Tags: architect passive income
Episode 175

How To Make Passive Income as an Architect with Eric Reinholdt

Enoch SearsNov 11, 2016

3 years ago, architect Eric Reinholdt started his residential architecture firm on a remote island off the coast of Maine. He faced the challenge of building a successful architecture firm and winning the kind of projects he wants to work on while also living in a remote location.

Inspired by people like Pat Flynn and Tim Ferriss' book, the 4-hour Work Week, Eric knew that he wanted to build a business that wasn't 100% reliant on the number of hours he worked in a day.

Today, you get an in-depth look at how he's built a practice that combines passive income, products, and service offerings.

This information and more you can find in his new book, Architect + Entrepreneur Volume II, A How-to Guide for Innovating Practice: Tactics, Models, and Case Studies in Passive Income.

In today's show you'll discover:

  • How architect Eric Reinholdt gets multiple income streams to supplement his architecture firm income by selling products
  • Eric's exact step-by-step morning routine that helps him maximize his productivity and make a massive impact every day
  • The interesting insight Eric discovered when he began selling his floor plans online

Go here to watch the second half of our interview on YouTube Video Marketing for Architects

Resources for today’s show:

30X40 DESIGN.WORKSHOP (website link)

Interview Transcript and Members Only Resources:

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Eric: I think you want to come up with a brand strategy, and this is what the book talks about, really figure out what your brand is. For me, it's simple, modern, residential architecture.

Enoch: Business of architecture, episode 175. Hello, I'm Enoch Sears, and this is the podcast for architects, where you'll discover tips, strategies, and secrets for running a profitable, impactful architecture practice. I'd like to invite you to discover how to double your architecture firm income and create your dream practice of freedom and impact by downloading my free, 4-part architecture firm profit map. As a podcast listener you can get instant access by going to free architect gift dot com. Maybe you, like many other architects, are intrigued by the idea of developing your own projects, like one of my early guests on this show, San Diego architecture Jonathan Siegel, FAIA. Well, today's guest has a different but very interesting, equally interesting focus, passive income. You're going to be simply blown away by today's story.

3 years ago, architect Eric Reinholdt started his residential architecture firm on a remote island off the coast of Maine. He faced the challenge of building a successful architecture firm, and winning the kind of projects he wants to work on while also living in a remote location. Inspired by people like Pat Flynn and Tim Ferriss' book, the 4-hour Work Week, Eric knew that he wanted to build a business that wasn't 100% reliant on the number of hours he worked in a day. Today, you get an in-depth look at how he's built a practice that combines passive income, products, and service offerings. This information and more you can find in his new book, Architect and Entrepreneur volume II, a how-to guide for innovating practice tactics, strategies, and case studies in passive income. Now, let's get into today's show.

Welcome Eric to Business of Architecture!

Eric: Thanks, Enoch. Great to be here, thanks for having me.

Enoch: Absolutely. Let's jump into your idea, I'm really excited for our architects to be able to listen to what you've done. I know you've been working hard for many years, and I've sort of had this little back seat view as you've developed over the time, as you've come out with your two different books. You are an advocate of an innovative business model for architects, that at least they should be thinking about, right, in terms of products and services. Tell us about this business model that you want to tell other architects about.

Eric: Yeah, well, I think this business model that I've come up with, Enoch, is something that a lot of other businesses are using today, but architects have really under-utilized it. It's something that's developed out of necessity for me, because I had lived on an island, I practice in a pretty remote part of the country, and when I opened my practice in 2013, I was figuring out, I was trying to find a way to find new clients. The internet was really an important aspect of my business, it became the hub of my business. For my business model, as I'm looking at the standard business model that architects implement is a service-based business model. Clients come, you service their needs, you build a house, or whatever the program is, and at the end of that, your relationship is over and then you have to feed the beast again. You have to find new clients. There's this constant search for revenue streams.

I thought, why not take the fruits of that labor, and also turn those plan sets into products? Instead of just looking at a service-based business model, I added products to that. The product side of the business, and the products can be any number of things: it could be books, could be videos, could be training courses, could be plan sets, there's a whole range of things. The product side of the business ends up being a sort of passive income generating system that feeds the business all the time. What I've found was when I was developing this model was that the product side of the business would start providing a constant stream of revenue, and allowed the service side of the business to be more selective in the clients that I chose. All of this had this sort of net effect on reinforcing the brand message that I was trying to develop.

