Why is your firm for sale?

Screen Shot 2016-07-20 at 12.22.12 PMIf you figure out the answer to that all-important question on the front end, you’ll have a great chance of closing on the right M&A deal.

One of the key responsibilities of any business owner is to lead their firm on a path for solid, sustainable growth – and to be open to evolving as the market demands and opportunities arise. Steady growth can mean organic growth – expansion by developing your own resources, or inorganic growth – expansion through M&A. But in order to convince someone else to join your firm, you need to be able to clearly communicate the vision you have for what the future could be like if the firms join forces.

Failing to communicate the vision and the strategic fit is a common misstep that does not apply just to buyers. Too often, we hear sellers that do not really know what they bring to the table. It is very hard to pitch a firm to a prospective buyer when we have no idea what we are “selling.” Is it capability? Expertise? A niche? Why this particular buyer? Why are they interesting to the seller? The selling company’s CEO needs to be able to effectively explain to potential buyers why the future would be better for the buyer if they combined entities. Establishing the reason for the conversation and aligning each firm on why this decision makes sense can help both sides ease the tension that inevitably comes from exposing your business to the scrutiny of an outsider, and can help keep the focus on the future, not just on the past.

One of the first questions that potential buyers ask us when we contact them on behalf of sellers is the motivation for the sale. Buyers want to understand what the seller wants – is it a retirement strategy? A growth play? Is the seller tired of the day-to-day of running the business? Do we need “big firm” resources to go from average to spectacular? The answer to this question is an important one, and one that potential buyers will assume an answer to before the first conversation. Managing the answer to that question requires some introspection, and often some coaching from a consultant or trusted advisor as well.

Regardless of the firm’s current performance, unless the potential buyer can get excited about the future of the firm and the ability to add value to the buyer’s clients, employees, and capacities, you will be hard pressed to close a deal that isn’t perceived as a “turn-around” attempt. Strategic buyers can bring an open mind to the table and can get excited about how the firms may be able to work together. But they should not be expected to fill in all the pieces themselves. Instead, buyers should be ready to answer what they do exceptionally well, how they can take that model and apply it to other companies, and why the employees and clients of the seller would be happy to be part of the buyer’s enterprise.

Leaders of both firms need to talk constantly, respond immediately, and remember throughout the process the “big idea” that got them talking in the first place. That “big idea” – the overarching value proposition that drove the decision to pursue M&A – can be a link that binds firms when the negotiation gets tough.

Jamie Claire Kiser is Zweig Group’s director of M&A services. Contact her at jkiser@zweiggroup.com.

This article is from issue 1163 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here to subscribe or get a free trial of The Zweig Letter.

 

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2016 Principals, Partners & Owners Survey: The stress & long hours taken on by firm owners does not go unrewarded

Zweig Group just released the 2016 Principals, Partners and Owners of Architectural, Engineering, Planning and Environmental Consulting Firms Survey. Over the past 30 years, this publication has picked the brains of some of the industry’s top talent and gleaned interesting insights from how they run their businesses to how they view the industry today.  As always, some interesting statistics were derived from the responses of the seventy-five principals and partners who contributed to the survey. Ninety-five percent of respondents were owners in their firm and over half of them owned at least 25% of their firm.  That is a considerable amount of ownership when you think about the net service revenue (NSR) of the firms represented, whose mean and median NSR were $9,004,000 and $4,100,000, respectively.

These are professionals who have devoted their life to the industry and who have most certainly taken their licks along the way.  In the 2014 Principals, Partners and Owners Survey, only 4% of respondents thought there was any possibility that they could be laid off in the coming year.  This year, that number was up to 12%.  Though this has been a profitable few years for A/E/P firms, the outlook for the next few years is somewhat uncertain.  Blame it on the election year or general economic trends, but owners of A/E/P firms are well aware of the implications of underperformance. Though only 12% took a pay cut last year, the median pay cut for a principal was 25% of their base salary.  Now that is a significant reduction in income!

We also found that most principals (76%) were generally pleased with their careers and had met or exceeded their career goals.  In fact, even more (82%) would recommend the career path to a friend or family member.  But becoming an owner in a firm is not an easy thing to do!  Most owners must have 10 years of industry experience, be with their firm for five years and have both a bachelor’s degree and professional licensure.  And that is just the beginning.  Nineteen percent of respondents said they had to purchase a minimum amount of shares to become a principal.   The median ‘minimum amount’ of shares to be purchased was 2% (which could be a considerable sum of money!).  Twenty-two percent said they received at least some shares through incentive programs and 49% said they had to borrow money to purchase stock or an ownership percentage in their firm.  A quarter of respondents borrowed money from their firm at an average rate of 3% over five years.

