Building a Sustainable Business Model – Part I

What interests me most is how a company creates a sustainable business model for long-term growth.

For architecture and development, the real question is this: what creates longevity for an architect-developer in a tough, cyclical marketplace? And what model actually allows for long-term growth and sustainability?

Market cycles last years, not days or months. That raises a practical issue most architects don’t spend enough time thinking about: how does the architect-as-developer manage and maintain a team, an office, and active development work through both good markets and bad—continuing to build throughout the cycle without drifting back into a client-service model?

When you operate only an architecture office, you at least have some flexibility. You can lay off members of the team. You can get lean if needed. But if your pool of clients dries up—as it will in bad markets—you’re done. There is nothing to wait for.

There are a lot of layers to this onion, and there are many ways to approach it. Every long-lasting architect-developer office has its own version of the model. Some work very well. Many are outright poor and completely unrealistic. In my own search to become a better firm, I studied many of the architects and firms I admired over the years and pulled bits and pieces from their models to create our own.

If we’re honest with ourselves, experience has taught me the architect-developer model—at least as it’s commonly imagined—is one of the worst business models there is. It combines the volatility of development with the thin margins of architecture, often without adequately addressing either.

In fact, unless you’re an architect—and you’re doing this for the reasons we’ve already discussed—it is significantly cheaper and far easier to just hire an architect and save yourself the overhead! And yes, I have thought about it more than once…

When you really dig into the firms that have actually lasted, you start to notice something important: they do a lot more than architecture to pay the bills and create the freedom we’re all looking for. They are construction firms, general contractors, property managers, private equity firms, fund managers – in part or often all at once.

Architecture may be the identity of the firm, but it is rarely what keeps it afloat.

What This Is Not About

This is not a discussion about the traditional architecture firm that has conventional clients and develops its own project once every now and again. To be honest, that model doesn’t interest me much, because there is no real path to financial freedom in it.

Those firms may produce good work, but they remain dependent on continued commissions and continued labor. Most will never truly retire, and they will never have total control over their outcome.

What I’m interested in is a model that creates control, durability, and optionality over a long career.

Set the Goals

Before any discussion of business structure, fees, or capital, I believe some goals need to be set—both short-term and long-term. They will change and evolve with experience, but they are necessary as markers of progress. Without them, it’s very easy to drift.

The questions are practical, not theoretical:

• Is there a target date to eliminate client work?

• What kind of work do you not want to do?

• How much revenue is required to operate the office doing only your own work?

• How do you pay yourself without clients—and for how long?

• What does “enough” actually look like?

If you don’t define at least some of these goals, you’re not building a business—you’re reacting to opportunities as they appear. And trust me, I spent a fair share of time playing defense before I got my goals in order. Take your time with this part.

My Own Starting Point

I had my own goals going in. They didn’t come all at once. They developed over time, shaped by experience and market cycles. But once I started focusing on an actual plan, the pieces began to come together—and I made plenty of mistakes along the way.

At the beginning, my markers were straightforward:

• First, I set a date for when I wanted to take my last client job.

• Second, we created a revenue model that could support a small office, the team, and pay me—first with some client work, and eventually without it. From there, I had to work backward and build a base of development projects that could support that model.

• Third, early on—and especially coming out of the 2008 crisis—I wanted to build a rental portfolio that could provide income regardless of what the markets were doing. I wanted to insulate myself from future crashes.

These variables and the model changed four or five times over the course of fifteen years as the firm matured and the markets shifted, and then shifted again. But the objective stayed the same: design a practice that could survive market cycles, not just perform during good years.

Where This Leads

This article isn’t meant to solve the problem. It’s meant to frame it honestly.
The architect-as-developer path isn’t elegant. It’s stressful, high-risk, and far from forgiving. Real estate is a business that has crushed many people over the years—and will continue to do so. It’s not an easy business, which is probably why the payoff can be so high.

If structured correctly, however, it can create something most architects never experience: independence that isn’t dependent on approval.

Everything that follows in this series—how fees are structured, how capital is raised, how construction is controlled, how assets are held and exited—flows from this single concern.
The question isn’t whether an architect can develop a project.
It’s whether that architect is actually on a path to financial freedom.