A lot of architects struggle early on when you're starting a business figuring out okay, what project is the right project to take? Is this going to advance the brand message? I had a very specific set of projects that I wanted to do, and those projects don't come along every day. The product side of the business built some extra freedom and revenue into the business so that I could be more selective and I could afford to wait one or two or three months before another client, before I took on another client. Knowing that once I implemented that I started to double down on the successes that I had, and really sort of build this fly-wheel, I guess, of passive income that supports the business in so many ways.

Enoch: All right. How old is your firm, Eric?

Eric: It's, I started it in July of 2013, so I'm into my third year here.

Enoch: Relatively young firm, so three years. I know you've been going at this, been working hard on both the products and the services side. You talk about approaching your firm in a strategic, but that's something that's always impressed me about you, Eric, is your strategic focus, your ability to not necessarily jump at the opportunity, but be slow and methodical in terms of just working on the things that you know are going to get you to your end goal. Is that a personality trait? That's not something that I think us as humans, we don't really have long-term vision, so tell me what's behind that viewpoint and that personality trait that you have.

Eric: Yeah, that's interesting. I guess it's just, I've always been someone who is driven by goal setting and sort of list-developing. I have a very set routine that I follow every day and every week. Say on Sunday, I'll set out the outline for the week, and those strategic goals are set early in the year. Then I re-visit them every quarter. I think architects by nature are planners, and certainly that's a personality trait that I've relied on to be successful in my architecture business. It's something that I've found in my, as I look at this from a business standpoint, it's something that if you have this framework to fill in and really a model to rely on, that you end up getting much much further in the business. I just relentlessly execute on a series of goals. I find that divvying it down into quarterly and then weekly goals, and then daily goals, even, I'm able to just continually plow through things.

You know, I don't, I guess I really enjoy testing things. I'll try something and there's a weekly goal of trying a new thing every week. I'll try it, I'll experiment with it, I'll see what's working, and then I'll whatever's not working, I'll pivot and try something new. It's this process of continually, not trying to optimize for perfection, but just trying to execute and see what works. I think so many people are afraid to put ideas out there and they're afraid it's not going to be accepted, and I am not like that at all. I would rather put something out there, test the sort of minimum viable product, and see what's working, and learn from the things that aren't working, and pivot to the next thing. I think having a framework for where I want to be at the end of the year and then being able to divvy those goals up into quarterly and monthly and weekly goals is something that's helped the firm really build, you know, quickly. As you said it's a pretty young business.

Enoch: Tell me about your daily routine, that's something that I've been thinking a lot about lately.

Eric: Sure, yeah. It starts with getting up really early. I get up at about 5 AM, and I'll do an initial writing hit. I have, there's kind of weird routines, obviously I have coffee, but then I also try and follow the Tim Ferris, like eat 30 grams of protein, like straight off. I'll move from the writing routine into a- I sort of divide my day into executing sort of making in the morning, and managing in the afternoon, so I'll make all the things I'm going to be making, producing, that all happens in the morning because that's where my creative energy, where my best creative energy is. I don't even tap into emails until the afternoon if I can help it.

I'll sort of schedule late morning for meetings and things like that, and then in the afternoon is really about managing the projects, because I do have this product side of the business, and that gets creative focus, some of my best energy's in the morning, and then there's also design work that happens for the service side of the business. That happens in the morning, and then the afternoon is all the managing of those projects, because as you know, that takes some time too. Meetings and things like that are pushed there.

The routine, that's just the basic framework of the routine. I always, the mid-day shift there, I always exercise. That's been a really productive thing, so I'll listen to podcasts and exercise at that time. It sort of divides those two halves of the day and provides a sort of boost for the afternoon sessions too. Then obviously, and you have kids, Enoch, so you know the late afternoons are taken over with kid duties and things like that. Then I try and have a sort of learning time at the end of the day, so I'm taking a master class right now from Vernor Hertzog on filmmaking, which is something that I'm really interested in, so I try to end the day like that, so I have this learning boost at the end of the day.

Enoch: That's fantastic. You've been very intentional about creating your life. One thing that's come up as we've just chatted right now, Eric, is you talking about pivots. You mentioned some big successes, you mentioned some failures. I'd like to talk to you about how this vision has changed since you started out three years ago. Let's get into the weeds and let our audience know what this is really like and what it takes to create something like this.