What does the typical day of an owner look like?  Are they spending more time managing the firm, marketing and developing business, or providing technical design support?  An interesting discrepancy we found was that principals in firms with a declining growth rate over three-years were only spending 7% of their days on marketing and business development.  These same owners felt like they should be spending closer to 40% of their days on marketing and business development.  This is a large gap and represents the importance of proper marketing and business development initiatives at the ownership level.  In comparison, owners in fast growth firms are spending over 20% of their day on marketing and business development initiatives.

The stress and long hours taken on by firm owners does not go unrewarded, though.  The average base salary of a firm owner was near $140,000 with 22% of that base being awarded as an additional bonus, and another 28% being distributed as a shareholder distribution.  This brings the total compensation for an A/E/P firm owner up to around $200,000.  Not too bad for a year’s work!

Zweig Groups 2016 Financial Performance Survey found that the median utilization rate, or chargeability rate, for A/E/P firms was 60%.  This is calculated by taking the firms direct labor costs and dividing them by total labor.  Chargeability is a metric that is often used to determine how effective a firm is at using its labor resources. For an owner, frequently the most effective use of their time is spent working on projects that are not directly billable.  We found that most owners were less than 20% chargeable.  Firm management, marketing and leadership activities were the highest priority, non-chargeable functions that respondents cited as daily activities.  Though hourly billing rates decreased this year from 2015, the average billing rate for a principal was still $178 per hour.  Environmental consulting firms had the highest median billing rate at $218, while single discipline engineering had the lowest median rate at $143 per hour.

Being an owner in an A/E/P firm certainly has its perks, but it is also a job that comes with lots of additional challenges.  To an extent, you are in charge of your employees’ well-being, their families’ well-being, and you are exposed to the volatility of the market.  When business is good owners are making great money, but they are also having to really put in the extra effort to make sure their firm is performing.  When times are not so good, as an owner, you are still responsible for the firm and its employees.  These are only some of the challenges that principals, partners and owners face.  But when it comes to job satisfaction most owners cite that it is both financially and emotionally rewarding.  If you are thinking about becoming an owner in a firm or starting your own, this is publication is a must read!

Click here to learn more about the 2016 Principals, Partners, & Owners Survey: https://zweiggroup.myshopify.com/collections/frontpage/products/2016-principals-partners-owners-survey?variant=21558748929

 

 

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Collect your money

3OEXFDXO6KThe subject never gets old and you can’t talk about it enough. Collecting money. Architects and engineers are horrible at it!

There are several reasons for this problem, including:

  1. ‎Poor self-image. If you don’t think you deserve to get paid – guess what? You won’t get paid! That applies to so many architects and engineers who willingly take the abuse from bad clients who mistreat them. As someone who is a real estate developer myself I can tell you 80-90 days to pay a professional service provider is NOT normal. I feel bad if we take 30 days to pay ours. You should not work for a client and expect to be treated poorly! You deserve to be treated well!
  2. Can’t get bills out. Some firms simply won’t send bills out. A geotech we have used, for example, has sent us some bills as long as eight months after the service was provided. We have to call them and ask them to bill us. Sorry, but that’s ridiculous! Should never happen. Your clients should not be calling you asking for an invoice. And the longer you wait to bill – the less likely you’ll ever collect. Hire someone if you have to and get the damn bills out.
  3. Won’t use “good cop/bad cop.” The actual people who are the front-line service providers (i.e., principals and PMs), should not be the ones asking the client to pay them unless there’s a problem related to what they did. This is the domain of the F&A people (finance and accounting). Use them for it! Protect the relationship from awkwardness by putting your accounting folks out there to do your dirty work. They don’t mind. They really just want to get paid so the firm can pay its bills!
  4. Won’t follow proven, established procedures. There’s a science to this stuff. We have written a million articles on it as have many others. Do certain things and you’ll get paid faster. Don’t do those things and you won’t get paid. Don’t over-complicate it and don’t act like you are the first firm in the world to deal with this problem. You aren’t! There’s a process you need to follow. Your bills need to look a certain way. Certain things should generally happen at certain times. And by the way – don’t let any principal who wants to stop the process stop it. That’s bull.

This week’s issue is all about our Hot Firms and Best Firms to Work For. ‎These companies are generally much better business people than the norm for our industry. Look at how they do things. Copy. Repeat. And then maybe we can all be partying together at next year’s Black Tie Dinner and our Hot Firm Conference and A/E Industry Awards Conference (we’re at the Arizona Biltmore in Scottsdale this year!).

Meanwhile, collect your money!!

