Profitability

The Three Biggest Challenges to Fast Growth in the A&E Firm (and what to do about them)

We waited ten years for business to be booming again, and now that it is, most of our problems have gone away, right?  In reality, we just have different problems, and for some firms, more problems. That is because as we grow and add more people, offices, services, clients and projects, we have so much more complexity to deal with, and potentially more risk. This can lead to a feeling of chaos. Even with a solid infrastructure in place it can feel like it is broken when everyone is moving 100 miles an hour all the time.  Recent industry financial surveys show that the average firm is growing at a 10% increase in revenue per year, however profits are leveling off. This is because salary and benefits costs are increasing faster than fees.       Most firms have revisited their strategic plans in the last year, recognizing that changes in technology and competition are driving a more strategic and streamlined approach to running a profitable A&E firm. Recent assessments we have conducted with executives of small, medium and large A&E firms have identified the following three issues as the primary sources of stress, and … Continued

How to be a Top Tier A&E Firm

The majority of A&E firms will concur that 2017 and 2018 have been stellar years for the industry.  Opportunities have been abundant, and economists are telling us that it is likely that the momentum will continue into next year.  With this high volume in the AEC industry, profits are up and we know from industry survey data that the current median profit percentage across all A&E firms in the last year has risen to about 15% depending on your size and geographic and industry markets.  This means that half of all A&E firms have profits below 15% and half are above 15%. In fact, the top 5% of A&E firms in North America are at 30% – we refer to these as the Top Tier firms. Our mission is to help our clients maximize the potential of their teams and achieve this status in their specific niches.      With these higher profits it is easier to attract and hire the most talented team, grow faster through acquisition or organically, and give shareholder and employee owners a much higher level of return.  What is keeping 95% of the firms in the market from achieving this top tier status?  We have researched and assessed over a hundred firms … Continued

QK Finds Lost Dollars with Profit-Enhancing Employee Development Program

“While I have always been concerned for the client, the company, project performance and profits, as an engineer my focus has always been on the technical aspect of the work. This focus on quality and technical excellence will never change. What has changed, however, is my behavior and focus on how the technical discipline and the project management disciplines are inextricably tied. By changing the way I look at and value project management, I am helping my company serve our clients better AND Find Lost Dollars!” – Lisa Wallis-Dutra QK, originally Quad Knopf, has been helping clients build great communities and healthy environments for more than 40 years. Based in California and founded in 1972, QK was built on five distinct areas of expertise that work together to make the built environment possible. Their creative professionals specialize in engineering design and construction management, survey and GIS, urban design and landscape architecture, biology and environmental permitting and planning. Issues affecting low profits and stalled growth In early 2017, the executives at QK realized that their strategic purpose, “one connected team, working in partnership, to make the … Continued

10 Strategies to Boost Employee Retention

The number one challenge stated by our clients right now is hiring and retaining employees. Because finding experienced employees is so difficult in the A&E industry, many firms are getting creative with their compensation plans, benefits, profit-sharing and other tactics to engage and retain their existing client. What Does it Cost to Lose an Employee?  Statistics show that losing an employee costs the average employer about six to nine months salary. For a $50,000 person that is about $25,000 to $37,500 for one person. And in fact, it can cost over 200% of salary for an executive level person.   These figures are mostly based on finding, replacing and training the new employee, however there are many other hidden costs such as:  Decreased client satisfaction  Employees taking clients and other employees with them  Ramp-up time to get the new person up to speed  Project issues and rework due to loss of continuity and teamwork  Loss of staff engagement  Having to turn work away due to lack of capacity  Losing the employee’s knowledge of clients and projects  Obviously, this is a huge expense that most firms want to avoid, yet many firms are still finding that the average tenure … Continued

10 Dirty Secrets of the Best A&E Firms

The Architecture, Engineering and Environmental industry is as hot as it has ever been in my 30-year tenure, yet even when work is booming, I still find even the best A&E firms struggle to meet targets in any given month, quarter or year. So many factors impact the success of a firm, including some institutional “dirty little secrets” that plague the firm’s growth, retention and profits. These are the bad habits, cultural discretions and unintentional results of focus on fast growth causing leaders’ sleepless night, and employees’ endless frustration. If they exist, they are also undermining the future success of your firm by eroding client confidence and loyalty, handicapping your best performers, and deteriorating your firm’s great reputation and ability to invest strategically. What Can be Done to Clean Up the Dirty Secrets? While fixing these problems is not easy, it is critical to overcoming plateaus in growth, and enabling a small firm to grow into a mid-size or large firm. The good news – these dirty secrets can be reversed and overcome! But first you need to acknowledge they exist. By first recognizing, and … Continued

