, networking--like joining orgs to be known)... i think its dull and takes too slow...
That's great, and those are all important too, but it really comes down to sales. You need to develop and perfect the ways to bring leads to you (the stuff you already mentioned), and ways to get in front of leads personally and perfect your sales and closing. It's hard and it takes time and trial by fire.


I think it's high time to look for the clients instead of waiting... and the only way to do so is to have other people market my business motivated by a large commission.
No, that's one way. It's not the only way. Ultimately whether you have agents or not, the core sales strategy and marketing of your business has to come from you and it has to come from many sources.

[Fulcrum]

So you want to compete against your current employer? I smell a conflict of interest here.

With that said, money isn't the only driving force for many people. A large commission can make you look desperate. I think you would be best suited to having a quality website built that acts as your primary sales channel. In your words, this is a moonlight venture, so why not start out trying to minimize expenses and keep them low.

[tallen]

IF the firm you are working for now only does commercial and/or institutional projects, and you will only be doing residential projects on the side, then there might not be a conflict of interest, but best to check the terms of your employment to make sure you are not setting yourself up for pre-mature dismissal.

I have only dealt with architectural design firms as part of the client team for institutional projects, where we used an RFP process to select the firm - I don't see how commissioned sales agents would be effective in that scenario.

For private residential or small commercial projects, I think you are ultimately still going to have to close the sale yourself as it is your professional services that are on offer; your commissioned sales agents are really just lead generators -- if you are paying them commission based on closing a sale (rather than just providing you with leads), then your agents are going to have to have confidence in your ability to do that (close the sale) in order for them to justify hustling up leads for you. It seems a hard row to hoe as an upstart. You are still going to have to develop your own marketing materials (portfolio) anyway. Do your own marketing/sales and earn 100% commission! ?

[sethdamien]

Thanks for all the remarks!

My employer and I are both architects. So inevitably, we'll become competitors -- eventually-- and he knows that.

Doing sideline/outside work is not prohibited, although it's highly discouraged. But we should never steal company clients (which i would never do)
I'm aiming in taking a 3-4 year experience with my current employer. I'm in management being the head of the design department and i also do the client presentations. It puts me in a pretty good spot in the learning curve as i can better handle projects on my own.

This may be a bit speculative, but my primary goal for now is not in sales, but in establishing a brand -- taking in as many projects as possible -- but should still be sustainable. Im even willing to split 20% earnings for the commission, and half of the rest to my partner, whom i have yet to propose this venture with, and the remaining for my assets. None for me - again this is just speculative.

But i agree with @tallen - the recommendations should be justifiable backed by a good portfolio. I only did one personal project of a friend's house although i handled numerous projects with my employer, but unfortunately i can't include those in my portfolio.
And, as @fulcrum said, lessen the commission just to have a more dignified approach

Again, your feedback are highly welcome!

[Harold Mansfield]

...

This may be a bit speculative, but my primary goal for now is not in sales, but in establishing a brand -- taking in as many projects as possible -- but should still be sustainable. Im even willing to split 20% earnings for the commission, and half of the rest to my partner, whom i have yet to propose this venture with, and the remaining for my assets. None for me - again this is just speculative.

But i agree with @tallen - the recommendations should be justifiable backed by a good portfolio. I only did one personal project of a friend's house although i handled numerous projects with my employer, but unfortunately i can't include those in my portfolio.
And, as @fulcrum said, lessen the commission just to have a more dignified approach

Again, your feedback are highly welcome!

Again, you can't do any of this without sales. The clients aren't going to just fall into your lap. You're going to have to sell yourself and your company and why people should choose you.

I can't comment on your proposed commissions because it seems to be putting the cart before the horse. You don't have a sales strategy, don't know what kind of clients you'll have because you haven't established a target market, and haven't figured out what your expenses will be...yet you're already setting commission structure.


I only did one personal project of a friend's house although i handled numerous projects with my employer, but unfortunately i can't include those in my portfolio.

I spent a couple of years working with another marketing company and did everything web related for every client, and I do use some of those projects as examples of my work but make it clear that I was acting on behalf of the other agency. I guess it's different when you're employee, but maybe instead of trying to use those projects in a portfolio, you mention them some resume' copy. Like in the About page of your website. There are ways to mention the experience without naming the specific client and stepping on anyone's toes.

[sethdamien]

Again, you can't do any of this without sales. The clients aren't going to just fall into your lap. You're going to have to sell yourself and your company and why people should choose you.

I can't comment on your proposed commissions because it seems to be putting the cart before the horse. You don't have a sales strategy, don't know what kind of clients you'll have because you haven't established a target market, and haven't figured out what your expenses will be...yet you're already setting commission structure.


I spent a couple of years working with another marketing company and did everything web related for every client, and I do use some of those projects as examples of my work but make it clear that I was acting on behalf of the other agency. I guess it's different when you're employee, but maybe instead of trying to use those projects in a portfolio, you mention them some resume' copy. Like in the About page of your website. There are ways to mention the experience without naming the specific client and stepping on anyone's toes.

