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 the biggest constraints to growth: 

 

1. Difficulty finding and retaining top talent.

Especially in the mid-range of 8 to 15 years’ experience. Being so busy gives prospective A&E professionals more options, driving salaries up and threatening succession plans and client relationships through attrition. This shortage also forces firms to settle for less talented staff for more money.  This situation has the potential to lower profit margins over time if jobs take longer to complete and fees do not escalate at the same rate as salaries. With more baby boomers expected to retire in the next few years, this problem will continue to be a major issue facing A&E firms’ growth and profits. 

 

2. Lack of accountability across the organization fueled by the fast addition of new employees, silos, acquisitions and failure to get the firm’s culture adopted.

This causes a great deal of inconsistency in project execution and client service and hinders the leaders’ ability to implement new processes and get employees to use and update data in key enterprise systems. As firms grow, it is essential to put business best practices in place to control quality, reduce risk, ensure safety, and provide consistency essential to ensuring excellent client service and repeat business. Getting employees aligned with these business best practices is a key culture challenge that many A&E firms battle with as they grow. 

 

3. Lack of leadership and project management competencies to enable growth in business units, offices and teams.  

With fast growth and high backlogs comes the need to be better organized and implement best practices that ensure high quality. But when everyone is so busy and you are adding new people quickly, it is harder to ensure that your project managers and senior leaders have the skills, oversight and processes in place to ensure their success. 

 

“Worry about being better, bigger will take care of itself.”  

-Gary Comer, Lands’ End Founder

 

Rather than trying to grow to reach specific revenue or employee targets, you might consider that a better goal is to work towards being the best. This sets the bar high and actually may slow down growth because decisions about hiring and taking on marginal projects will lean towards the side of being more selective.  

Being highly selective means that you don’t take projects that are not A+ projects with highly desirable clients and high fees. It also means that you don’t knowingly hire an employee that does not have the potential to be on your “A” team. 

Focusing on employee performance, getting great clients and projects, and implementing effective best practices will quickly transform your firm and culture, and take much of the strain off of having to keep up with substandard projects and deal with lower performing staff. 

There is a lot to be said for growth if it ends up being successful, profitable and fun. If it only adds additional risk, stress and problems, then growth in itself is not a good thing for your firm.  

Profits, rather than revenues, are a much more effective indicator of success. The top performing or “Top-Tier” firms in the A&E industry have developed strategies based on being better, not bigger. This means elevating the skills, performance and effectiveness of every employee – not just hiring more of them. 

By investing in your team and giving them what they need to be successful, you will increase employee retention, client satisfaction and ultimately, your bottom line. This is the essence of Find the Lost Dollars – ensuring that your firm earns every dollar it should – and more!

 

June R. Jewell, CPA is the author of the bookFind the Lost Dollars: 6 Steps to Increase Profits in Architecture, Engineering and Environmental Firms”. She is the President of AEC Business Solutions, offering employee development training focused on helping Architectural, Engineering and Construction firms make more money on their projects and develop their next level of leadership. Read more tips for A&E firms at her blog at www.AECBusiness.com/blog.

 

DID YOU MISS THIS YEAR'S PROFITABILITY SUMMIT? 

That's okay! You can find your lost dollars by joining us for our next complimentary web training!

Find the Lost Dollars: 9 Areas Your A&E Firm is Losing Profit

Thursday, October 10th - 1:30pm ET

Many A&E firms are leaking profits due to ineffective processes, non-integrated systems, and a culture focused on technical excellence and not business success.

In this session you will learn how to improve 3 Key metrics – your win rate, utilization and project profit margin by improving business management and operational practices that will lead your firm to find the lost dollars in your company. You will gain useful best practices that can lead to increased financial success including sales & proposal success, estimating, project management, time management and client relationships. Learn how to identify problem areas by doing a company-wide assessment and getting valuable insight from your employees. This web training will focus on how to assess people, processes, and systems including what questions to ask and how to ask them.