CEO of BIG RED DOG Engineering & Consulting (Hot Firm #65 for 2017), a 105-person multi-discipline engineering firm based in Austin, Texas.
By Richard Massey Managing Editor
“It’s been true since day one and remains true today even with our marketing team – marketing is the job of everybody in the firm,” Schnier says.
A CONVERSATION WITH WILL SCHNIER.
The Zweig Letter: What’s your philosophy on fee/billing and accounts receivable? How do you collect fees from a difficult client?
Will Schnier: We don’t mess around on this topic. We have no debt and we aim to keep it that way. We’re not a bank that extends credit, and we recognize that cash is king. We’ve been blessed by having very good clients. Our most valuable clients know that in order to continue providing our top quality services and to take care of our team members that provide those services, it is necessary for us to receive payment of our invoices in a timely manner and in accordance with our contract terms. We do not accept payment terms that exceed 30-days in our contracts – that’s a non-starter for us.
The great state of Texas is an excellent market with a lot of good work. We have no need to extend credit to our clients. We have a written collections policy that is incorporated into our contracts and which is sent with the first invoice. Our accounting department contacts our clients on day one with the invoice, on day seven to ensure that they received the invoice, and on day 30 to let them know that the invoice is past due. On day 45, our PM gets involved and tells the client that work stops on day 60 if payment has not been made. We stop work on day 60 and send a formal stop work notice. So the project is on hold at this point. On day 90, we send a final demand letter. On day 120, the account is sent to our attorney for collections and we file a lien on the property if that’s an option. A client that is sent to collections becomes a former client. We subscribe to the adage, “String us out once, shame on you, string us out twice, shame on us.” We really would love for clients who cannot pay in a timely manner to become a competitor’s client and string that firm out on payments instead of our firm.
TZL: Is there a secret to effective ownership transition?
WS: Of course there is! The secret to an effective ownership transition is to have a plan and strategy for an effective ownership transition. And you’ve got to have that plan in place and executable five to 10 years before the transition is set to be finalized. If that plan is not in place, then you’re looking at an external sale or closing the firm. Nearly every week I speak with a firm owner about an acquisition. We have around $18 million of annual revenue, so our acquisition targets generally tend to be half our size or smaller with a single owner or very small ownership group. Almost without fail, they tell us that they have a plan to sell their firm internally to their next generation of leaders. Of course, when I ask to review that plan, there typically is nothing documented. For owners in that situation, an external sale becomes their only option. With no plan, there is no transition. There is only an external sale or a closing.
TZL: How do you go about winning work?
WS: First, we win new work by fulfilling our value proposition with our current clients. Our number one way of winning work is to accept more work from happy clients. Second, we force prospective clients through our BIG RED filter. The BIG RED filter is the screen that all of our prospective clients will pass through before they have a live visit with a BIG RED DOG team member. We don’t want anybody to cold call us – or BIG RED DOG to cold call him or her for that matter. We want prospects to know BIG RED DOG and why they need to work with our company regardless if they contact us or we contact them. The BIG RED filter is critical to our marketing effort for the simple fact that since 2011, more than 93 percent of all business-to-business sales in the U.S. have originated with an internet search. Of those searches, more than 70 percent of the buying process is complete before any direct human contact occurs. What goes into the BIG RED filter is proprietary so I’ll stop there.
TZL: What’s the greatest problem to overcome in the proposal process?
WS: For us in the current market, it’s not proposing on everything that comes through our filter. We’ve had to consciously monitor the amount of new work coming in so that we’re able to meet our financial goals without burning out our team members or falling short on the delivery of our value proposition. When the market turns, and it will, the challenges will turn, too. Fortunately, we’re able to refer a lot of work to competing firms that we are friendly with. Our traffic engineering practice and structural engineering practice, for example, does work for many other civil engineering firms that don’t have those capabilities in-house. When we have leads we can’t handle or can’t manage properly due to workloads, we have the luxury of referring them to a competing firm that is also a client. It’s nice to help our friends in other firms and our clients by giving them work. That’s another great example of our BIG RED filter doing its job – we have no shortage of good opportunities for us and for our friendly competitors.
TZL: Once you’ve won a contract, what are the “marching orders” for your PMs?
WS: That’s simple – we must fulfill our value proposition. Our PMs play the most important role in fulfilling our value proposition, which has four components. First, we’re experts in the client markets we serve. So as a client, you’re not hiring a generalist, you’re hiring somebody who’s done this hundreds or thousands of times very successfully on substantially similar project types. That expertise has allowed us to win work nationwide – because the local firms hold themselves out as local generalists when clients want experts. Second, we communicate exceptionally. This is the primary marching order for our PMs – communicate the heck out of things with your client and the design team. Third, our billing practices are transparent and fair. And fourth, our construction plans are complete and constructible. If our PM executes all four of those tenets well, then the client will keep coming back and become a raving fan of BIG RED DOG. Once the client is a raving fan, they become an important screen in our BIG RED filter.
TZL: You are a proponent of open-book management. What is the advantage of showing the firm’s financials to everyone on staff?
WS: The leadership at our firm strongly believes that if you expect people to execute your business plan, they must know two things. First, everybody needs to know what the business plan says and what goals have been set. Second, everybody needs to know how our performance is benchmarking against the written plan and they need to know it in as close to real time as we can manage. The information that we share in our open-book management report to our team members is the exact same type of information that we provide to the owners of our firm. We’re unequivocal about sharing the information because if everybody has a sense of how we’re doing relative to our stated goals, then everybody can also take the appropriate actions to help the company perform better for our clients. An added benefit of our approach is that our engineers, planners, and designers, both new and those with significantly more experience, learn the metrics and terminology of what it takes to run a business. The metrics and information we’re sharing provide some financial literacy to a group of folks that typically have never been trained to speak that language.
TZL: How does marketing contribute to your success rate? Are you content with your marketing efforts, or do you think you should increase/decrease marketing?
WS: I’m a marketing guy at heart so I always think we need more marketing and more brand promotion. Like cash, content is king for today’s marketing department in an AEC firm. Having said that, we really just built our marketing team in the last year. Prior to that, there was no marketing department at BIG RED DOG. However, it’s been true since day one and remains true today even with our marketing team – marketing is the job of everybody in the firm. We’re building a brand here, so understand that marketing to us does not mean proposal mill. Proposal writers are among our billable teams, not among our marketing department. Our marketing team doesn’t touch a proposal and they’re not charged with winning work. We also don’t have and will never have any “cruise director” business development types that spend money, waste prospects’ time, and can’t actually produce anything when the rubber hits the road. The marketing department at BIG RED DOG is responsible for the management of the BIG RED filter. Done properly, the marketing department sets the stage for our seller-doers to successfully close their deals. When the time comes for me to be replaced as CEO, I hope they give me a chance to become the CMO!