This article first appeared in The Zweig Letter (ISSN 1068-1310) Issue # 987
Originally published 12/17/2012
See what more successful firms than yours are doing, straight from ZweigWhite’s surveys.
We’re down to the end of the year now and everyone seems to be working on their business planning. Part of that process usually involves benchmarking how your firm compares to other, similar A/E/P or environmental firms. I can see this is happening based on sales of our survey products. We just had the biggest single-day sales of surveys I have seen here in years last week. It’s crazy.
My problem with benchmarking has always been: Whom are you comparing yourself to? While most firms in this business seem preoccupied with finding other firms that are their exact same size, or discipline, or based in Peoria like they are, the real issue in my mind may be finding other firms in this business that are super successful, and comparing yourself to them. Our “Successful Firms Survey” looks at companies that are growing faster (average of 20 percent or more for the past three years) and are more profitable (average profitability of 24.5 percent of net service revenue) than the bulk of the firms in this business.
I like this survey. It’s one we can all learn from. Here are some interesting tidbits from it:
· Successful firms budget more for marketing – 8.6 percent of revenue on marketing versus 3.5 percent for all others. I have always believed there was a relationship between marketing budget and growth and profitability.
· Successful firms have higher chargeability rates – ranging from 64.3- to 65.6 percent versus 57.3 percent for other firms. Having principals and managers who work on jobs (instead of spending all their time on corporate management) and less support people goes a long way to help utilization rates. High utilization makes it easier to make money – plain and simple.
· Successful firms charge higher fees and manage their fees better. High profit firms have effective multipliers of 3.37 versus 3.08 for all other firms. Having a brand name and providing high quality – along with being willing to ASK for a better fee – all contribute to higher multipliers. Higher multipliers make it easier to hire good people, spend money on I.T., and spend money on people.
· Successful firms employ the simple tool of regular project progress reports to all clients on all projects. Seventy five percent to all successful firms send out periodic PM reports, compared with only 68 percent of all other firms. I will never know why everyone doesn’t do this. It is cheap and easy to implement and clients like it. It improves collections and client relationships.
· Successful firms use continuous client feedback collected through a formal process. Sixty seven to 75 percent of successful firms have a process for ongoing client feedback versus only 51 percent for all other firms. Regular polling of past, potential, and current clients and then publishing the information – good and bad – for all staff to see is a very powerful tool if you want to really have outstanding service.
· Successful firms have harder working people in their management jobs. If you can get your principals and PMs to work more hours, everyone will work more hours and you increase your production capacity at no cost to the firm.
· The average work week in successful firms for PMs is 50 hours versus 45 in all other firms. It’s 57 hours in successful firms for principals versus 50 in all other firms. People only work like that if they are happy and challenged, and not upset with the company. Seems obvious!
There’s so much more good information in here. The important thing for you to be thinking about – as the end of the year approaches – is whom you are modeling yourself after. Make sure it is a company that is more successful than yours is – not less!
Mark Zweig is the chairman and CEO of ZweigWhite. Contact him with questions or comments at email@example.com.
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.