Dealing with eroding profitability

Eroding profitability. Never good. Never fun. The result is less and less money to go around.

I’m not going to talk about the obvious things such as labor costs that are too high, overly lavish offices, or too-generous comp-time policies. Those are the easy things to spot and I sure hope you don’t need our help with them (though we would be glad to do so if you need it!).

That said, there are other factors to consider, including, but not limited to:

  • Staff morale. Take a good look in the mirror. Are you doing anything to demotivate your staff? When everyone heads out the door at 4:52 p.m. it’s possible (though far from a certainty), that you could inadvertently be turning off your people. Bad policies? Bad communications? General nastiness of management? Too selfish? Time for some introspection. For a firm in this business to be consistently profitable, you need all hands on deck. And they need to be giving more than 40 hours a week to the job.
  • Raise fees. Always more fruitful than micromanaging the minuscule fee you have. Ask for more money! And if you don’t have the willpower to do it, find someone else who will. We have so many firms telling us that they are busy well beyond their capacity and yet they still won’t raise fees! I don’t get it! Low fees make it impossible to be profitable. And while you’re looking at fees, cut back on who can quote them and instead let your gutsiest people take control of this process.
  • Do more of what you do best and less of what you don’t do so well. This has been a recurring theme in my writing, talks, consulting engagements, and life! Spend your time doing what you do best versus trying to turn around the stuff that isn’t doing so well. This applies to individual offices, markets you serve, disciplines you provide – and your own personal self. Always worth some introspection to see whether or not you’re spending time capitalizing on your opportunities or, instead, solving problems and putting out fires. There’s a big difference. And it affects your profitability.
  • Get better accounting and reporting. One of the ways companies in the AEC industry lose money is by simply not understanding what is coming in and where it is going. Good accounting and financial reporting is beyond crucial. It isn’t a luxury that you do if you can afford it. It is a must that every business needs to survive and prosper –  i.e., to make a profit. Make sure you are asking the right questions – and getting the right answers to those questions.

I could go on but I’m out of time. Enjoy your summer, folks! It’s here!

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

Posted in Articles | June 12th, 2017 by