Eric: Sure, yeah. I talk about this in the book quite a bit, because I had this vision when I'm, I think a lot of architects are like this, that if we're thinking about making products, the first thing that comes to mind is plan sets. There's a lot of architects who actually do that. That was a sort of easy first task for the business, like let's come up with some plan sets. I had designed a house for myself, and it was a dwell houses we love finalist. It had a lot of popularity, so I thought, okay, I'm just going to take this and I'm going to sell this. It wasn't just the floor plans, it was the whole shebang. I wanted to sell all the details, and as a custom residential architect I'm thinking okay, this should be 10, 12 grand for a set of really nice drawings. I realized pretty quickly that yeah, people aren't in the market for buying a house that's going to cost 350, 400 thousand dollars. They're not in the market to spend that much on their floor plans. They're not going to do it.

I reduced the price to 2500 dollars, and I thought, okay, that's reasonable. That's probably as low as I'd want to go for that plan set. What I learned there was people aren't really willing to spend that much, either. I ended up sort of price pulsing this plan set up and down, really trying to find a market for this thing. I would say that was a pretty big failure. I say in the book it took about 200 days, but I finally sold that plan set. The day that I sold that plan set I'd sort of talk about this exactly what my revenue was that day from passive income. The plan set, it sat on the site for you know, 200 days. I sold it for $2500, I had some affiliate income there, I had some advertising income, and other digital products that I had started to develop at that date. It all sort of coalesced, and I looked at this and I said okay, there is something here. There's something that's working. The sort of little pieces of passive income along the way were pretty small, but the ones that started to build momentum over time and really started to double down on.

Something like YouTube now, that's been a really important part of the business and is something that I've used to then direct people into my email list and then sell them plan sets that way. I've really started to throw these little seeds out there and then watch which ones sort of grew as I was watering them. The ones that grew, I could learn from their successes. Okay, this is how it works. I could sell a plan set not for $2500, but I could sell a plan set for let's say $500. Pretty basic plan set. Then people would say yeah, but I need this, or I need that, I also need this. I took that and I learned from that, and I said okay, well there's a separate service for that.

If they ended up being a good target client, and I looked at the plan set that I was selling them, of course it's my architecture, I know they're into my architecture, they like this, let's work together. We start developing a working relationship, and then suddenly that passive set of a plan set turns into a fully customized solution. Okay, we're going to add a garage. Now we're going to add a guest house. We're going to take all these things. I realized, oh, there's all of these other products. I could take a $500 plan set and I could turn it into a $12,500 commission by just attaching these little pieces. People would buy things along the way. People were really accustomed to buying products, so if I put it out there and said this product's 500, and then the consultation is 1500, and then there's a set of specs for 2500, suddenly people are like oh yeah, okay, yeah, I've made it this far. I can, yeah, I'll buy that. I need a window schedule? Of course, yeah, I'll buy the window schedule.

All of these things sort of by experimenting I've found a way forward with it. You know, it's strategic, I guess, looking back on it, but it's more a series of sort of little pivots and relentlessly executing on those little ideas.

Enoch: If there are architects out there who want to monetize their plans, for instance, what advice do you have for them?

Eric: Well, I think, you know, it really… I think you want to come up with a brand strategy, and this is what the book talks about. Really figure out what your brand is. For me, it's simple, modern, residential architecture. The brand is focused on drawing inspiration from Egrerian forms, barns, grange halls, real simple forms. A lot of people come to me because of looking for a main architect for those reasons. The brand works pretty well for my business. In order to have the plan sets make sense and these up sells make sense, I think you have to really craft them to be brand specific. I have very, there's a sort of branded up sell that these plan set customers get.

It's really well thought out, and it really marries well with the vision of the plan set. These are, they're simple plans, so the plumbing fixtures schedules, the up sells for the door package, the up sells for the window package, the interior fit out, those things, they're all finely crafted to support that brand message. That would be my recommendation. People can go to these plan set warehouses and buy a generic plan set, but as an architect, we're taught to think about these things on a much higher level, on a much deeper level, and so there's so much value that we can bring to this. There's all sorts of up sells that I could think about that I'm not even really capable of doing, you know the sort of passive house up sells. California, you guys, you have insane energy codes. It's great you're leading the nation, but there's all sorts of up sells that you guys could bring to the plan sets, so really thinking about it from a critical, with a critical mindset, like what would my clients need? What would these people need? What's the next logical step? Then sort of build on that to support your brand.