The Blessing and the Curse of Being So Busy

The Architecture and Engineering industry is busier right now than it has been in a long time. This is great for your firm – right? I talk with at least 5 to 10 A&E firm CEOs a week, and their results are surprisingly mixed. While it is obviously a booming market for services, being busy does not necessarily translate into high employee performance, recruiting success or project profitability. How Can you Position Your Firm for Success in this Market? Every economic market provides us opportunities and obstacles, yet many firms run on autopilot, assuming that the dynamics of making money and growing are the same in up or down economies. This approach assumes that the opportunities will be obvious and take care of themselves, and that is not usually the case. To be successful in a fast-paced business climate, it’s imperative to position your people, strategies and decisions to recognize opportunities when they present themselves, and be agile enough to move quickly to take advantage of them. Likewise, we need to prepare for an inevitable future downshift and availability of work, and the hidden opportunities … Continued

Why Some A&E Firms Make More Money Than Others

Many A&E firms come to me because their profits are too low, not hitting expected targets, and barely enabling the firm to grow. In most cases, their projects are making a profit – just not at the levels expected or needed. The leaders of these firms are frustrated, and want to know – what do we have to do to get to the top 10% of firms in the industry? By getting to spend quality time with the executive team of over 700 A&E firms over the last 28 years, with confidential access to their key financial indicators (KPIs), I was able to see a huge variation in the profit margins from one to another. While some firms struggle to hit 8% profit, others are sailing along with consistent profit margins over 30%, and in some cases, in excess of 40%! What Profit Should You Be Making? While these higher margins are much more expected and targeted in most other professional services industries, the average architecture, engineering, environmental and Geotech consulting firm is targeting 13% to 15%, and lower if 100% of their work is … Continued

10 Keys to Increasing Utilization

  The employee utilization rate is one of a handful of key performance indicators (KPIs) used by A&E firms to measure the ability of the firm to keep employees working on billable projects.Your employees are your firm’s primary asset and optimizing their performance and use of their time will make the difference between low or high project profit margins. For a 100-person A&E firm, just a 1% increase in utilization is about $225,000 in additional revenue per year. Firms are the busiest they’ve been in over a decade, so I have to ask, If everyone is so busy, why do so many firms struggle to hit utilization targets? So why do so many firms fail to hit utilization targets and keep their billable staff fully utilized? There are really only a handful of reasons that utilization is not optimized: Poor and/or Inaccurate Time Management Lack of Direction / Focus on Non-Billable Time Lack of Scheduling Processes Inability to Forecast Poor Communication with Staff Insufficient Scrutiny / Approval of Time Not Enough Work 10 Keys to Increasing Your Utilization Now Hitting utilization targets involves careful attention … Continued

Over 12 Million Lost Dollars Found at 2018 AEC Profitability Summit

  The AEC Profitability Summit is an event developed specifically to help architecture and engineering firm leaders increase profits by focusing on implementing business management best practices. The 2018 Summit, held at the beautiful Eden Roc resort in Miami Beach, Florida, was a tremendous success. Attendees enthusiastically looked for and found lost dollars and shared ideas and proven solutions in an interactive environment. Focus on Four Common Areas Where Businesses Can Improve The Summit helped A&E firm executives work on developing new approaches in four areas of their business: Selling on value and differentiating their firms; Developing effective project management processes; Increasing employee productivity and utilization; and Implementing positive accountability and performance management programs. Many firms had multiple leaders attend which enabled them to work together with their colleagues on their firm’s most challenging areas. As attendees identified opportunities for improvement in their business they were encouraged to assign a dollar value to the impact of implementing a solution. The leaders returned to their offices motivated to implement solutions and to communicate the financial benefits to increase staff buy-in. Over $12,000,000 of Potential Profit Found … Continued

