Clarity and focus in your business
Apr 05, 2004
I was talking with a client of ours the other day— a very successful founder and CEO of a mid-sized engineering, planning, and surveying firm. I asked him the typical pleasantries such as, “How are you, Bob (the name’s been changed to protect his identity), and how are things going down there?”
The response I got was something on the order of, “I couldn’t be better. If I were any better, there’d be two of me. We are having a regular love fest down here.”
When I asked him to elaborate, he went on to tell me how their backlog was building, how they were beating their competitors, how the projects they were getting were the best they’d ever had and the fees were great, how many job openings they had, and how everyone inside the firm was getting along so well.
I thought to myself, “Gee, this is great. I know Bob is a really great guy and loves his firm, but why is this firm doing so well when a lot of companies we are exposed to aren’t?” Sure, they have beautiful offices, pay their people well, and involve all of their key people in business planning and ownership, but a lot of firms do those things and don’t perform as well as this firm does. Every year, these guys are growing more and making better profits than what their competitors and the rest of the industry can muster. Why are they doing so well?
Then it dawned on me. One big reason these guys are knockin’ the cover off the ball right now is that their entire firm is aligned with the market they serve— private developers. Everyone on the staff there looks, acts, and thinks like their developer clients, from the very entrepreneurial founder/CEO at the top, on down to the junior engineers and planners. They win the best work, they do it profitably, and they keep their clients happy because they are in tune with their market. And, then, their people are happy because they are being successful, and everyone likes success.
I shared my observations with my client. His reaction was that their firm sure felt and performed a lot differently back when they were chasing down any type of work they could get from any client type.
Back then, they were a lot less efficient. Marketing was harder. And the profitability of the enterprise was certainly compromised by too much client diversity. The reason they are doing well now is they focused their entire business on a couple different types of developer clients and then helped those clients get things done in places that could generally be considered unfriendly to development. He added that this was thought to be a very risky strategy at the time he embraced it.
And just in case your reaction to this story is, “The REAL reason these guys are successful is that they serve developers, and that’s a hot market sector,” let me tell you that I recently met the chairman, president, and CFO from another similar-sized company in a different part of the country and heard much the same story: 15-20% profits, high growth, and tremendous optimism, and their firm is entirely focused on the public-sector transportation market!
The key for both of these firms’ outstanding performance and recent track records is the clarity of mission and the focus they have throughout their entire business. Hiring is easy— you know what kind of people you need, those with experience in serving a specific type of client. Compensating people is easy— the issue of whether or not to pay overtime to exempt people is simple based on the type of clients the firm serves. Where offices need to be is simple. How much marketing overhead to take on is simple. What kinds of technology the firm should invest in is clear. How accounting should be handled is readily apparent.
There’s no question that if an A/E/P or environmental firm has its staff spread out over two, eight, or 38 offices, it certainly complicates the management process. But firms attempting to serve many different market sectors may find that’s an even bigger complicating factor. Principals who choose to ignore this reality as they embark on a course of diversifying their business in the name of reducing risk do so at their own peril. They may find out that trying to work for too many different client types with one organization just doesn’t work!
Originally published 04/05/2004
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.