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

This article is from issue 1162 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here to subscribe or get a free trial of The Zweig Letter.

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Are you in a marketing rut?


Postcard-MockUp_3Take a good hard look at your firm and what it’s saying to the world. If things appear stale, it’s because they are. Fix it or lose out.

Here are ten signs it’s time to make a change:

  1. Your marketing plan has been updated every year, but almost nothing has changed since 2007.
  2. Your social media strategy consists of the following:
    • Your boss routinely asks you how many Facebook followers the company page has and each new one is celebrated.
    • You haven’t had the time or inspiration to post anything on Twitter in a couple months, but it’s on the schedule for next week.
    • The most exciting thing on your Facebook is a picture of the company BBQ from the 4th of July – it even has a picture of Kathy from accounting eating some ribs that Bob made.
  3. Your firm’s president still thinks SEO is “one of those useless trendy marketing acronyms.”
  4. You only have one target audience and it’s mostly repeat clients.
  5. You’re very excited to start designing the firm’s Christmas card – in June!
  6. All of your press releases focus on new hires, except one from that time three years ago when a bridge project you were affiliated with was finally finished after 10 months of delays.
  7. You’ve been planning a website update for the past three years, but no one from the management team can decide if your firm’s name should be changed to a five letter acronym or keep all the last names of the founding partners in full.
  8. The professional photographer you used to take pictures of projects for your brochure has since retired and now lives in Pensacola.
  9. All of your graphic design work is done in MS Paint.
  10. Your prospective client list still contains the names from a tradeshow you attended in 2008.

If things are going well for you, and they probably are, you might be feeling that a shake-up or change would be unwise. But if you’re guilty of one or more of the above, it might be time to reevaluate your marketing plan, budget and staff. Change, invest, and re-invigorate yourself before it’s too late.

If you’re like much of the industry, 70 percent or more of your work comes from repeat clients. It’s a precarious position to be in. Would you like to ride your current wave of prosperity until you crash on the shore during the next market downturn? New firms are entering the market every day and old firms are finding new ways to innovate and market themselves. Don’t sit still and get comfortable with the same marketing methods and the same clients. It’s a matter of when, not if, you will get beaten by the competition.

Want some help? Contact me, or check out our upcoming A/E/C Business Development Training | Becoming a Better Seller Seminar  November 10 in Atlanta, GA.

We also have the 2016 Marketing Survey of A/E/P and environmental consulting firms. 1446739392-Msurveycover_web

A Guide To and Samples of Press Releases 

Christina Zweig is Zweig Group’s director of research and marketing. Contact her at christinaz@zweiggroup.com.

This article is from issue 1165 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here to subscribe or get a free trial of The Zweig Letter.

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Crisis mode

Screen Shot 2016-07-13 at 1.06.13 PMA good communication plan is vital when things don’t go your way, so put a little thought into who’s going to do the talking when people start asking questions.

Not a day goes by that you can’t find a story about a company trying to explain why something went wrong with their product or services.

Oftentimes, the stories are about something related to the company’s performance. Chipotle recently had issues with food safety at its restaurants. Macy’s and other department stores reported less than expected earnings. Lululemon, the fitness wear company, had complaints about the sheerness of its fabric.

How a company responds to a crisis can literally make or break it. Take too long to get your message out and people think you’re hiding something from them. That lack of communication can lead to mistrust in your company and in your leadership abilities, and that’s not good for business.

Hopefully, any incident involving your company is minor, but should it cause a death or serious injury, or a catastrophic financial loss, expect to be flooded with questions from your employees, the media, and the community. Consider these truisms: sex sells; if it bleeds it leads. For a major happening, expect to be the lead story, online and in local and national newspapers.

How you handle a crisis will say a lot about you and you’re A/E/P firm. Even minor issues can become large problems if not handled correctly and within a reasonable amount of time.

When handling a crisis, consider several things:

  • Bad news never gets better with age. Holding onto bad news in the hopes that your client or the community will forget or overlook an incident is not a recipe for success. Let your firm, your clients, and any other stakeholders know what has happened, so they can respond appropriately and in a timely manner. As a military commander, I gave all of my direct reports a “When to Wake Me Up” list. This helped my subordinates understand which events I deemed critical. If something occurred and it was on the list, they needed to call me immediately. If not, they could wait until the morning.
  • First reports are always wrong. You may have heard this expression before. Rarely will anyone have all the facts within the first few minutes. Be deliberate and methodical in your fact-gathering and avoid guessing until a preponderance of the evidence is available. If asked for an immediate comment, leave yourself some wiggle room for when you have to correct your first report. “Based on what we know at this time, we believe …”
  • “No comment” is no comment. Never give up an opportunity to tell your story. If asked for a comment when you’re not ready to provide a formal statement, there’s no harm in responding with a placeholder such as, “Our first priority is to ensure the safety of our community as we continue to gather information about this incident. We will provide more details as we conduct our investigation.”
  • Stay in your lane. A friend of mine, a retired Navy pilot and former Blue Angel demonstration team member, was recently asked for his assessment of the cause of a fatal accident involving a Blue Angel pilot and his aircraft. Rather than speculating about causes, my friend wisely refrained from venturing into an area for which he had no first-hand information. He deflected the question with a simple answer: “I’d rather not make guesses on what happened. I’ll let the accident investigation team finish their work and then we’ll all have a better idea of what happened.” Avoid spreading rumors while a formal investigation is underway.

