It is hard to believe 2016 is here. I always get excited about the beginning of a new year – I look at it as an opportunity to start over, correct the mistakes of the past and achieve some of the goals that eluded me in the previous year. For most of our clients, 2015 was a good year for business. We saw a growing number of projects, expanding revenues and larger backlogs than we have seen in a long time. But with growth there are also challenges – a war for talent, increasing competition and with it, a resulting increase in salaries.
More than ever we need to be innovative, efficient and run our businesses smarter than our competitors. We face many unknowns for the future including declining energy prices, fall elections and continued technology advances.
Every year I attend 8 to 10 industry conferences in order to take the pulse of the industry, as well as understand the challenges that our clients face. Based on this last year and various expert’s predictions for 2016…
Here are my top 10 recommendations for how your company can make more money in 2016:
1. Spend more time on the front-end of your projects
One of the issues I see in a lot of firms is spending a lot of time on the proposal but not the estimate. Really understanding your clients’ needs, requirements and desires is the key to not only winning, but ensuring a successful project. It is impossible to do a great estimate without a detailed requirements analysis. I recommend taking a hard look at your discovery process and determine if there are inconsistencies or lack of detail. Rushing through this process can cost a lot more on the back end of a project when things go wrong or unexpected requirements pop up and require unwanted change orders.
2. Give your clients more options
If you go back and look at all the change orders you have had to initiate over the last few years, how many of them could have been anticipated? Clients don’t like change orders so your ability to foresee their “unexpected” requirements before they do will make you seem much more in tune with them and can possibly add to higher fees in the beginning. Take some time to review those extra services that consistently crop up during projects and offer them as options in your proposals. This will help reduce stress later on and clients will appreciate your forethought as they plan their budgets.
3. Get your leaders on the same page
One of the biggest challenges I see every day in A&E firms is a lack of consensus at the leadership level. This can lead to issues with inconsistent messaging to employees, as well as failure to achieve the company’s goals and vision. This becomes a major sources of stress to everyone in the organization, and will affect financial performance as well as employee retention. Your ability to get agreement among your top executives is one of the key factors to maximizing your firm’s success. If the leaders don’t agree how do you expect your teams to function optimally? If your leadership team is struggling with agreement on direction and culture, a coach can help you get on the same page and learn how to work together more effectively. Leadership is the single most important factor in an A&E firm’s success, and may require regular fine tuning to keep everyone in sync.
4. Develop a client retention plan
We have all seen the statistics that it takes 6 times more money to win a new client than to keep an existing one, but many firms don’t strategically focus on how to retain their best clients or get more work from them. A client retention plan can help you outline specific actions that leaders and managers should be taking on a regular basis to better communicate with clients, improve relationships, and look for ways to get more work from current clients. The plan should focus on the firm’s top 20% of clients, and determine frequency for face to face client meetings, online communication, as well as best practices for post-project follow up and debriefing. Maximizing the long term value of each client should be a top objective for 2016 as competition increases and clients have more options.
5. Revamp your performance management processes
As the war for talent gets harder and more expensive to fight, it is critical to retain and reward your top performers and ensure that all employees are maximizing their potential. My research shows that an annual review is just not an effective way to ensure top performance, and more frequent communication, two-way feedback and measuring systems are much more valuable methods of appraising performance. A good performance management process should include a regular rhythm of meetings, clearly defined goals and metrics, and well thought out incentives, or other consequences, for hitting or failing to achieve individual targets.
6. Teach your people how the business runs
Most technical professionals are oblivious to how your firm makes a living, and dollars are being lost every day due to inefficiencies, failure to follow processes, or lack of focus on the bottom line. Much of the undesired behavior is rooted in the culture of the firm, and takes an intentional focus to change. I recommend a program of training combined with discussion, and implementation of a performance management process as outlined above to focus on specific behavior changes that can lead to improved financial results. Your employees are your greatest asset and teaching them what your business needs to grow and thrive is key to seeing improved overall profitability.
7. Develop a sales process
If you rely on seller-doers to close business, it is critical to measure the effectiveness of their sales activities. Many technical staff are involved in pursuing new business with no training, process or accountability, leaving sales results mixed and unpredictable. The key to a good sales process is documenting where leads come from, and prescribing how each type of lead should be managed. Using a good Client Relationship Management (CRM) system (see below) will make a big difference in providing controls, visibility and accountability. The last thing you want is precious opportunities to fall through the cracks and a documented sales process, along with training, can provide the needed guidance your technical experts need to ensure a higher win rate.
8. Ask your employees what you can do better
Your employees work every day to bring in business, execute on projects and keep clients happy. The quality of your people, processes and systems can make a big difference in both their effectiveness as well as the ultimate profitability of your work. However, if you have multiple locations and employees start to develop their own ways of doing things, you may be losing potential revenue. I recommend asking your employees their perceptions about your business management effectiveness so that you can focus on where improvements can make a positive difference. There may be many areas that you feel need to be addressed to improve operational effectiveness and profitability, and your staff can provide amazing insight as to where they may be struggling with accomplishing their goals and maximizing their performance. A Business Management Assessment can be an eye-opening tool to gain this type of insight and learn where investments in the business can really pay off.
9. (Finally) Implement your CRM
A CRM system is an automated tool that helps your marketing and sales staff better manage opportunities, proposals and client relationships. Many firms struggle with getting their CRM up and running and give up. Implementing a CRM can be a great competitive tool, but may require special expertise to implement effectively. Having an effective sales process is the first step, and along with sales training, the CRM system will help you ensure that leads are tracked effectively, clients and contacts are managed and sales pipeline and results are visible to the firm’s leadership.
10. Sell on value, not price
The commoditization of the A&E industry has forced many firms to bid on projects with low margins, setting them up for potential budget overruns, and low or negative profits. The key to eliminating this trap is to ensure that you are selling your services based on the value you bring to clients rather than just the price. To move your firm in this direction requires a concerted effort to find better clients, educate your management team that are developing your estimates, and a clear message as to where your firm adds value to projects. I recommend you interview your staff and try to dissect some of your most successful projects to understand where you may have saved a client money. You can also interview some of your best clients to understand why they would be willing to pay more to have your firm rather than the cheapest consultant available. By looking for ways to focus on your firm’s unique expertise and value, you can move away from unprofitable clients and projects, and help boost your firm’s profitability.
It is looking like 2016 will be a very good year for the A&E industry, but just having higher revenues does not ensure higher profits. A more strategic approach may be in order and stepping outside of your comfort zone can prove to be a great competitive move.
What resolutions did you make this year that will help your firm improve employee performance and increase profits?
Cash is King Webinar
Managing Cash Flow in a Down Economy
Date: Wednesday, August 19th, 12:00pm ET
The average days to collect cash in the AEC industry is between 60 to 120 days. In this web training we will examine the complete project lifecycle to understand how cash flow can be increased when the economy is uncertain. Participants will gain valuable tips to improve cash flow by improving timesheet practices, reducing the billing cycle, and improving client relationships and collection practices.
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