Thanks!

You're right, obviously I cant just wing it, i need to have a marketing strategy.

Im thinking i should market along the lines of first-time homeowners which means social media might be helpful. What level of guarantee are we talking about in closing a deal through websites?
I also understand it might be a bit of a burden to keep updating the website and social media page. Would you recommend i hire the services of a web designer? though i admit its too pricey for me now.

Going back to my proposal though.
To market aggressively, is it proper to suggest to real estate brokers/agents that a commission based system could work if i assure their confidence? it may be through a Business plan, Profile/Portfolio, or both?

[tallen]

Do you really think first-time home buyers are your target market? I just don't see them as looking for custom-designed new construction. Or are you thinking of designing renovation projects, a la "the property brothers" or maybe the "love it or list it" model? (I am trying to suss out the connection to real estate agents...)

What are the actual services you see yourself providing?
- custom designs intended for new construction
- designing renovations and/or additions to existing homes
- interior design make-over (that don't involve structural changes)
- exterior design make-overs (landscape, etc...)
- HVAC/Plumbing/Electrical systems refits (maybe more engineering than architectural design?)
- other?

Detailing what you can offer would seem to me to be the first step before you can identify your target market(s), which you in turn need to do before figuring out how to best reach that market.

Instead you seem focused on this idea of offering real estate agents a commission to deliver customers to you -- coming at the problem from the back way round ... but you haven't really defined why the real estate agents' customers need your services, or why the real estate agents would want to sell your services to their customers (other than the commission incentive).

BTW, most real estate brokers work for the seller of a property, although there are some buyer's brokers out there, too.

Just taking the "designing renovations and/or additions to existing homes" service, I see three or four possible markets -- (1) people who are trying to sell their house and think they need to do some reno to make the sale (real estate agents might be a good sales avenue); (2) people who want to stay in their house and are looking to do a reno to make it better suite their current needs (they are probably not going to consult with real estate agents); (3) people who are looking to buy a house but are not happy with (or can't afford) the available housing stock so are looking at fixer-uppers (real estate agents might be trying to match these people with group#1); and (4) professional house-flippers...

The point is that in order to make these connections, you have to know what it is that you are offering, and why people might need that.

[sethdamien]

Do you really think first-time home buyers are your target market? I just don't see them as looking for custom-designed new construction. Or are you thinking of designing renovation projects, a la "the property brothers" or maybe the "love it or list it" model? (I am trying to suss out the connection to real estate agents...)

The point is that in order to make these connections, you have to know what it is that you are offering, and why people might need that.

Thanks! I appreciate your inputs @tallen.

Well, most of what you stated can be in my list of services like retrofitting, renovation, interior design etc, but more into designing a building from scratch.

-From gathering the client's requirements, needs, budget, etc. to conceiving a plan based on the initial client meeting, to engineering design as you mentioned (structural, plumbing, electrical, mech'l) all the way to construction. But construction is no longer on my scope, but a foreseeable venture though.

I strongly believe there is a good market for new construction here. Most subdivisions here, empty ones, are slowly picking up pace in turn over of lots and/or built homes and even condominium units.

What is an effective way to market these services? if you were a prospective homeowner/commercial lessor, what would you like to see? how would i convey the message and through what means?

[Marina Lommerse]

I think it is an interesting proposition. You will still have to build your reputation with the Real Estate Agents. Typically real estate agents, like any business people rely on having a good reputation, therefore any reputable ones will want to recommend people with a good track record.

[Harold Mansfield]

Going back to my proposal though.
To market aggressively, is it proper to suggest to real estate brokers/agents that a commission based system could work if i assure their confidence? it may be through a Business plan, Profile/Portfolio, or both?

Offering commission alone won't be any kind of incentive. Assuring their confidence in your work and customer service is going to be key. If you have a good reputation you won't have to give away money to get recommended.

I would never suggest my clients use another service provider just because I'm getting a commission. I could send them all to Go Daddy and easily get a commission on their hosting sign up, but Go Daddy sucks. It's not about the money. It's about having their trust.

A decent percentage of my business is referrals from past clients. They don't do it because I'm giving them something. They do it because they know I'll take care of their associate.

People who refer you only because of the kickback will send you crappy customers.

I honestly think that you should develop a multi faceted plan to attract customers and not rely on putting all eggs in one basket. I think you should think a little bigger than the one off commission here and there and work hard to build an honest business with happy clients and great reviews that will recommend you without a monetary incentive.

Then the way I'd do it isn't with the individual agent one by one, I'd shoot for working with entire Realtor companies and other sub contractors as a preferred contractor to ALL of their customers.

[sethdamien]

Ok, scratch the commission based referrals, well, maybe not entirely, but only until i can build a reputation of a trustworthy brand...

It dawned on me though, people don't just want to have beautiful houses built. Most prospective homeowners don't even have a clue on the cost of owning a house or on how to go about financing their new home. And i think that's my selling point. By acting as their financier, we can build the house with no down payment from the owner. Once it's built, we let them pay the amortization to the financing group through us. We'll process all the paperwork and ensure the approval of the loan with the building and property being the collateral.