I recommend preparing your firm for the day that will, hopefully, never come. Having an already developed crisis communication plan will make the process go as smoothly as it could possibly go.

  • Designate a public relations representative within your firm. Large firms may have a designated spokesperson, but too often it’s someone in the human resources or marketing departments who has never received formal training on how to handle anything more than a simple press release. Small firms should appoint someone to fill the role on an as-needed basis. In either case, your designated spokesperson must have unfettered access to your firm’s senior leaders. They are the voice of the firm, so they better have access to as much information as possible.
  • Take a proactive approach. Get out in front of the situation and let your stakeholders know you’re actively working to resolve the issue.
  • Coordinate and communicate. When handling a crisis event, bring all stakeholders together to share the currently available information. That way, everyone hears the same information at the same time. As an event progresses, you can always trim down the number of people required for each update meeting. For major events, consider setting a recurring meeting every four to six hours.
  • Attend a media training class. As with any training program, be cautious when choosing your media consultant. Some consultants are great, while others spout theory and lack the experience of crisis communication when a fatality or other significant event is involved. You’ll do your firm a disservice by sending an untrained spokesperson to face highly trained media.

Hopefully, you won’t ever have to handle a major occurrence, but chances are you’ll have to address some relatively minor ones. Having a plan in place will help you work through the event and can make the process a little less stressful.

Bill Murphey is Zweig Group’s director of education. Contact him at bmurphey@zweiggroup.com.

This article is from issue 1162 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here to subscribe or get a free trial of The Zweig Letter.

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The everything firm

1667As with most things in life, there is a point of diminishing returns when it comes to going after new work in the A/E/C industry. This is especially true when times are good, as they are now for many firms. Lots of opportunity does not mean that firms need to be going after everything that comes their way. It eans they can now be choosier and more strategic about the work they pursue. Many firms are doing more proposals and interviews than ever, yet they have not increased the size of their marketing and business development support staff proportionately. This is leading to decreased win rates as evidenced by the industry average dropping from 33% to 22% over the past year.

Going after everything limits the creativity and customization on proposals, interviews, and other business development support activities that set you apart from the competition. I see many firms doing two to three times the proposals they did just three years ago, but without any increase in marketing staff. Thus, higher probability and higher profit potential are being cannibalized by lower probability and lower contribution. Furthermore, the obsession with new work can erode your relationships and focus on older, established clients and the untapped opportunities with them. Here are a few simple business management techniques firms can employ to fight the tendency to go after lots of new work at the expense of better contracts and established clients.

  1. Be more strategic in every pursuit. Firms need to be strategic about what clients they pursue and who in the firm is tasked with leading those pursuits. This speaks to the need for annual marketing plans that outline what markets the team will pursue, what specific clients, and who in the client organizations the firm will target for development. When firms come to the realization that they are going after too much work and not getting the returns they want, oftentimes the knee-jerk reaction is to implement a go/no-go process or further complicating the one they may already have. Go/no-go processes can be helpful but they need to be very simple and most are not.

Relying on a long form of if/then statements can limit the one activity that you rely on for growth – the acquisition of new work. Go/no-go processes should focus on adherence to the marketing plan. If proper attention and strategic planning were put into the marketing plan, then decision making for what to pursue becomes easier. At the end of the day, all firms needto be thinking in terms of return on investment: What returns can we reasonably expect compared to the investment needed for each individual client and pursuit?

