How we Started a Startup - Anniversary Edition (Part 2)

Here wo go for Part 2. Carmen Hawkins Rhodes helped me write an introduction to the installments, and I'm going to go ahead and go off script here and freestyle the intro. #sorrynotsorry ? Every company has challenges, but for us as a small startup the bumps in the road can turn into major problems quickly. Size and scale are huge issues - especially as you are growing. This week lets talk about how we manage clients and projects and ultimately cashflow. (If you missed the first installment last week you can find it here: (4) How we Started a Startup - Anniversary Edition (Part 1) | LinkedIn)

Clients, Payments & the Dreaded Non-Payment

Clients are clients - with all the known quantities that the term entails. We survived our first big gasp when we had a non-payment that dragged out multiple months. It hurts. It's hard. It's incredibly nerve-wracking to think about. The key to managing this is to stay resolute and know your rights as an Architect. I cannot stress this enough to anyone starting out; pay for a good lawyer (shout out to Quadros Migl & Crosby PLLC ); read, learn, and understand the Architecture Practice Handbook; and know the laws in your jurisdiction. Every Architect should be a paralegal to a certain degree.

Be creative with how you manage your client in non-payment issues as well. Make sure you understand why you're not getting paid. Not every situation is the same, and not every situation leads to the same ending. In our specific case, we had a client that was stuck in a bad draw cycle. Now on the one hand, it's pretty absurd to finance soft cost design fees for the size of project we were working on - but that's just how they did it. What we found out though, is that the client had different draw accounts for different projects, and there was one they were about to kick off but had not yet selected an Architect. We turned a non-payment situation into a business development proposition by proposing to the client that we would hold on collection on the one project provided they issued a retainer payment on a new project that covered to outstanding invoices.

In the end this was a win-win for everyone. The client eventually caught up on all payment, and we landed a significant project that was otherwise out of our normal scope of work that we might not ever have been considered for.

All this is to say, in these situations you do not need to lawyer up at the drop of a bad check or a failure to pay. But knowing the facts, writing good contracts, and gracefully navigating issues go a long way to resolving problems. This entire episode also gave us a crash course on how to be flexible and deploy key resources. Only work if you're being paid. Maintain clear communication with your internal and consultant teams to keep overall anxiety down and productivity high.?

Have a Backlog, but Don't Drown

There is a fine line between strategic positioning and outright desperation for contracts. Let me explain. Everyone knows there will be times when you'll buy a project. It's well known that to get into certain corners of the industry with little to no name recognition, you will have to give one up for a loss – or something close to it. The key here is to make sure that it's strategic. We always have to ask ourselves – are we doing this because we need to keep cash flowing, or are we doing this to position ourselves for the next one? And in most cases, the answer is YES.

Over the past two years, and it's somewhat self-serving to proclaim, we've done an excellent job deciphering when to take the job and when to pass. Do we really want to be in this market? Is this a market sector we are staffed to serve well? Or is this a one-off project that will grind someone down, and then we'll never do another?

And what about the markets we're already in? Can we really afford to take on another core business project? The answer to this one is YES. Emphatically. Another key thing here is understanding what core business and new markets are. In our case, steady growth and profitability have all been a function of pursuing, winning, and preserving our market share of our core business.

Saying yes to these key opportunities is how we grew our backlog – yep, finally getting to that point. A backlog is a blessing and a curse. I tell staff this every day (or something close to it). You never know when a project is going to start. You can plan and staff and project all you want. But guessing when a client finally signs that contract is like predicting the….stock market? President? Clouds? Insert something difficult to pick. It's just not something that you can rely on. And to that point, you never really know if or when a project will die. A project might not ever start to begin with. It might make it to the schematic phase and price out. Hell, we had a project go all the way to CDs and then die at permit. You never know. On the upside, having a steady stream of backlog helps to insulate the ebbs and flows of project timelines in a way that nothing else can.

With that being said, backlog can drown you as well. Taking on too many projects and being unable to deliver on them is just as bad. Navigating that fine line is super hard because you're trying to juggle employee burnout, profitability, and pursuit activities simultaneously.