Like a farmer who needs to invest
in a seed to grow a plant, businesses need to invest money before they can
start picking up any winnings. This is the money that you need for renting an
office space, registering your company, paying for electricity, buying office
equipments, marketing, etc. These are the expenses that you need to incur in
order to generate income in your firm.
Architects often consider that as their business is not as capital intensive as other industrial businesses, their knowledge of the field will be enough to start their own practice. Due to this reliance on only their technical knowledge, most architects begin their firms by applying their personal savings and do not do any prior financial planning. When the business rolls down, they frequently discover that there is not enough money to continue the day-to-day operations and face a panic situation.
Architects often consider that as their business is not as capital intensive as other industrial businesses, their knowledge of the field will be enough to start their own practice. Due to this reliance on only their technical knowledge, most architects begin their firms by applying their personal savings and do not do any prior financial planning. When the business rolls down, they frequently discover that there is not enough money to continue the day-to-day operations and face a panic situation.
Therefore, understanding your
capital requirements before starting your firm is of crucial importance for
building a sound and sustainable business. From my experience, I suggest
that you carefully plan following three types of capital needs:
- Capital required
prior to start-up (initial capital):
For example, the costs of
registering your company, obtaining the licenses and permits, finding and
establishing an office space, purchasing office equipments, etc.
- The capital
required for ongoing operational activities (working capital):
For instance, the costs of
administration, marketing, operating your office equipments (such as computers,
printers, etc.), employing and retaining staff members, paying for utilities
(phones, electricity, internet /communications), etc.
- Capital required
to cover living expenses:
If
you are a one-person firm or a group of partners, calculating your personal
expenses is critical. You do not want to execute a business because of which
you experience difficulty paying your own house rents. Carefully examine how
much money you will need to maintain your lifestyle and make provision to
acquire that money before starting your firm.
Our template for ‘Sample Business Plan’ gives an idea of how you can organize your
calculations and identify your capital requirements.
Other related articles:
- Business
Planning for Architects
- Do
ARCHITECTS need money?
- HOW
not to MISMANAGE the money?
- Factors to consider while calculating architect's fees
- Marketing
for Architects
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