Turning Around an Underperforming Team

Are you frustrated because not every team in your firm is hitting their goals or performing at their highest level? Unfortunately you may have groups that struggle to be profitable, have high turnover, or don’t embrace your firm’s culture. It can be difficult to hold remote offices and project leaders’ accountable, and even figure out what is going wrong. There are many options to attacking the problem of an underperforming team including replacing team leadership, closing a remote office, or other intensive measures. Very often an office is opened or a new team assembled in order to accomplish one of the firm’s strategic goals such as breaking into a new market, geography or client. Depending on how the group was created – from breaking off from another successful division, to an acquisition, to a key strategic hire, many things can cause a group or remote office to underachieve. Measuring Team (Under)Performance In measuring the performance of our groups or teams, we often look at revenue or profit goals, but it is also important to understand the other key metrics behind the scenes that are causing the group … Continued

10 Ways to Knock it Out of the Park in 2018

“If you’re going to play at all, you’re out to win. Baseball, board games, playing Jeopardy, I hate to lose.” – Derek Jeter 2017 had many ups and downs but overall was a good business year for the A&E industry. From the indicators I am seeing, the number of cranes everywhere you go, and the promise of huge infrastructure investment coming, 2018 may prove to be another great year for those of us that depend on Design and Construction spending. At the beginning of every year I try and define 10 key strategies that our clients can follow to ensure success in the coming year. If you know me, you know that I love sports. Not much gets me more excited than a competitive game. I decided to go with a baseball theme for this year’s annual article. I’ve become a huge Washington Nationals fan in the last few years, which requires having to endure a roller-coaster of wins and losses. I am fascinated at how some teams always seem to be in the playoffs, and others struggle to get to a 500 season. If … Continued

Top 10 Reasons to Attend the AEC Profitability Summit 2018

  I am thrilled to announce our second AEC Profitability Summit to be held in Miami Beach, March 18th-20th, 2018. Many people have reached out to me with questions – Why should I attend? Why are you holding this Summit? There are two main reasons I decided to hold another Summit – first, I go to about 15-20 conferences a year, and while I enjoy them, meet lots of great people and learn a lot, most “sessions” don’t go into enough detail to provide the how-to steps to implement any of the ideas. Most “conferences” don’t just focus on profitability either. I didn’t want to have a typical conference and I’ve been working overtime designing an unbelievable experience for you and your team. You’ll explore areas of your business at a whole other level and make significant progress towards implementing game-changing new approaches to your business. Second, we have many Find the Lost Dollars Training Program clients who have seen great results from putting their teams through our training program, but they want to do more and have asked for extra help implementing the initiatives they … Continued

10 Estimating Mistakes that Kill Project Profits

You planned for your project to make 14% but you end up with 8%. So do you know what caused this loss of potential revenue that your firm was counting on? Was it: A. Deficient project management? B. Scope creep? C. Lack of systems and processes? D. Poor scope development and management? Very often it is all of the above! That elusive project profit variance is often caused by many different factors and can be very difficult to control and mitigate. What’s the #1 Way to Meet Your Project Profit Goals? Start with a great scope and estimate that includes a plan for possible situations. Estimating is one of the most crucial steps to ensuring a successful project, yet many estimators do not have the tools and skills to develop a scope and estimate of costs that will stand up to all the challenges faced during project execution. From unexpected delays, changes in clients’ staff, regulatory issues, unplanned meetings, and unrealized client expectations, your estimate must anticipate and account for anything that could happen. The recession and all the bad habits it created is long … Continued

How to Strategically Grow and Retain Your Best Clients

  Trying to get work in the door can be a challenging process for A&E firms, and many may be missing the easiest opportunity of all. Getting more work from existing clients! You may assume that your clients are giving you all the work they have, but what if they aren’t? What if they don’t even know everything your firm is capable of? Are Your Business Development Efforts Strategically Focused I frequently see business development effort focused on getting new business while ignoring the greatest asset the firm has – it’s existing clients. Research done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score) shows increasing customer retention rates by 5% increases profits by 25% to 95%. And it is well known that it can cost 5 to 10 times more to acquire a new client than it does to retain an existing one. While many A&E firms rate themselves as having excellent client relationships, the truth is that much of that is by accident. Only a small percentage of firms actually have a documented and strategic initiative to retain and grow … Continued

Are Your Clients Taking Advantage of You?

