Goodness, how times change. Can you imagine what your reaction would have been five, or even three years ago, if a management consultant advised you to get out of the environmental consulting business and move into architecture? You would have said they were insane, that’s what!The reality at mid-year of 1997 is that most environmental firms aren’t doing that well, while most building design firms are doing great!But if you’re in the environmental business, that doesn’t mean your company has to perform poorly. You can succeed in this market, but you’ll have to change. Here’s what I mean specifically:Change your organization structure. Environmental firms— and many of them are big ones— still think technology is what sells. It’s not. While that may have been the case at one time, today it’s all about how well you understand your client’s business. Yet how many environmental firms are still organized around their disciplines? Take an office tour of some of the largest firms in the business and they’d show you, “Here’s our hydrogeology group, over there is our air group, that’s our wetlands group...” and so on. These same firms will tell you that it’s a top priority for their people to cross sell. But what they don’t get is having this type of organization structure does nothing but build walls between groups so they don’t cross sell. I constantly hear stories in firms set up around disciplines how a client of their hydro group had no idea they did air work, and vice-versa. Set it up around clients! Get off the idea that environmental is a market— it’s not. I hear this all the time— in some cases from the CEOs of big firms— they talk about the “environmental market.” And I always tell them, “There is no such thing!” Just like there’s no such thing as an “engineering market” or an “architectural market.” You won’t succeed by being a price leader. Every few months or so, another story breaks about a big firm getting bigger, buying every tank testing firm in the southeast, or every environmental lab in the northwest. When you read the interview with their chairman/CEO/CFO, what usually comes out is how they plan on dominating the market by being the lowest cost provider of these services to a huge group of repeat clients. Well guess what? The largest rarely ever has the lowest production costs. Someone else can always do it cheaper! I believe that it’s preferable to be better, not cheaper. That comes from paying what it takes to get and keep good people; spending money on training; buying and maintaining the best computers, software and other equipment; and spending money on office facilities, PR, and marketing. Outspend your competitors on marketing. If the average firm you compete with spends 5% of revenues on marketing, maybe you ought to spend 10% and see what happens. My bet is the top-line growth will make up for the additional 5%, and you’ll increase your profits and the likelihood that you can sustain that success for a longer term than you would otherwise. Change your accounting/billing system. If you can’t get a daily cash flow report, you’ve got a problem. If you can’t get an on-line project status report, you’ve got a problem. If you can’t send a bill out along with a Phase 1 site assessment report, get an 8-week cash flow forecast, or sort accounts receivable from the oldest to the freshest, you’ve got a problem. If you need new software, buy it. If you need different people in accounting, hire them. This information is critical to your livelihood! Put your principals back to work. The good old days of having partners in environmental consulting firms that average 7% job chargeability are long gone! Yet, not all firms have to come to grips with this. They’re still sitting around strategizing, or making one business development call a week, or farting around with some professional association, instead of doing honest work that someone will actually pay them to do. I say get these people (even the president, in a smaller firm) back out there. They need to be managing projects, making field visits, running calculations, writing, going to meetings, and in short, doing something to earn their keep! Stop trying to do it with sales people! This is not what I’d be spending my marketing dollars on. When you stop to think about how much money these people cost you versus what they can bring in, in most cases, they aren’t a very good investment. Sure— there are some really hot business developers who sell 20 times what they cost, and I wouldn’t run them off, but these are the minority! Most of the sales people I meet really don’t know much about what they are supposed to be selling and have absolutely no compelling logic to offer a potential client on why they should hire the firm. Start looking to buy or be bought. I hate to sound negative, but many of the troubled companies we work with would be better off if they teamed up with other firms. One way to do this is to buy or be bought. I still think there’s an opportunity for a number of these smaller firms to combine, shed redundant overhead, and create some excitement in their staffs about the combined enterprise. If it were me, I’d look for decent firms that I could swap stock with, those that were serving some of the same types of clients my firm served, but doing different things for them. Or I’d think about who might be interested in swallowing up my company, preferably a firm that knows how to succeed in a mature market as evidenced by their revenue growth and profits. Clean up your dumpy offices. While I have been in a few environmental firms whose office looked like the Taj Mahal, most look like they were furnished with the cast-offs from five different consulting engineering companies whose owners decided to shut down their firms when they retired! It’s GSA desks and duct tape, along with dirty carpet, warped laminate bookcases, and bent mini-blinds. I’ll tell you what— if I were one of these large, private-sector clients that so many environmental consultants are chasing, I sure as heck wouldn’t want to deal with a fourth-rate company for my high-risk consulting needs! Don’t panic and think this business won’t ever get better— it will. I was in this business when we had 18-20% interest rates; today they are 8%. I was in this business when Houston had higher housing costs than Palo Alto; today Palo Alto is probably five times as high as Houston. I was in this business when the Dallas/Fort Worth area was dead; today it’s red hot. I was in this business when you could sell an asbestos technician’s time for six times what their raw labor rate was; today it’s about 2.6. I was in this business when the owners of firms were supporting Democrats; today principals are Republicans to Democrats by a ratio of 2.5 to 1. I was in this business when you wouldn’t even take your jacket off in the office; today I see professionals wearing shorts to work. I was in this business when 35% of the architects in Boston were unemployed; today no one who wants to work isn’t working. Times will change. New laws will be created. Political tides will shift. What’s not hot now will probably come back.Originally published 6/23/1997
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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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