The State of Small Architecture Firms

Key Insights from the Q3 2024 EntreArchitect Business Pulse Survey

Small architecture firms are the backbone of our profession, but for too long, they’ve been underrepresented in industry-wide analyses. That changes with the EntreArchitect Small Firm Business Pulse Survey and Report, a quarterly initiative designed to provide insights specifically tailored to the challenges and opportunities faced by small firms.

In partnership with Archmark, this survey introduces the Business Pulse Index (BPI)—a new benchmark for tracking small architecture firms' economic health and performance. Here’s what we learned from the inaugural Q3 2024 survey.

Key Findings

1. The Business Pulse Index (BPI)

The Q3 2024 BPI debuted at 57.8, signaling moderate optimism among small firm architects. A score above 50 reflects positive sentiment, with stable billings and increasing project inquiries driving growth for many firms. However, challenges such as cash flow variability and demand fluctuations remain prevalent.

What does this mean? The BPI provides a vital benchmark to track trends and forecast economic conditions. As it evolves, the BPI will help small firms benchmark their performance and confidently navigate economic cycles.

2. Lean Staffing Models

Small firms are resourceful, operating with an average of 3.5 personnel, including full-time employees, part-time staff, and independent contractors.

• 44% of firms operate with just one full-time employee.
• 18.4% have no full-time employees, relying entirely on part-time or contract staff.

While this lean structure offers flexibility, it presents challenges in maintaining team cohesion, scaling operations, and managing consistent project quality.

3. Business Process Effectiveness

The survey evaluated six critical business processes: Leadership, Marketing, Sales, Services, Operations & Overhead, and Cash Flow.

• Leadership & Services: Many firms excel in setting clear visions and understanding service profitability, with 64.8% rating their profitability tracking as moderate or strong.
• Sales Processes: Only 38.4% rate their sales process as effective, with many struggling to qualify prospects and close deals.
• Cash Flow Management: Variability remains a concern, with 11.2% of firms rating their cash flow management as weak and 20% rating it very strong.

Regional Insights

Economic health varies across regions:

• Pacific and South Atlantic firms reported high confidence, fueled by increased project inquiries and demand.
• Mountain Region firms showed mixed results, with urban areas thriving while rural markets faced slower growth.

These trends highlight how geography influences opportunities and challenges for small firms.

Why This Report Matters

The EntreArchitect Small Firm Business Pulse Report fills a critical gap by providing consistent, reliable benchmarks for small firms to track their economic health. Here’s how it can help you:

• Track Trends: Understand how your firm aligns with broader industry patterns.
• Anticipate Challenges: Identify risks like cash flow instability and prepare accordingly.
• Benchmark Performance: Compare your firm’s metrics with those of others of similar size and structure.

What’s Next?

We’re committed to making this report a cornerstone for small firm architects. The Q4 2024 survey launches in January, and we invite you to participate. By contributing your voice, you’re not only helping shape a vital resource but also receiving actionable insights to grow your practice.

?? Sign up to participate in the next survey here.

Those who missed this report can still access it.

?? Purchase a copy of the full report here.

Together, we can strengthen our community, shape the future of small firm practice, and thrive in a competitive market.

What challenges or successes are you seeing in your firm? Let’s discuss this in the comments!