The struggle with subscale

These firms often rely on few clients, multitasking staff, and undocumented processes, creating volatility, inefficiency, and growth challenges.

According to U.S. census data, 80% of engineering firms and 90% of architecture firms have fewer than 20 employees. Those figures rise to 97% and 99%, respectively, for firms with fewer than 100 employees.

Most architecture and engineering firms are subscale.

But what do we mean by subscale?

There’s no formal definition and no precise size of firm that signals “scale.” However, here are some of the signs of a subscale business (in any industry):

• Difficulty absorbing a loss of one client
• Employees wear two or three (or 10) hats
• Certain functions are single-threaded (e.g. only one finance employee)
• Processes are “in someone’s head”

The same endemic problems for these subscale firms tend to crop up over and over again. This article outlines the top five we see when talking with firms, plus spells out how technology can help support a lack of scale and allow smaller firms to operate like and compete with larger ones.

• Volatility:
  • The problem: Lower volume naturally means higher volatility. At a small firm, losing that big client could mean 20% of revenue walks out the door at once. At a larger firm, that might only be 2% of total revenue. This is especially challenging in an industry that prides itself on working with current clients; the downside is client concentration. Even if clients aren’t churning, lower volume naturally means higher sensitivity to project delays or slow-paying clients.
  • Tech support: While technology isn’t a panacea for volatility, business technology can improve finding and winning new clients, forecasting, project delivery, and client management. It can also shrink accounts receivable balances when that technology supports faster invoicing, and when automated client reminders and electronic payments acceptance leads to clients paying faster.
• Recruiting and retention:
  • The problem: Consider you’re the leader of a 30-person A/E firm. You need to make your first and only finance hire. What are your odds of success? I’d argue quite low. Most firms at this scale don’t have stringent hiring practices or the know-how to evaluate functional experts. Without the brand-name scale can bring, hiring the best project staff can also be more difficult. Retaining employees becomes an additional challenge when roles and career paths are unclear, or when there’s little process maturity to support professional development.
  • Tech support: Technology can serve as both a talent multiplier and a safety net. By embedding financial best practices into the software – like budgeting, billing, reporting, and cash flow forecasting – firms reduce their reliance on any single person’s expertise. Tools that guide workflows and surface insights also help less-experienced hires operate with confidence. In effect, the right platform allows a small firm to punch above its weight, making each hire more effective and the firm more resilient.
• Specialization:
  • The problem: At subscale firms, employees often wear multiple hats: designing, managing projects, handling finances, and even chasing invoices. This generalist approach can lead to an inefficient staff who loses productivity due to constant “context-switching”, which can lead to inefficiencies or mistakes. The issue is compounded by an industry-wide tendency to promote from within or hire others with similar technical backgrounds, rather than functional experts in operations, finance, or HR. As a result, firms may lack specialized skills in areas critical to scaling and sustainability, even if their technical design work is strong.
  • Tech support: Smaller firms cannot afford to hire functional experts for every function. Business technology can help fill the expertise gap. Tools that embed best practices – like project-based accounting, time tracking, or pipeline forecasting – allow firms to function with more structure and fewer errors. Automated workflows and dashboards reduce reliance on tribal knowledge and help non-specialists make smarter decisions faster. With the right software, even a small team can operate like a more specialized one.
• Business development:
  • The problem: Many small architecture and engineering firms rely heavily on repeat business and referrals, often from a tight circle of long-time clients. While this speaks to strong relationships, it also creates risk – especially if the pipeline slows, a key client moves on, or a firm leader retires. Most architects and engineers don’t identify with traditional marketing or sales, and as a result, business development tends to be ad hoc, reactive, and underfunded. Without consistent outreach, follow-up, or pipeline tracking, the firm’s future work is left to chance.
  • Tech support: Technology brings structure and scalability to business development. CRM tools tailored to project-based firms help track leads, manage follow-ups, and forecast future work. They also make it easier to mine past project data, identify cross-sell opportunities, and systematize client outreach. By using software to create repeatable marketing and sales processes, firms can grow intentionally – not just when the phone rings.
• Process excellence:
  • The problem: In many subscale firms, processes live in people’s heads rather than in shared documentation. This lack of standard operating procedures means every project manager may run projects, manage resources, or handle invoicing differently. While this can work in a tight-knit team, it creates inconsistency, inefficiency, and risk as the firm grows or experiences turnover. Without standardized processes, the quality of outcomes varies, and scaling operations becomes nearly impossible.
  • Tech support: Business software encourages and enforces process consistency. By embedding workflows into the platform – like how time is tracked, how invoices are created, or how change orders are approved – technology helps standardize practices across the firm. It reduces reliance on institutional knowledge and enables new employees to ramp up faster. In short, good software acts like a digital SOP, ensuring the firm operates with more discipline and less variability, regardless of who’s at the helm (of the firm or of the project).

One more to wrap up: expenses versus investment

I see the five problems above all the time in subscale businesses. (Frankly, our company has 300 people, and it often feels like we’re subscale.) Technology can help firms operate like and compete with larger firms.

However, there is one common theme I hear across subscale firms: their approach to expenses versus investments. Most small/medium firms think of defining processes, implementing software tools, etc. as expenses – and expenses are to be avoided. Most larger firms think of these as investments that benefit the ongoing health of the staff and business.

A shift in this mindset might be the most important step for subscale firms. 

Matt Cooper is CEO of BQE Software, Inc. Connect with him on LinkedIn.