Why Be a Hot Firm?

For each of the past five years since we created The Zweig Letter Hot Firm List, there have always been readers out there who write in to ask why we are so obsessed with growth here. Why don’t we offer a contest for the firms with the best training programs? Why don’t we put out a list on which firms are the most profitable? While those are all good questions and it would be fun (and perhaps enlightening) to see who ends up on those lists and why they are there, it would be hard, if not impossible, to collect good date on these things. Firms would not participate, or the evaluation criteria would be too hard to come up with. In any event, it seemed to be time once again to remind all of our readers why being a growing firm and getting on The Zweig Letter Hot Firm List is a good thing: Employees like it hot. Just like some folks can’t eat their Mexican food from Taco Bell without large quantities of “Diablo” hot sauce, there are people in this business – you can say they are either cursed or blessed (depending on your point of view)—who need to work in a “hot” firm. These people get bored easily. They need new challenges. They aren’t content to keep up with their peers—they want to be ahead of their peers. They won’t wait years to find out if they are going to be made a principal or not. Being employed by one of the leading firms that does what they do isn’t good enough. They want to be at the firm that DOMINATES its markets, no matter how small those markets may be. They will never be content with second best. Clients like it hot. There are some clients who only want to work with the firm that is the rising star in its field. There is prestige in working with a hot design firm. When you see firms like WD Partners (Columbus, OH) – Hot Firm #3 on this year’s list – doing as well as they are serving retail clients, I’m sure that part of their success is due to their continuing success. That may sound crazy, but successful organizations want to deal with other successful organizations. WD is domination their target markets. Everyone in business likes a winner. Lenders like it hot. Those on the outside of design or environmental firms who supply us with the financing we need for equipment and cash flow like to see a firm that’s growing. It’s an indication of the company’s health and acceptance in the marketplace, and that helps them feel warm and fuzzy. Of course, lenders also want to see good cash flow, strong balance sheets, and profitable operations, too, but these things usually go hand-in-hand with having a firm that is growing faster than its peers. Investors like it hot. Many of those outside of our “industry” (if you can call it that) who invest in A/E and environmental firms are more interested in growth than they are short-term profit distributions. And the growth in value is closely related to the growth in revenue (not to diminish investor requirements for strong EBITDA these days, however!) The public at-large likes it hot. Everyone likes a success story. Hot firms get more media coverage. Publicity helps build the brand name. It makes the phone ring. It reduces the risk of hiring the firm. It makes the firm more interesting to investors. It drives good people to apply for jobs there. It gives the firm clout in purchasing. When an A/E/P or environmental firm’s business success makes it known in the community to the public at-large, the company has crossed a major milestone in its evolution that will bring benefits for years to come. I don’t know how many more reasons any owner of an A/E or environmental firm needs to want to be a Hot Firm. If you are on the list this year, congratulations! And if not, good luck making next year’s list! Originally published 6/28/2004