    In today’s post we’re sharing a podcast of an interview of June Jewell by STEVE GORDON on The Unstoppable CEO. >> Click HERE to listen   If you have a professional service firm… you can’t miss this one. Have you ever done a project and ended up making less than you estimated? Maybe even lost money? The project went off without a hitch. In fact, you over-delivered. It may be hard to believe… but that’s where you went wrong. June Jewell of AEC Business Solutions shares the dangers of “culture traps” that allow professional service firms, to flounder financially even while providing great service. June also shares a business model that gives your business a guaranteed income every month. Listen now and you’ll get straight talk from June about… When – and how – to turn down a client request Ways to guard against the dreaded scope creep How to make sure “technical” people keep profitability front of mind The training your team needs now that could save your business How to guard against the biggest “money drains” The importance of estimating – … Continued

6 Steps to Find the Lost Dollars in Your A&E Firm

In my book Find the Lost Dollars: 6 Steps to Increase Profits in Architecture, Engineering, and Environmental Firms, I conclude with a final chapter that outlines the six steps that can guide you towards increasing your firm’s profitability. This article will summarize that chapter, as well as give you some success principles for ensuring that desired changes and improvements do not lose their momentum and die before being implemented. Change is inevitable and necessary in all businesses. If you are not able to adapt to changes in the economy, marketing, technology, and availability of human resources, you will find your profits dwindling, and your ability to retain your most talented employees diminished. So then why do 70% or more of most change initiatives fail? I argue that the foremost reason that A&E firms fail to grow and improve business operations is lack of a detailed strategy and plan to improve. This article will summarize the six steps that can help you start to identify and implement business improvement initiatives to help you find and recover the lost dollars in your business. 1. Calculate your metrics … Continued

5 Crucial Steps for Project Manager Success

The success of your Project Managers (PMs) can make or break your firm. Right? Considering all of the tasks that the typical project manager is required to perform, it is no wonder that many PMs get frustrated or even lose money! I did an assessment of the typical duties of the PMs that work for our clients, and here is a comprehensive but not necessarily complete list of the responsibilities that get thrown at PMs on a daily basis: Responding to RFPs and creating proposals Estimating project fees Documentation of work product Managing subcontractors Scheduling and using resources effectively Maintaining high utilization Solving client problems Budgeting and planning projects Project financial management Project quality control Management of the project timeline Reviewing and approving employee time and expenses Reviewing and approving client billing Collecting Accounts Receivable (AR) Nurturing client relationships Recruiting and interviewing new hires Mentoring and training staff Managing staff performance, and dealing with performance and behavior issues Managing contractual deliverables Avoiding scope creep and/or billing for extra services Preparing for and attending internal and external meetings Business development and networking (including events, social media, etc.) … Continued

Finding the Lost Dollars™ in Your Civil Engineering Firm Podcast

In today’s post we’re sharing a podcast of an interview of June Jewell by Anthony Fasano of The Engineering Career Coach. >> Click HERE to listen Here are some key points discussed in the podcast: Many engineers are more focused on their technical skills, the quality of their projects and the relationships with their clients and not focused on the money. Sometimes money is the last thing that gets paid attention to when working on a project and by the time you get to the end of the project you find that it wasn’t as profitable as you would hope it would be. Time and materials contracts are one where you bill your client for every hour that you work. Make sure that your billing rates are covering your costs of the project when you are billing clients hourly as a lot of money can get lost on time and materials contracts. The firms that share more financial data and help their managers to understand business and accounting concepts and financial terminology have better project profitability and their employees do a better job of managing … Continued

3 Estimating Lessons to Boost Project Profits

We have all had projects that for some reason did not meet our financial expectations. Overbudget projects happen for many reasons, including bidding on the wrong projects to begin with, underestimating the number of hours needed to successfully complete the project, failing to allow for delays and problems, or just not knowing the client well enough to anticipate what they really wanted.   Not only does your firm lose the profit margin associated with budget overruns, but overruns can also have a negative impact on client relationships and cause stress for your teams as they try and minimize the losses.   A great deal of value can be gained by analyzing past project failures to understand what went wrong, and designing safeguards, processes and approvals to minimize the chances they happen again. The following are three of the most common issues with developing accurate estimates, and some structure and practices you can put in place  to turn prior past project disasters into lessons that add protection for future jobs:   1. Understand the client’s expectations One of the most common problems in accurately developing a … Continued