  1. It’s about matchmaking. When considering what clients to target, pursue those clients that have similar values to your firm. Are you a firm with ambitious growth plans that is trying to create the best place to work for your employees? Then an ideal target client could be all the municipalities that are the more ambitious and dynamic when it comes to attracting residents and investing in the infrastructure that attracts families and businesses. Those shared values can really improve your ability to develop a meaningful relationship and thus your chances of winning work. Also, match your people to the clients in these organizations. Make sure the people tasked with developing relationships have similar values, backgrounds, and other features that drive relationships. This is still all about relationships for many firms!
  1. Don’t forget your core clients. The euphoria of winning a new client can sometimes eclipse our focus on existing clients. Winning new clients and entering new markets is critical for every firm in the industry. However, we must always consider the opportunity for growth with existing clients as well. Most firms do not fully exploit the opportunities with their existing clients. That established relationship is gold and that could easily offer additional work or may offer another part of your company an opportunity to do work. This is called cross-selling; the action or practice of selling an additional service to an existing client. To be effective at cross-selling, your people must be fully educated on all of your services and have the incentive to sell those services even though it may not directly benefit them or their team. It takes an intentional and intense focus to provide the level of client service needed to both existing clients and new clients.

The bottom line is firms need to be more strategic in their pursuits. This is an age old problem. Firms go after everything and do better when times are good, and then decline when the market sours. Being more strategic and resisting the tendency to go after everything is the first step in diversifying the firm and setting it up to be more resilient in any market. Furthermore, being more strategic allows the firm to be more profitable as they focus more resources on the pursuits that have a higher potential for being profitable and have a higer probability of winning. Integrating an ROI (Return on Investment) mindset in your culture can revolutionize your pursuit of work and have a dramatic impact on the future of the firm. Stop being the everything firm and start being more strategic in your pursuits today.

Enjoy this advice? Subscribe to The Zweig Letter, Zweig Group’s Weekly management publication: https://zweiggroup.com/p-57-the-zweig-letter.php

Want more in-person advice? Check out our upcoming seminars here.

Or contact Chad Clinehens, Zweig Group’s executive vice president for individual consulting opportunities. Contact him at cclinehens@zweiggroup.com

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Lessons from Lucinda

876NVLPYMFWhat did I learn about running an A/E/P firm from a 62-year old former British equestrian Olympian? Quite a lot, as it turns out.

I recently had the opportunity to ride in a two-day clinic with Lucinda Green, a British equestrian and journalist who competes in eventing. She is most well-known for winning the Badminton Horse Trials a record six times, on six different horses, and she also took home team silver at the 1984 Olympic Games in Los Angeles.

Just as in business, in horseback riding you are never done learning. I try to keep myself educated through reading, watching others ride, and occasional visits to my coach. When I heard that Lucinda Green, the star of one of my favorite computer games from my youth, an Olympian, and one of the best jumping instructors in the world, was coming to a friend’s farm in Starkville, Mississippi, I couldn’t pass up the opportunity to ride with her.

Lucinda Green did not disappoint. Like any good coach she was tough and clear about areas that needed improvement, but also encouraging of each rider’s individual strengths. Her unique and clearly defined philosophies about riding left me with a lot to think about in my riding, and had some clear parallels to running a successful business.

Cross country is one phase in the equestrian sport of eventing.  For this phase, a horse and rider gallop at speed over 20 or more solid obstacles. Penalties are incurred for stops or fly-bys, for circling, and for going over an optimum time.  You need to quick, brave, agile, and most importantly accurate, in order to succeed in this sport.  Due to the high speed of travel and solid nature of the jumps, mistakes can have disastrous consequences in this sport.

So what does this have to do with the A/E Industry?  An A/E Firm is a lot like a horse – it weighs a lot more than you do, it has a mind of its own, and it’s responsible for carrying you through a variety of situations. You can hold the reins and try to dictate every single step, but sooner or later you will encounter some unexpected terrain and your horse may falter. No matter how strong your arms are, you will never be able to control every movement of your horse. In fact, the act of trying will only set you up for trouble. The last thing you want is a power struggle with a 1,000-pound animal on your way into a solid four-foot fence. Do you want a power struggle with your firm in the face of disaster? Absolutely not.  Every person in your firm has an important job to do, but they also have free will. You can harness this free will by empowering your people to use their own creativity and energy, or you can try to micromanage every aspect of every person’s job.

As a rider you can use your body to get your horse pointed in the right direction, then the rest is up to them. As a firm leader, you have to get your firm headed in the right direction, but you certainly can’t work on every part of every project.  You definitely can’t run the company, sell more work, answer the phones, and do all the accounting!

Lucinda stressed the importance of the rider’s “aids” or parts of their body that they can use to influence their horse.  These same parts directly relate to managing your firm.

A rider’s eyes are for intention. You always have to focus on where you are going next or your horse won’t know where to go.  Without intention and focus, the rest of your body can’t do its job properly.  As a firm leader, you have to have a clear and established vision. Your number one job is not to put your stamp on every project, but rather to set the trajectory for where you are going next.

