A/E firms are doing surprisingly well

Aug 17, 2020

Firms seem to be doing better than most anyone would have predicted when everything had to shut down in March. Why is that?

August 2020: From the Good News Department – In spite of COVID-19, the A/E business overall is surprisingly strong.

Firms seem to be doing better than most anyone would have predicted when everything had to shut down in March. Why is that? I think there are a number of contributing factors:

  • Demand was high before COVID-19 and most of it is still there. Backlogs were strong going into this thing. Projects were already funded. And some infrastructure projects just can’t wait any longer. So the fact is – with many firms entering the post-COVID-19 period having six to 18 months of work on the books – this thing has had little effect on workload (so far).
  • New client needs are evidencing themselves. Better HVAC for more air exchange and filtering. Office spaces that support social distancing. More new warehousing and distribution facilities. Rethought retail with big box stores facing increasing demand at the expense of small retailers. Changes in anything involving a queue where people have to line up. More automobile, truck, and rail travel. New technologies and spaces needed for virtual meetings. More renovation and repurposing. I could go on but for some firms, COVID has lead to new demands for what they do.
  • Firms already had the systems and technology to accommodate remote workers before COVID-19, and have refined it since. So for this industry, it wasn’t a huge deal to have everyone work from home, especially when compared to some other industries that weren’t prepared or don’t have that luxury.
  • Firms cut their overhead more quickly than they normally do. I have to say I was impressed with how the companies we work with acted quickly to shed any unnecessary costs. In the past, we tended to make necessary changes to our cost structure much more slowly. To a certain extent I think companies panicked. Things weren’t as bad as they expected so they got out in front of this problem by shedding all unnecessary costs quickly.
  • PPP money and disaster relief funds. This money was very helpful to many firms that got it. It has kept some companies that did have reduced workloads afloat and even profitable (on a cash basis) for the last five months, and it was a huge godsend to our industry. There are some companies I am aware of that got PPP funds and haven’t even touched them yet.
  • Employees can work more during any given day. No commute. Less unproductive meetings that linger on. Think about all the time people wasted prior to COVID-19 that they aren’t wasting now. There was a lot of it. Everyone has more time now, plus, the remote technologies and working from home expands the potential work day dramatically. Many studies have shown that people are now working harder (i.e., more) than ever.
  • More aggressive marketing. If you follow the largest firms in this business as we do, you will have seen a dramatic uptick in their marketing efforts. Improved websites. White papers. Podcasts. Surveys. Much more social media activities than they were doing prior to COVID-19. E-marketing. New videos. All of these things are much more common now than they were five months ago. It makes me proud to see!

Do all of these things mean we can avoid a recession in this business? Perhaps. Or if we do have one, it will be down the road.

No doubt that hospitality, higher ed, airports and aviation, retail/office, and some other markets will have to be impacted negatively by this thing. The question is whether or not the firms affected can quickly move to reposition themselves to work in hotter markets quickly enough. Only time will tell!

Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

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About Zweig Group

Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.