By Mark C. Zweig
Sooner or later one comes to the realization that the answer doesn’t always lie in growing revenue. It may just not be possible with the time you have to fix the problem.
Sometimes, you have to cut costs.
Back in my younger days, I used to be known for my ability to go into an A/E or environmental firm, quickly assess the situation, and then, without a shred of doubt, tell the owners what they needed to do to cut costs. I was pretty good at it. The firms I worked for usually did much better afterward and had me back year after year to help them with their annual budgeting and business planning.
Some firms wouldn’t do what it took. I once quit the BOD of a company that would not cut out $1.6 million in unnecessary costs. Got tired of talking about it and decided I would start with the $50K they were paying me at the time, getting them down to “only” $1.55 million needed to go!
Gradually, as the ’80s and early ’90s ended and times got more and more prosperous for firms in our business, there seemed to be less interest in cutting costs.
But there’s been a whole new level of renewed interest in cost cutting in the last few years in this business. I’m getting more calls again. Here are some of the things I look at when I go into a firm to help them find where they can cut costs:
1) Labor. It’s always the biggest cost. Too many companies cut from the bottom during this last downturn. Principals and top management are probably where you need to look. It may help to have someone like me, who isn’t afraid to confront your owners to point out where the real problems are. It can be hard to do from the inside.
2) Office space. Firms just have too much of it. It’s time to cut back, compress, renegotiate your lease, get out of your old lease, and anything else to cut back on costs. Office space is cheap now pretty much everywhere in this country and there are deals to be had. And while you are looking at space, look at entire offices. Some that have been struggling for years may just need to go now.
3) Unnecessary overhead items. This is stuff like sports tickets, condos, expensive business developers who are on contract, institutional ads that aren’t helping, outside web hosting services, professional society expenses that don’t help create business or do projects, and more.
4) Benefits. People are paying more of their insurance costs today. It’s not a great situation but the reality is companies cannot do what they used to. Ditto for 401K matches. They have declined. Companies are starting to figure out that the way most plans are written, the company can renege on it if they can’t afford it, even if there is a match. Again— a grim reality of life in this business today.
5)Outside service providers. You have to look at the attorneys, accountants, recruiters, marketing consultants, web hosting companies, e-mail blasting companies, and more. All of these providers need to be shopped, talked to, and negotiated with. All of their prices tend to go up over time.
6)Other stuff. Unnecessary training expenses. Using outside recruiters before trying to fill the job on your own. Too many internal meetings— especially those requiring travel. Expensive company cars. Partners taking big lunches on the company credit card every day. Outside consultants who are supposed to be doing “business development” for the public and charging big bucks but getting no results all need to go.
Again— it may help to get some ruthless outside assistance here. Relationships with people, fear of change, and an almost limitless ability some folks in this business have to delude themselves about things getting better, all get in the way of cutting costs. But if you do get outside help, don’t hire someone who is related to your principals!
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.
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