Enoch: What would you say to architects who may be thinking, Eric, it sounds like you're commoditizing the profession? It sounds like you're commoditizing your design by selling $500 plan sets.

Eric: Yeah, that's a pretty common complaint coming from architects. You know, my response to that, it generally is somebody's going to be providing services. There's a need in the marketplace, so people need homes, and I feel like architects are best positioned to design those homes. Not everyone is going to be able to afford a luxury, custom residential service that I provide. I feel like having a product side to the business really acknowledges the fact that people aren't going to spend, you know, 20, 30, 50, 60, some of my clients will spend over $100,000 in architectural fees. I couldn't afford that personally, and I'm guessing you probably couldn't afford that personally, but you deserve to live in an architect-designed home, too.

I feel like there are some compromises that are made. Obviously I can't design a home that's site-specific, if I'm selling a $500 plan set, it's going to be generic in a lot of ways, but I can make it really energy efficient. I can make the plan work. I can give people a functioning home for what is going to be probably the largest investment in their life. It's something they deserve, rather than having a contractor design it on a napkin or purchase something that from a modular home company that isn't well thought out. I mean, I have some neighbors who purchased those things because they couldn't afford to work with a designer. I see the result of what they live with. I mean, they spent as much money on their home as I did, and they can't furnish their living room because of the way the circulation works. As architects, we can plan the circulation so it makes sense, so you can furnish it, so you can get a lot of natural light, so you can save a lot of energy. You know, I don't think this is for everybody necessarily, but I do feel like architects have a responsibility to people who are buying homes, to provide them with other options.

Enoch: I think we're going to focus a lot on the product side of the business during the interview just because that is something unique about that. Tell me, where does the revenue split happen? Talk to me about the revenue right now in your business, services versus products.

Eric: Yeah, so services account for probably 65-70% of the income of the business. You know, 30-35% are coming from products. One of the really interesting things that I did, and I just finished my studio here, Enoch, I wanted to use it as a case study to sort of prove to people that passive income can be a real significant portion of a firm's revenue stream. What I did was as I designed the structure, you know, it's not a huge structure, it's like 12 by 32, so it's close to 400 square feet here. I have a couple little loft spaces. It serves multiple purposes. For a small footprint, what I did was I wanted to take all of the passive income and have the passive income build the studio alone. Solely. As I was sitting in my house, you know, my firm is, it's pretty young, it's three years old, but I was also getting to the point where clients would come in and they'd have to sit at my dining room table. You know, I was kind of outgrowing it. If you're asking someone to spend $100,000 on your fee, you'd probably need a formal space for that.

As I'm sitting in my drafting, at my drafting table in the corner of my living room and I'm watching the construction of the studio take place, I was sort of tracking the passive revenues versus what I'm spending each day. I'm looking out and I'm seeing 2 guys working and they're framing, I'm like, okay, it's going to be, that's X amount of dollars here. Okay, what have I made in passive revenue? The entire studio build was completely financed with passive income. It really is possible, and I think as I get larger commissions, that percentage of the product side of the business is probably going to go down, or if I scale and hire more employees, then it's possible that that math is going to change. I am always developing new products, and it's something that has been really successful for me. I do see it growing with the business.

Enoch: You're very… You strike me as a technical person. You have some great design strengths and then also you've been able to monetize YouTube. It seems like you're pretty handy with these new technologies. I've been hesitant myself because obviously I have passive income streams and I'm kind of following a similar path. However, I've been very hesitant to recommend that to other architects, Eric, just because I feel that unless they have those skills and they really know how to navigate that, it would be very difficult for them to make it work. I haven't done a productized architecture business like you have, so I'm just curious to know realistically, person to person here, for the average architect who wants to, you know, that sounds appealing and they want to go down a similar path, is it even possible for someone who may be a more traditional architect and isn't up on all the latest tools, technology tools, Cloud-based tools, up sell strategies, things like that. What do you think about that, Eric?

