Building a Sustainable Business Model – Part II

In Part I, I focused on the problem: longevity. Market cycles are long, architecture is fragile, and most architect-developer models are far less sustainable than people like to admit.

This article moves to the next layer: what actually makes a sustainable architect-as-developer business possible in practice.

Let’s talk about money. It makes the world go round, and architects are exceptionally good at pretending it doesn’t matter.

There is no single formula. But there are common elements that show up again and again in firms that survive multiple cycles. And they all start with one uncomfortable truth.

Architecture Fees Are Not Enough

To achieve long-term sustainability, an architect-developer must create a path to secondary revenue. Your architecture fee alone is not going to do it. There is no continuity built into that model.

On top of your architecture fee, you need to charge a development fee that is a percentage of total project cost. That fee must be sufficient to cover operating costs over the full life of the development—however long that may be.

For us, we charge that fee quarterly. We’ve found this to be the most effective way to manage the office, align with the development budget, and stay in sync with the requisition and construction cycle. It’s not a profit center. It’s meant to keep the lights on.

A Word of Advice

I’m not sure this point fits neatly anywhere, but it’s critical.

This is where many developers make their first serious mistake. There will almost always be an investor—sometimes well-intentioned, sometimes not—who suggests that you back-end your architecture or development fee so that “interests are aligned,” or so they feel more comfortable or secure. People in the industry or those who understand investments usually won’t ask this of you.

Don’t do it.

Find a different investor.

You’re a developer now - not an architect providing drafting services. Developers need operating capital to pay a great team dedicated to the success of the endeavor. You need money to run an office, manage consultants, carry risk, and survive delays. There is no shame in that.

Shifting the Economic Power Base

In retrospect, architects who shift their economic power base from architecture to construction tend to have a much more stable platform for paying themselves fees.

I didn’t do this myself, but I thought about it many times—and still do. When you study architect-developers with truly sustainable businesses, you’ll notice a pattern: many of them are also the builder.

The ability to manage the construction schedule, control the billing cycle, and unlock a different scale of fees is materially superior to architecture alone. Construction cash flow is faster, larger, and more predictable.

If you look closely at other architect-developers, notice how many of them also control construction. You may be surprised.

Long story short: many of them can afford to be the architect because they are also the contractor.

Where the Money Comes From (Early On)

In the beginning, projects are scraped together from friends, family, and anyone willing to take a chance on you. You will need to make sacrifices—sometimes in ownership, sometimes on the back end—because you need one thing above all else: a track record.

You do not have a real business until you have a track record you can show potential partners.

Once you do—and if it’s successful—raising capital becomes easier. More importantly, options start to appear.

At that point, you can decide which bucket of capital you want to work with:

· Debt-heavy structures

· Syndicated equity

· Family offices

· RIAs

· Institutional capital

Each comes with different constraints and different implications for control. We’ll get into those distinctions later. The point here is simple: optionality only comes after credibility.

Ownership and the Role of Passive Income

One of the most important lessons I learned early on is that passive income—though rarely truly passive—is the end goal.

Owning your own real estate changes the equation and flips things.

Yes, it’s more work. But compared to the high-risk world of development, it’s often much easier to live with. It’s predictable. It’s stable. It’s recurring. It’s income that shows up every month regardless of what the market is doing—and something you can actually build and budget around.

After the 2008 crisis—about ten years into my career—I was married and had just had my first child. After barely surviving the crash, I set a clear goal: build enough rental income so I would never again be deal-dependent.

I did my first rental project and self-managed it. The income was small, but it was a start—and more importantly, I knew how to scale it. I set a specific monthly income target from rentals. That number became my safety net, and eventually part of my end game.

With that single objective, over the next ten years any money I didn’t need to survive or operate the business went into rentals. To my surprise, I hit that number in nine years.

Then I tripled it in five.

That income didn’t eliminate risk—but it fundamentally changed how much risk I had to take. And on top of that, I accidently created a third stream of revenue by created a property management company.

Exit Strategy Is Not an Afterthought

When looking at a deal, there are dozens of ways to structure it. The right structure depends on your goals, your financial objectives, and the requirements of your equity partners.

Exit strategy isn’t just about maximizing IRR. It’s about how a deal fits into your broader business model:

· Cash flow vs. liquidity

· Portfolio balance

· Risk tolerance

· Long-term control

Those decisions matter far more over time than any single deal.

One final note: you will never be able to time the market. All you can do is test and stress your thesis, and execute professionally.

Anyone who tells you they can time the market is either lying—or trying to sell you something.