So you've decided you're going to take the leap and start your own architecture business. You've got some savings, a few leads or maybe even some contracts and you think you're ready. There are many things for you to think about when starting an architecture firm all of which involve money so where do you start?
Determine where you're going to work and if you're working on your own or with someone. Do you have the space in your home to have a home office or will you need more space for all those drawings? If you're going to need more space, think about using a co-working space first to keep costs low before getting into a 5 year rental. If you use a co-working space, consider who else is going to be working in the space - what kind of clientele does it have? Will there be opportunity to grow your business through new connections here? All of these things can help your business grow at the beginning
Set up a company bank account AND a savings account for your company. Start getting paid through your company bank account right away to keep your income from your company separate from your personal account. Same thing goes for expenses - trust me - when you have to go through all your costs at the end of the month, this will make things much less painful. In addition - yes you’re just starting out but transfer 20% of everything you make and move it into your savings account. This will help at the end of the year when you’re paying taxes (you now have to do this since you're self employed). It can also act as an emergency account if needed.
Get a separate credit card. Same idea as above, you want to keep all your business expenses separate from your personal expenses. If you can’t get one for your business then get one personally and dedicate it to business expenses. If you can’t get more credit - you can request that a portion of your current credit card limit be transferred over to a new credit card.
Make yourself a budget! How much do you think you’ll REALISTICALLY make a month and break your budget down by month. Being realistic will reduce stress and help you make better decisions. You should split this based on what phase your projects will be in. Usually you will have a ton of fee at the beginning of the project and it will taper off towards the end when you're in the CA phase. This will help you determine when you can ramp up on another project and plan out your income.
Get an accounting software, some options I’ve like include quickbooks online, xero, kashoo. This will help you keep everything organized and your first year end will be much less hectic. In addition, software will allow you to allocate income and expenses to a project making it easier to see how a project is doing. If numbers just aren't your jam... hire a bookkeeper - see my post about reasons to hire someone and what to watch for here
Keep track of your receipts! This one is a biggie - you’ll be able to claim your GST (once you've registered for an account) and also have backup if you ever get audited. I usually recommend to sort your receipts based on month and year. If you have physical receipts, put them in an envelope with the month and year on it and throw it in an accordion file. If they're electronic - put them on the cloud in the same file format. Just remember which receipts you've filed and where.
Figure out how much money you need personally per month. The last thing you need is to randomly be transferring money to yourself or worse, realizing its the end of the month and you don’t have enough for your rent/mortgage! This can be incorporated into your budget and allow you to see how much cash flow you need to pay yourself and stay afloat. A good place to start is to see how much you made in your last job per month and see if that was enough to stay afloat.
Need help getting that initial budget or accounting software set up? Please reach out and I'd love to chat about how I could support you.