If firms employ these operational and financial strategies, their chances of weathering a downturn, regardless of how bad it is, will increase.
Last week, June Jewell outlined five ways to insulate your firm from the worst elements of an economic downturn. This week, she provides another five things a firm can do to prepare for a slump, one that is sure to come at some point in the future.
- Improve business management processes. Many firms are still doing things the way that they have been done for years. Unless you are constantly improving how you manage your business, you are falling further behind and will experience waste. Inefficiency comes in many flavors including redundancy, non-integrated systems, spreadsheets, and inconsistency between offices and teams. A business management assessment is a great first step to understanding weaknesses in business operations and provide a clear path for improving.
- Operate as if the recession has already happened. Many firms wait until it is too late to make the needed changes to their spending, hiring, and investing practices. By operating as if work is hard to get you will position your business for more fiscal responsibility and lean operations. The only caveat to this advice is to ensure that you continue to invest in areas of the business that will give you leverage and improve project performance.
- Focus on client relationships. Your existing clients are your source of future success yet not all clients are created equal. Make sure you are focusing on those clients that provide the most profit and growth potential for your company. Many firms do not intentionally focus on how to grow their business through existing client relationships. A client retention plan for your best clients is a strategic way to ensure your business will thrive during an economic downturn.
- Create financial rituals. One of the challenges that many A/E industry leaders struggle with is holding project managers and employees accountable for hitting goals and achieving financial results. When I explore further, I often see a lack of financial rituals, including regular meetings, to keep focus on metrics and financial progress. Your teams are very busy and often we fail to pay attention to key numbers until it is too late. A regular rhythm of meetings and reporting will create better habits and serve to change your culture to one that will benefit you greatly during a recession.
- Train staff to improve project performance. Many firms lose money on projects because of all the gaps identified above that lead to scope creep, inefficiencies, and lack of accountability. By training PMs and other technical staff about the importance of profitability and financial best practices, you can set your firm up for better financial success and eliminate costly budget overruns.
By increasing the operational and financial performance of your firm, you can make your firm more valuable, efficient, and better prepared for any economic climate. Whether the next recession is big or small, long or short, having a lean and operationally optimized business will go a long way toward long-term survival and growth.
June Jewell is president of AEC Business Solutions. Connect with her on LinkedIn and learn more about how to improve your firm’s financial performance at aecbusiness.com.