Carta vs Forge For A Commercial Architecture Studio

The studio's founder, a licensed architect, held sixty percent of the firm, with three principals, two licensed architects and one non-licensed business operations lead, holding the remainder. The founder wanted to sell down to twenty percent over three years while staying involved part time, and the principals needed to figure out how to fund that transition. None of them had been through a founder transition before, so the first step was simply agreeing on what questions to ask.

Under the firm's state licensure rules, non-licensed ownership was capped well below what an outside institutional buyer would typically want for a meaningful stake, and structuring around that limit for a single founder transition felt like more legal complexity than the situation warranted. The principals also worried, reasonably, that an outside buyer's diligence process would expose the firm's project pipeline and fee structure to parties with no long-term stake in protecting that information. Weighing the legal complexity against the size of the transaction, the principals concluded Forge would have cost more in advisory fees and time than it could plausibly have saved.

The three principals, backed by the firm's cash reserves and a modest bank line, funded the founder's buyout in three annual tranches through Carta, with each tranche's price re-benchmarked against an updated appraisal to reflect the firm's performance that year rather than locking in one number for all three payouts. This kept the transaction inside the existing, license-compliant ownership group throughout.

Midway through year two, the bank line the firm was counting on tightened due to a broader commercial lending pullback, and the principals had to renegotiate the year-two tranche size downward with the founder rather than default on the payment schedule entirely. The lesson the firm took away: build a lower bank-financing scenario into the original plan rather than assuming credit availability would stay constant across a multi-year payout. The founder, to her credit, treated the renegotiation as a normal part of a long-term plan rather than a broken promise, which the principals attributed to having been transparent with her from the very beginning about the financing assumptions underlying the schedule.

A multi-year, internally funded buyout through Carta works well for a licensed design firm's founder transition specifically because it avoids the ownership-rule and confidentiality problems an outside buyer would introduce, but it requires realistic, conservative financing assumptions rather than optimistic ones. Model at least one downside financing scenario before committing to a payout schedule, and revisit pricing at each tranche rather than locking in a single valuation years in advance.

Firms considering a similar move should plan for these points:

• Model at least one downside financing scenario before committing to the tranche schedule, since a bank line can tighten mid-payout.
• Re-benchmark each tranche's price against an updated appraisal so payments track the firm's performance rather than one locked-in number.
• Start the succession conversation early enough to build a cash reserve before the first tranche comes due.
• Treat the founder's remaining stake as a separate governance question and revisit it annually at a partner meeting.
• Recognize that a multi-year internally funded plan strains cash at a larger studio, and plan for a bigger reserve or outside capital.

Asked afterward what they would change, the principals said they would have started the succession conversation at least a year earlier than they did, since the compressed timeline left little room to build the cash reserve properly before the first tranche came due. They also said re-benchmarking the price each year, while more administrative work than a single locked-in number, was the single decision they were most glad they made once the bank financing tightened.

The founder's remaining twenty percent stake, which she planned to hold for several more years while stepping back from day-to-day project leadership, was left untouched by the transition rather than folded into the same buyout mechanism. The principals treated her ongoing stake as a separate governance question, revisited annually at a partner meeting, rather than assuming the succession plan needed to resolve every ownership question in the firm at once.

This three-tranche, internally funded approach worked well for a firm with three principals and predictable project revenue, but a larger studio with a dozen or more equity-holding staff would likely find the cash strain of funding multiple simultaneous transitions unmanageable without either a much larger reserve or outside capital. Larger licensed design firms considering a similar transition should model the internal funding capacity question explicitly before assuming the same playbook scales. Before adopting a similar plan, ask how many equity-holding partners are likely to seek liquidity within the same rough window, not just the one currently planning to retire; a firm with several partners approaching retirement around the same time faces a very different cash math than one managing a single, isolated transition.

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