Im thinking about venturing there. It will also act as my market catalyst. Its basically a one stop shop, and i think alot of people will buy into this because of the ease and comfort on their side... Of course we'll have to strike out a deal with banks though, but i think in the end, it'll be worth it.

What do you guys think?

[Fulcrum]

Or you can just start designing homes and selling the plans.

[Harold Mansfield]

Ok, scratch the commission based referrals, well, maybe not entirely, but only until i can build a reputation of a trustworthy brand...

It dawned on me though, people don't just want to have beautiful houses built. Most prospective homeowners don't even have a clue on the cost of owning a house or on how to go about financing their new home. And i think that's my selling point. By acting as their financier, we can build the house with no down payment from the owner. Once it's built, we let them pay the amortization to the financing group through us. We'll process all the paperwork and ensure the approval of the loan with the building and property being the collateral.

Im thinking about venturing there. It will also act as my market catalyst. Its basically a one stop shop, and i think alot of people will buy into this because of the ease and comfort on their side... Of course we'll have to strike out a deal with banks though, but i think in the end, it'll be worth it.

What do you guys think?

Those are pretty big and expensive plans. Builder and financing. I can only say that I know of at least 5 companies in this market that were doing that, and they have all gone belly up.
I honestly think the days of "no money down" ended with adjustable rate mortgages. It's too risky for people with bad credit, and people with good credit can get it anywhere...if it's even offered anymore.

Of course I'm not a mortgage or finance expert. I just see you starting a business which is already hard enough, already short on start up capital, and taking an enormous amount of risk by getting into financing.

I agree with Fulcrum. Work on doing the man thing that you actually have knowledge in and getting good at that first. Making things and getting paid for your work.

One step at a time. Accomplish one thing first and build.

[sethdamien]

I think the mistake these companies made is because they held themselves liable for the loan in financing their clients. If the client fails to pay their amortization or has a bad credit score--the bank goes after the financier, not their client.

I think i have a pretty safe bet if the client is still liable. We're just the middle men, processing guys, and we market the bank's offer via our architectural services, instead of having the client process their home/business loans themselves.
I believe its more convenient that way and many clients will want a one-stop shop for all their needs in building their new home or business.

But i agree, im just letting all possible business ideas out right now...

Thanks for all your inputs!

[Harold Mansfield]

I think the mistake these companies made is because they held themselves liable for the loan in financing their clients. If the client fails to pay their amortization or has a bad credit score--the bank goes after the financier, not their client.

I think i have a pretty safe bet if the client is still liable. We're just the middle men, processing guys, and we market the bank's offer via our architectural services, instead of having the client process their home/business loans themselves.
I believe its more convenient that way and many clients will want a one-stop shop for all their needs in building their new home or business.

But i agree, im just letting all possible business ideas out right now...

Thanks for all your inputs!

OK, I'm getting it now. You're not necessarily doing all of those services in house and taking the excess risk, you're basically talking about being a full service company where you bring in specialists to help them with everything they need.

That makes sense.

[tallen]

I just noticed that you've listed your location as the Philippines, which I don't think you had set originally. Local customs and business practices there might be somewhat different from what we experience here in North America. There are significant differences in real estate practice from state to state, here, even.

What you seem to be describing, I might call a "retail residential real estate developer" -- retail in the sense that your client is the end-user, the person who will ultimately be living in the homes that you build. You will work with lenders to help secure financing for your clients, you'll work with real estate brokers to help secure a plot of land for your clients to build on, you will design your client's new home, and you will work with general contractors, to help see that their new home gets built.

Although, around here, I guess the typical "real estate developer" usually is involved even earlier, in working with large property to owners to undertake the process of subdividing the land in the first place, and building the necessary infrastructure on the property to make it viable for further development (roads, water, sewer, power...), and then they often continue with what I outlined above.

If you wanted to be more involved in the actual construction of the house, you could cast yourself more as a "design-build" firm -- you could still do all the above, but you would now be taking on the role of general contractor as well as architect.

Going back to your original idea of offering commissions to real estate agents who bring you architectural clients, an expansion of that model might include developers and builders as well as real estate agents as potential lead generators. Or rather than thinking about commissioning these folks to bring you leads, you might think about partnering with them to accomplish the end goals. But it requires a different way of thinking, rather than you and your business being at the center of a hub, you would be just part of a larger team.

[sethdamien]

You hit the nail on the head @tallen!

Particularly yes, i guess im leaning towards real estate development. But that's another venture for another time.

In a sense, i want to build an all-service firm... my bottom line is to provide client convenience. Partnering with one real estate agent could be limiting compared to having many agents as lead generators.
I also considered design-build services (its a good marketing niche). however, i lack the capital and assets to begin with. I do have a contractor who may be willing to sign a partnership, but it wouldn't really be called a "design-build" since Architect's fee and contractor's fee would still be separately paid.