Making money in the A/E business

As a student of this “industry” for more than 37 years now, I have seen a lot of companies and their associated financial statements. And here’s what I have noticed: Some people make a lot of money in this business while others don’t. When I look at the differences between the highly profitable companies and those that aren’t, here’s what I see:

1. “Working” owners versus non-working ones. The profitable companies have owners who are highly engaged with their clients and projects versus the ones that are simply working as administrators. It just makes sense. As a result, they have a much better feel for what’s going on both inside and outside of the firm and are revenue generators as opposed to cost centers. In unprofitable companies the owners are disconnected from the business.
2. They ask for – and more importantly, get – good fees. This is another huge problem in this business and it simply isn’t talked about enough. We spend more time talking about how to manage a meager fee and making a profit than we do about how to get a good one in the first place. The profitable firms do stuff not everyone else does. They charge a lot and deliver outstanding service. They drive demand for what they do beyond their capacity to do it so they are fine with saying “no” when they must. Unprofitable firms are always in the opposite condition. They need every job and will tolerate abuse from their clients.
3. They have high performance standards for their people. The people who make money in this business just don’t believe in carrying anyone who won’t carry their own load. They have high standards for themselves and everyone else who works there and aren’t afraid to move people out who don’t meet those standards. Unprofitable companies have legions of people they aren’t happy with, but they never do anything to get them turned around or change them out.
4. Their owners and managers – and as a result, their employees – think great things are possible. They are willing to try hard to achieve big goals instead of setting expectations so low they will always be met. A bigger, bolder vision creates better results. Why shoot for a grade of “B” when an “A” is possible?
5. They have really good accounting. That means that the data coming from accounting on the performance of the firm, or units in the firm or projects, are accurate and trusted. It also means the profitable companies get their numbers out faster AND they share them with their people. Unprofitable companies have data no one trusts, and it comes out too late to act on it.
6. They have great pride in what they do and love it. How can you put a price on this? It really is a defining characteristic of those who do exceptionally well and those who just squeak by. The passion for the work – coupled with high standards of excellence – simply produces a better end result in terms of the product and the financials. This in contrast to the firms where people are only working for the money and don’t really care that much. Clients pick up on this and prefer using these firms.

I could go on and on. This list could probably have 20 or 30 points on it but these are some of the big differences between those who bring in the big money and those that don’t. What has been your experience? Let me know. We love hearing from you.

Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.