A rider’s legs move a horse forward and also help with steering. As a firm leader it’s your job to create energy in your firm that will move it forward. A positive culture, enthusiasm, creativity, all these things will create new opportunities for your firm and be extremely valuable to surviving hardships.

A rider’s hands are for steering and putting the brakes on when necessary. Lucinda stressed that it’s OK to slow your horse down when faced with a complex or narrow obstacle that demands a lot of accuracy, but you can never stop the forward motion of your horse’s legs. Stopping the forward energy of your horse usually results in crashing a fence.  As a firm leader you can never let your firm come to a standstill. It always has to grow and move in a focused direction.

Some other lessons I learned from Lucinda Green:

  • Prepare for the worst. Many A/E/P firm leaders think playing it safe means moving very slowly, taking a long time to make decisions, and never pursuing growth. In situations such as a bad project, a rough economy, or policy changes – all of which are inevitable, by the way, no matter how safe you play it – you need to giddy up and get the heck out of there, not lollygag.
  • Take small risks every day. Lucinda stressed how important it is to create tiny challenges for your horse to overcome, building on each achievement. Firm leaders need to take risks to grow.
  • Embrace the ugliness. Your horse has to learn from its own mistakes sometimes. You can point your horse at the fence and encourage it to go over, but where it puts its feet has to be its own choice. If you give your horse enough opportunities to position itself, it will learn and start jumping better and more accurately. As a firm leader, you have to let people make some choices for themselves and learn from the results. They will get quicker, smarter, and better able to do their jobs as a result.

Christina Zweig is Zweig Group’s director of research and marketing. Contact her at christinaz@zweiggroup.com.

This article is from issue 1161 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here to subscribe or get a free trial of The Zweig Letter.

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The romanticism of mediocrity

Screen Shot 2016-06-28 at 9.45.27 AMFirms like to talk about growth, but fear of risk, and even laziness, contribute to lackluster marketing and timid strategic plans.

If asked to offer words that describe your firm, would you use ordinary, average, middle-of-the-road, uninspired, undistinguished, indifferent, unexceptional, unexciting, unremarkable, run-of-the-mill, pedestrian, prosaic, lackluster, forgettable, and amateur? Of course not. You would use words or phrases like superior, innovative, progressive, top-quality, great place to work, fun, experts, and so forth. The unfortunate reality is that our approach to business does not match what we say. Here are several areas that stick out to me as suffering the most from this over-glorification of being average.

  • Marketing and branding. While so many in this industry complain about the perceived continual slide toward becoming a commodity, they do little to combat it. Differentiation is the key to fighting commodity perceptions and pressure on fees. A successful differentiation strategy will move your firm from competing based primarily on price to competing on non-price factors such as quality of service and final product. There are two issues that contribute to the weakness of differentiation strategies – avoidance of risk and just plain laziness.

    You must be intentional and willing to take risks by identifying where you are strong and where the competition is weak. Instead, we look to what others are doing and often mimic them. The result of this lazy approach is that nearly every firm in the industry is a “multi-disciplinary firm that offers cost-effective, innovative solutions.” The remedy here is to develop a true marketing function in your firm. I am not talking about hiring more proposal coordinators. I am talking about real marketing and branding talent that can work with your top leadership in developing a differentiation, branding, and promotion strategy that will transform the firm. If you want to learn more about this type of marketing, Zweig Group is launching a seminar titled Marketing and Branding for AEC Firms that will take a deep dive into this very subject.

  • Growth plans. Another area that suffers from mediocrity is growth plans. Firms do not set high enough goals and then pursue those goals with an aggressive effort. Instead, we say we want to grow, but then we stay busy getting work done when the market is hot. When the market cools, we look back and wish we had done more to make that growth sustainable. I also run into firms that say they don’t want to grow for fear that it will change them into something they are not. When it comes to growth, we just don’t get serious about it. The fact is, you either grow or you die. Which side of that equation do you want to be on? If you don’t evolve and change in a growing way, you will certainly become somebody else – a nobody.

    The solution here usually starts with an authentic strategic planning process that is driven by research as opposed to philosophy. After you have a growth oriented vision and plan in place, you must work daily to execute it. Every operational decision must be done with the overall plan in mind, and the incremental steps taken that are necessary for ultimate success.

  • Organizational structure. Another huge problem is firms’ organizational structure. Investment in staff in this industry is highly reactive. Furthermore, there is an inherent resistance to adding “overhead” or support staff until we are beyond crisis level. This reactive approach to building the organization breeds mediocrity. When the market is hot, we are all fighting for the same talent, often settling for any “warm body” we can get to help handle the work load. Our resistance to authentic strategic planning and organizational investment sets the table for the feast and famine cycles from which so many firms suffer. The solution here is to use the plan mentioned above to drive investment in staff and resources with particular attention toward marketing, recruiting, and IT. Those three areas are shown to drive growth in professional service firms. Research shows that firms that sustain 20 percent growth rates for three or more years all invest more in marketing, recruiting, and IT than average performing firms.