How to Save your Project Managers Two Hours a Week

  The main complaint I am hearing from A&E firm leaders these days is how they would love to “find more time” for their project managers (PMs). With workloads the highest they’ve been for many years, and talented and experienced PMs difficult to hire, asking PMs to work overtime has become a necessity. The average PM is working 45 to 60 hours a week, and many executives are worried about them burning out and considering leaving for a less stressful position. Multi-faceted Role of Project Managers The PM’s job is a difficult and often frustrating role. More and more responsibilities have been piled on the backs of our PMs as business has become more competitive and great people harder to find. A PM is no longer just responsible for managing the day to day and contractual obligations of the contracts, but also has to help bring work in as a seller-doer; manage the time, billing and collections of the work; and maintain happy client relationships. Many PMs face frustrations in trying to be great in all of these areas, and many others lack the business … Continued

How to Get Leadership Buy-in for Business Management Training 

  Many of our clients see the need to improve the business acumen of their project managers (PMs) and other technical staff. Even the project managers themselves, many of who have come up through technical ranks and have little to no formal project management training, are begging for it. But, it’s difficult getting firm leaders to agree to the best approach and take action. They know on some level it will probably payoff with increases in profits, higher customer satisfaction, etc. But how can they be sure? Different options include 2-day bootcamps out of the office, in-house training, bringing in outside consultants to customize training for your firm, or industry-specific online training. Each method has it’s pros and cons but most firms agree that the training needs to address the key issues that are causing dollars to get lost, causing lower than expected profits. Having trouble getting leadership buy-in for business management training?  Without leadership buy-in, support and the very important (but often overlooked) aspect of also participating themselves, your training program can fail to gain momentum and acceptance throughout your firm. Studies show that when leaders get … Continued

How to Make 3% More on Your Next Project

  In my book, Find the Lost Dollars, I focus on the impact of just a 1% increase in profits in nine areas of your business. The reason for focusing on such a small increase is twofold – first – it sounds easy. Most employees will gladly step up to help the company improve just 1%. Second, it is usually much more money than most business leaders realize. The power of just a 1% increase in profits in several key areas of the business can be thousands to millions of dollars for most A&E firms. But the reality is that most firms that focus on improving their business practices actually increase profits much more than 1%. For many of the clients we work with, we target a profit increase of 2% to 5% which is a substantial increase. Many of our clients tell us that their projects are profitable, however, they are not earning the level of profits they desire. For example, when you bid a project with a 10% estimated profit margin, but actually end up with just 6%, what happened to the other … Continued

Are You Blowing Through Yellow Lights?

  As we drive along the roads each day we make split second decisions. These decisions can have zero or life changing consequences, or anything in between. A cautionary yellow light can occur when driving slow or fast, far from the intersection or right in it. Once in a while we ignore the warning signal and blow through a “risky” yellow light and pray for the best. Yellow lights occur in your work and business every day. Your employees often make similar split second crucial decisions that impact the risk, profitability, and health of your organization without realizing it. This is because we don’t like to rock the boat, question our clients when they make a request, or even follow instructions that just don’t seem right. Very often it seems much easier to ignore these questionable situations – we don’t have time, we don’t want to appear untrusting. But we all know that a yellow light can turn red at any moment. Yellow lights in business come in many forms but all have something in common – they all have potential consequences that are unknown. … Continued

6 Steps to Win on Value Instead of Price

We’ve all been there, sitting in front of that client we know we don’t want to work with. But the fear takes over. The fear of not having enough work. So we don’t walk away. We succumb to the pressure and lower our fee. Or maybe it is our best client, and he is threatening to go to one of our competitors, telling us we are too expensive. What do we say? Do we just agree and go ahead and give him a break on his estimate – know we will lose money on the job? Situations like this are happening every day and slowly killing the architecture and engineering services industry. The problem is, we really do start to believe that we can’t get the kind of fees that we need to be successful and profitable, but we still don’t know how to turn down work. It is just against our nature. As our employees navigate these difficult situations every day, small amounts of money are being given away. Rather than believe we are adding additional value to our clients’ projects, we assume we … Continued