The thing we all have in common right now is that it is difficult to predict the future. In my Monday AEC Crisis Roundtable meetings, the number one concern of A&E leaders right now is uncertainty. Without certainty it is challenging to develop strategy or plan beyond a few months. Even planning for the Fall right now seems risky.
But there are a few things that we know for sure. You can create some stability by identifying what you know for sure. This will enable you to build your 30, 60 and 90–day action plans based on fact and not fear, hypothesis or rumor.
Here are 10 questions to deliberate with your Executive team to determine what your team feels certain about going forward. With no control over the external world and local events, these are the only facts you can build on right now:
1. Which clients can we count on not cancelling existing projects? (backlog)
By now you should have a good idea from your clients what they see in the next 90 to 180 days. What is happening with their funding? What concerns do they have? What can you count on? Take your backlog and your clients’ estimates of potential projects and build a projection of potential workload through the end of the year.
2. What services will our best clients absolutely need no matter what happens?
In some cases, our clients are expediting projects and putting others on hold. What are the reasons these changes are happening and how can you leverage them? What will your clients need later in the year and how can you work closely with them to ensure you can help them achieve their goals? This is a good time for very in-depth discussions with clients to uncover hidden opportunities.
3. Where should we focus marketing?
With a possible reduction of work in the next 6 to 18 months, where should we focus our marketing expenditures? This is a time to get strategic and use data as much as possible. As your local areas start to reopen do you need a new strategy for business development? How open are your clients to meeting in person again? Should you focus on branding, thought leadership, social media, your web site? All these are questions that can give you more certainty about your marketing efforts going forward.
4. Which employees must we keep?
Regardless of what happens in the world there are a group of employees you cannot afford to lose. Reinforcing their loyalty and commitment right now is essential. Even if you must do layoffs later in the year there are employees you must keep. This is a certainty that helps you plan a brighter future and should be protected at all costs.
5. How much cash do we know we can bank on?
Cash flow forecasting and daily focus on cash collections is essential right now. How many months could you survive at 75% of planned revenue? 50% even 25%? What expenses would you cut at each level and which employees would you furlough or layoff? It is also essential to talk with clients and understand their cash situations. If you are a subcontractor on a pay–when–paid contract, additional collection efforts may be needed to ensure you get paid on a timely basis.
6. What markets will do the best over the next few years?
To ensure the long-term health of your firm it will be important to be agile and possibly diversify. This will take research. Talk to as many people in your local area as well as other firms across the country that are not competitors. Sharing information is a great way to get ideas about how to pivot if some of the markets you work in have slowed down. If you are an A&E leader and want to meet other leaders across the country, join our Monday afternoon AEC Crisis Roundtable.
7. What competitors do we have to worry about?
What is going on with your competition right now? Are they busy? Slow? Are they hunkering down or looking for growth opportunities? Most firms are in crisis mode and there may be more opportunities as some of your competitors may fail. However, if there are fewer opportunities down the road, the competition will increase. How good is your firm’s market penetration? What larger firms could swoop in and take some of your work? How can you solidify relationships with clients to protect from increased competition?
8. Which projects are we making the most money on?
Right now, it is crucial to know what projects are making money and which ones are not. This goes for clients too. Expending resources to pursue and work on unprofitable projects will bring you further down. This is the time to dump your commodity projects, get more selective, and only work with “A” clients that you make a decent profit from. Many firms get desperate and take low fee projects just to keep mediocre employees busy. Having a smaller more profitable firm may be a better strategy than a less profitable growing firm.
9. Who else in the industry should we be talking with?
Over the last few years most A&E firms have been so busy they have not had time to implement new strategic relationships. Key partnerships can provide inroads into new industries, markets, and services that you have not pursued before. LinkedIn is a great place to start researching new people, technologies and ideas that can help take your firm to the next level. You may want to consider bringing in some fresh blood to reinvigorate your direction and strategy for a better future.
10. What skills or training do we need to position us to be profitable in the future?
Having a diverse and highly skilled team is the best way to take advantage of new opportunities. Asking staff for feedback is a great way to gain new ideas and discover how to invest in your teams to ensure your firm can be competitive in the future. Technology is expanding rapidly, and especially with the impact of this pandemic. Your young staff may aspire to get involved in new technologies such as Artificial Intelligence (AI), 3D Scanning or Robotic Process Automation (RPA) that can help differentiate and propel your firm forward. Investing now when everyone else is scared might pay off.
While the world and the AEC industry are full of uncertainty, identifying what is certain can enable you to develop a short and mid-length action plan. By asking the questions above, you can determine what you know and don’t know and make better decisions. We all have access to the same information but what we do with it will determine how we come out on the other side.
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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