Architects and engineers – well, anyone for that matter – who own their own business are bound to get unsolicited (or requested!) advice from time-to-time.
While some of that advice may be good, a lot of it is horrible. Here is some bad advice that is too often doled out:
- “Your architecture/engineering/etc. company is only worth what you can take out of it every year.” Small accountants and other business advisors often think professional service firms have no value and encourage their clients to take all the money they can out of the company every year. This leaves the firm strapped for cash and unable to grow as easily and reduces the opportunities for the employees who work there. The bottom line is AEC firms DO have significant value if built and run properly and there can be a pot of gold at the end of the rainbow for firm owners.
- “Your people don’t understand the economics of this business so why share the numbers with them.” You don’t need a business degree to understand the difference in productive labor charged to projects clients are paying you to do and labor that is overhead that you don’t get paid for. A non-MBA can understand the difference in being paid for a project now or waiting another 80 days to get a check. This stuff isn’t difficult. Sharing the numbers with your people builds trust in management and helps a wider group of people understand how the business makes or loses money.
- “People don’t really care what they do. They only care about how much they make.” This is so untrue! People really DO care what they do. They want interesting work and they want meaningful jobs and lives and will, in fact, work for LESS to have those things. Companies that think their people work only for the money really underestimate them and will undoubtedly have other morale and motivation problems to contend with.
- “Run every single personal expense that you can through the company.” More bad advice from small-minded accountants who think owners should treat their firms like personal playgrounds. Avoid taxes at all costs by treating non-business expenses as business expenses. Not good! Not only in some cases do these people run afoul of the tax laws (i.e., evasion is not legal), they again show their employees that there is probably a better place to work where the firm’s resources are treated like the firm’s resources.
- “Get your wife/kids/mother in law/parents on the payroll.” Another bit of bad advice to save on taxes that is commonly followed in small firms (or even mid-sized ones). The rest of the people in the company love seeing a bunch of non-working relatives who in some cases never even show up but get a check every week. Absolute morale-killer.
- “Don’t worry about having fancy offices – no one will ever see them.” Your employees will see them. YOU will see them. A nice workplace (not necessarily “fancy”) can be important to your recruitment, employee motivation, and employee welfare. People need plenty of natural light, lots of common area for collaboration, and good bathrooms. We spend a lot of time in the office – more waking hours there than at home for some of us. Why is that a waste of money?
- “Spending money on marketing is a waste. Your best marketing is word-of-mouth.” This is bad advice that can really hurt you. How will anyone get a chance to say good things about you and your firm if they never use you in the first place? You have to spend marketing dollars – consistently – to create demand for what you do. And the ideal situation is to drive demand beyond your ability to supply it. That’s when you can say “no” to bad clients AND raise your fees.
Mark Zweig is Zweig Group’s chairman and founder. Contact him at firstname.lastname@example.org.Subscribe to the electronic version of The Zweig Letter for free.