Eric: Yeah, I think, I mean, it's a good point, Enoch, but I also think that the tools of technology have really become democratized. If you look at the platforms just for online coursework, they're being made so accessible now. You could, as an architect, record a course for Teachable very simple, with very little technical knowledge. You could write a book. I mean, if you could draft a set of plans, the technology is totally accessible. Yeah, you may not be able to produce a high-quality video, although I would argue that even because iMovie and Final Cut Pro, these are drag and drop tools, but let's say that's too intimidating for someone. Writing a book is, it's really sort of, it's been democratized by the platforms that are out there. I mean, you can drag and drop a book template into iBooks or Blurb, I mean, you can drag and drop photos in there and make your own monograph and sell that, and reap all of that passive income very simply.

I realized there are some technological barriers, barriers of entry, but I actually think they're really low once you get into it. I'm not suggesting that everyone would necessarily adopt all of these productized, you know, ideas that I have that I'm using in my firm. You know, I certainly don't. I don't have a course out right now, I mean, I'm interested in doing that, but there are, the book that volume II of Architect and Entrepreneurs presents a model of possibilities. People can pick and choose the things that they feel are most appropriate to their personalities, and I do feel like given the range of products that I point out, I think there's something in there for everyone. Certainly plan sets are, that's a no-brainer as far as I'm concerned.

Then the up sells on that are energy audits and programming consultations and there's interior design services, so there's a way to take the product side of the business, even with a really simple product, and convert people from the product side over to the service side. I feel like that's a great pathway. If we were talking about a revenue split, so the 30/70 revenue split, you want to try and get people over to the service side of your business so you can sort of hold their hand and help them through the process, and that's, you know, that's a lucrative side of the business, that's undeniable. I'm not suggesting to reject that altogether, but there is a way to take the clients that you're getting and sort of shuttle them into the service side and make a better business.

Enoch: Where would you recommend architects get started on finding out more about this?

Eric: Of course my book. I mean, that's the number one. Actually I've tried to make both the books that I've written, volume I and volume II are complimentary. Volume I is more of the inspirational, like I want to start my firm, and tackling all the steps along the way. The mindset issues, and then there's practical business, you know, organizational strategies and marketing and those things. Volume II really gets into all the pivots that I made to that initial sort of blueprint, if you will, of the business. Volume II is really a tactical guide that says okay, if you want to get started, really making a business that builds on this brand revenue strategy where you have a product side and a service side these are the things that you can do. The chapters, it starts off with a broad brush approach, painting the strategy, but then each chapter is a sort of technical focus. Okay, are you interested in courses, are you interested in writing books? Are you interested in developing your Youtube channel? It takes each one of those steps and breaks it into a smaller sort of series of steps.

There's one chapter in there called Making your first $100, and it walks you through the process of what it would be like to develop your own product, where you start. You're going to look at a market, you're going to look at a niche, you're going to try and solve a problem. Then you're going to pre-sell it. There's sort of four steps there, but it walks you through getting that first $100, and it's those steps really that build the framework for applying this to any one of those productized models. You can take those four steps and build any one of the other products that I list in the chapter. I do feel like it's a resource, a good resource, and it's sort of the only resource, I think, printed resource, that's out there specifically directed at architects, interior designers, and designers.

Enoch: Absolutely, and I highly recommend Eric's content is fabulous. I can't recommend it enough. I did kind of open up that question hoping you'd tell us a little bit more about the book, inviting us to go check it out. Obviously in the show notes we'll have a link to those resources, if you visit Business of architecture, the actual blog, the site, Eric, just for people listening here, what's a URL that you want to send them to? It's a no-brainer. Even if an architect has been doing this for years and years and years, they have a lot to learn from what you're sharing here. Where should they go?

Eric: 30 by 40 dot com is my home on the internet, and that's the sort of hub that I'm really developing. You'll find access to all the other channels in my YouTube channel and things like that. You'll see the books are on there, so 30 by 40 all spelled out dot com.

Enoch: That is a wrap, thank you for listening today. If you're looking for more time, freedom, impact, and income as an architect, get instant access to my free four-part architect profit map by visiting Free Architect Gift dot com. The sponsor for today's show is Arch Reach, the client relationship management tool built specifically for architects. If you want to systemitize your marketing and business development, Arch Reach will help you do it. Visit Arch Reach dot com to learn more.


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Enoch Bartlett Sears is the founder of the Architect Business Institute, Business of Architecture and co-founder of the Architect Marketing Institute. He helps architects become category leaders in their market. Enoch hosts the #1 rated interview podcast for architects, the Business of Architecture Show where prominent guests like M. Arthur Gensler, Jr. and Thom Mayne share tips and strategies for success in architecture.


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