The idealistic notion we have of ourselves combined with the resistance to change contributes to the romanticism of mediocrity. Nobody wants to be average, but that is the playground of the majority. The tendencies of your peers spell opportunity for you if you can simply spend the needed time to become more than just mediocre. To outperform the market, you must take extraordinary measures and look different in everything you do and say. Make long-term oriented investments in marketing, recruiting, and IT to set the stage for becoming a firm of the future versus a firm of the past. The dangerous romanticism of mediocrity shields us from the reality that we are allowing the market to dictate our success. Create your market and create your success with intensive planning and investments, and start celebrating true achievements.

Chad Clinehens is Zweig Group’s executive vice president. Contact him at cclinehens@zweiggroup.com.

This article is from issue 1161 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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Old recruiting habits slowing you down? 

Screen Shot 2016-06-22 at 9.15.48 AMDemanding a resume is a good way to scare off potential hires, but your chances improve if you pick up the phone and sell your firm.

One of the biggest challenges facing the AEC industry is old interviewing habits. As a recruiter working in this industry we see it all, and one of the biggest mistakes is the importance that hiring managers place on seeing a resume. If I’ve heard it once, I’ve heard it a million times: “I just need to see a resume.” It’s an age-old refrain from a bygone era – before LinkedIn and online recruiting changed the game. It’s one of the most frustrating aspects that my recruiting team faces.

As recruiters, we take the time to learn about the candidate and create an informative profile that we present to our client. This candidate profile covers the basic information that any hiring manager would need to determine if someone is suitable to work at their firm. Sometimes we get so much information that the only thing missing is the candidate’s blood type. While I may be exaggerating a little, I think you get the idea. If you are a hiring manager and you are one of those people that always needs to see a resume, you should worry about the future of recruiting. I don’t believe you will be able to keep up over time with the change in technology and procedures.

Here are three things that you can start doing to make sure you don’t get left in the recruiting past:

  1. When a recruiter sends you a candidate that looks or sounds good to you, ask them to arrange a phone call with the candidate ASAP. Time is of the essence in the AEC industry, and if a good recruiter finds a potential candidate, you may not have a large window of opportunity. I always tell my clients that it doesn’t cost anything to have a 15- to 30-minute phone conversation with someone that may be a fit for their organization. Requiring a resume before you talk to someone can hurt you in the long run.
  2. Please consider where the candidate’s mindset is. A person that is not actively looking for a job may be more inclined to have a conversation with a hiring manager. In their mind, it’s not a major commitment, and it may be worth checking out the competition up close and personal. As a hiring manager, you must use this rationale to your advantage. If you start making candidates, or potential candidates, jump through too many hurdles, you will lose them.
  3. You have to “Sell the Sh#&” out of your firm. Don’t sit back and make the candidate do all the talking. Yes, of course, you want to hear about them and their background and expertise, but you also want to make the candidate aware of why your firm is the best place in town to work. Asking a candidate that’s “not actively looking” why they want to leave their firm is a mistake and a waste of time. You should help them understand why your company is great and what you do to help your team members grow and get better at their jobs. Nowadays, personal and professional development programs are a fundamental component of firms that are growing. Growing companies are attractive to candidates. Nobody wants to be in the same place five years from now, even if the pay is good.

I recognize that some of this advice may sound foreign to you, but I’m encouraging you to throw out the old way of recruiting great talent and try to implement some of these practices. Trust me. They work. And if you get stuck somewhere in the process, give me a call or shoot me an email and we will try to get you unstuck.

Randy Wilburn is director of executive search at Zweig Group. Contact him at rwilburn@zweiggroup.com, or 479.856.6171.

This article is from issue 1160 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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When a key person jumps ship

photo-1446540830250-e2076f9e6917It happens to all of us at some point. Maybe we have even done it ourselves. What I am talking about‎ is when a key person quits unexpectedly – they jump ship.

