There are a few basic traits that differentiate firms that make money from those that scrape by.
Chad Clinehens and I were talking in the office yesterday about why some firms we work with make money and others seem to struggle with it. There are some basic differences worth noting. The following observations are based on 35 years in this business and working with thousands of A/E/P and environmental companies:
- Profitable companies understand why it’s important to be profitable. They know everyone feels better when the enterprise is successful. They know that they need profits to be able to pay people well and keep building their teams. They know they need profits to buy other companies and accelerate their growth, to improve their IT systems, to pay for training, to spend money on marketing – and for many more investments. These people don’t need to be sold on why profits are necessary!
- Profitable companies have management that expects to run a profitable business. Believe it or not, not everyone out there goes into business with the assumption that they will, in fact, make a profit. Some believe it’s immoral to do so. Some just think you can’t do it in this industry. And some set such low goals and budgets that they aren’t going to be profitable. In the last year, we have twice seen companies set annual budgets to make $0 profit – and these were not small companies. How can you expect to be profitable when your goals don’t even describe a profitable outcome? You can’t!
- Profitable companies have management that takes action. They don’t just wring their hands or delegate the problem to a committee that cannot even meet because they have too much project work. They act. And they act quickly. They know that you cannot rationalize for why you aren’t making money and instead have to match costs to workload. They know that you cannot afford a losing month because you have to make up for it next month and that losing months kill morale and motivation. They just plain DO what they need to do every month to make a profit, even if that means doing hard stuff that they don’t like to do.
- Profitable companies have owners and managers who have a healthy self-esteem. They don’t go into a new client relationship expecting to get beaten down on fee or to have AR collection problems. They don’t think they should just work for anyone who will give them a job. They know they are good – heck, they know they areBETTER than good – and WILL be paid accordingly. Because they have high self-esteem they don’t want to waste their time. So, all of these good things happen and the virtuous cycle repeats itself.
I know this probably sounds terrible to some of you, but I can meet a CEO of a company in this industry and form an opinion within just a few minutes about whether or not that person is likely to be running a profitable business. I’m not always right, but I am right a lot more than I’m wrong about it. The defining characteristics above are only part of the story; the rest of it is not so clear. I’m not so sure charisma is such a bad thing, in spite of Jim Collins’ work in Good to Great
. But, that’s the subject of another article!
MARK ZWEIG is founder and CEO of Zweig Group. Contact him at firstname.lastname@example.org.
In response to Mark Zweig’s column in TZL issue 1113 on July 27, reader Chris Hillmann, president and CEO of Hillmann Consulting (Union, NJ), contributed three lessons he’s learned:
- Serve a charitable cause (or multiple causes) together as a company. We do it every year, but this year we are doing it 30 times (actually more like 40) to celebrate our 30th anniversary. You can imagine how much this has built camaraderie within our team and with some of the client teams we volunteer with … not to mention how good it feels. Imagine waking up to emailed photos of children an employee you sponsored is serving at an orphanage in Haiti or the thanks we received from a couple who lost their home in Hurricane Sandy as we put the finishing touches on their new home for Habitat for Humanity.
- You’ve said it before, there is no substitute for personal contact with your clients. So, get out of the office often, even just in the evening to attend cocktail networking events or, better yet, evening charity functions, if you are too busy 9-5.
- Our first attorney 30 years ago taught me the value of respecting the corporation. Pour money back in, and it rewards you with a healthy balance sheet, which our banking and insurance clients find very appealing. I asked our business banker back in the throes of recession in 2009 why we were still a good risk. He told me stories of owners with multiple vacation homes or big boats who were at the doorstep of bankruptcy because of lavish personal spending at the expense of retained earnings. The bankers simply love the respect we give the business. Don’t kill the golden goose!
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.