It could be a critical office manager in a remote location. It could be your CFO who has been there 20 years. Or it might be one your “rising star” younger employees – someone you have mentored and promoted. ‎The bottom line is they tell you they are going to leave. What matters now is how YOU react to the situation. Here are my thoughts:

  1. Recognize the emotions you could be having and get them under control. You may feel a sense of betrayal. ‎Do not succumb to the temptation to assassinate the character of the person who is leaving! Many principals and managers of A/E firms seem to do this. They are obviously proud of their companies and it’s hard for them to understand why someone would leave so it must be the employee’s fault. Not good. Many times the person leaving – if it is upsetting – is someone who was perceived by others to be a good employee or coworker. You will unnecessarily cause internal ill-will if you trash this individual. Stay calm!
  2. Communicate with your employees. Tell them what happened, what you know, and that you wish the person who is leaving the best of luck.
  3. Communicate with your clients.
  4. Take action. Just because it didn’t work out doesn’t mean you shouldn’t try again. ‎And don’t let any grass grow under your feet. Try to look inside the company first for your replacement person if you can. The best candidate may be right in front of your nose.
  5. Stay positive. More than anything else, being positive – not letting your feelings of rejection take hold – is critical. Not everyone is the same and not every situation is perceived the same way by different people. Do some self-examination of what went wrong – pay heed to what you learn so you don’t repeat the same mistakes – and move on. Maybe what seems bad now will seem good later. It often works out that way – IF you can stay positive!

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

This article is from issue 1160 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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Unplanned events

Screen Shot 2016-05-18 at 9.35.39 AMAs the bumper sticker says, “Shit Happens.” Unfortunately, it rarely occurs at the ideal time. Problems crop up that you didn’t anticipate – health problems, a parent dies, a key employee quits, divorce, IRS audits – there are many bad things that CAN and DO happen that are not within your control.

What you can control is your response to these things. That’s what I want to talk about today.

  1. Stay calm. ‎Cool heads prevail. If you get emotional you cannot think properly and you won’t get the reaction you want from others. Don’t let that happen to you.
  1. Start by figuring out what your desired outcome is. Whatever happened has happened. Now what do you want to happen next? That’s what you need to know or it probably won’t happen.
  2. Write down your ideas and options. I do it all in my phone. You may do it on a notebook. Or you could do it on‎ your computer. Don’t be too judgmental too early. You want ideas here.
  1. Make a decision. Ideas and options are great but you have to make a decision. Maybe some of these have a lower risk of failure than others. Or maybe some have a very low cost if they do fail. These may be some of the first things you want to try.
  1. Take action!‎ Nothing good happens until you make it happen. You have to take action. All the positive thinking, ideas and options won’t do you any good without action. It is only through action that you will rebuild your confidence.
  1. See if you achieve your desired outcome. Evaluation to determine success or failure is crucial to your ultimate success or failure in how you dealt with the problem.
  1. If you aren’t happy with the decision, make a new decision‎. This is what my dad calls “decide-act.”
  1. Repeat steps 5, 6, and 7 until you achieve your desired outcome.
  1. If things don’t work out, remember that this, too, shall pass. Nothing is permanent. Everything is temporary. You will get through whatever it is you’re going through. That’s life! Nothing good, or bad, lasts forever.

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

This article is from issue 1159 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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A sneak peek of the 2016 Financial Performance Survey

Screen Shot 2016-08-24 at 11.23.54 AMZweig Group’s 2016 Financial Performance Survey of Architecture, Engineering, and Environmental Consulting Firms, gives firm leaders a clear view into industry trends and financial metrics that can help firms effectively manage their resources. The best way to do this is with a strong understanding of their firms’ financial position and accounting activities.

According to survey results, since 2010, firms’ pre-tax, pre-bonus profit as a percentage of gross revenue has risen each year. This year, firms’ pre-tax, pre-bonus profit rose from 9.1% to 9.9% of gross revenue.  As a percent of net service revenue (NSR), pre-tax, pre-bonus profit rose from 10.7% to 12.8%.  Firms are profitable! 2015 was a great growth year for firms, providing ample opportunity for leaders to invest in their firms.

The efficiency of firms’ labor continues to improve.  Net service revenue per employee reached a 10-year high and has continued the convincing upward trend.  In 2015 NSR/FTE was $133,605.  This year that number reached $137,113.  With improvements in technology and staffing software, firms are continuing to find ways to make more money with the staff they have.  This trend is real! If your firm’s revenue per employee is not moving in an upward trend, you need to take a good look at your operations.

Overhead rates decreased this year with a median of 165.5%.  As expected, high profit firms led the way with reduced overhead rates around 140% over the last three years.  Another way to look at overhead is a metric called the breakeven multiplier.  It indicates how much money the firm has to generate per dollar of direct labor to cover their overhead costs.  We found that fast growth firms have a lower multiplier (2.55), indicating they are more efficient at generating revenue than other growth categories.

Lower interest rates across the US have provided opportunities for investment and firms seem to be taking advantage of the low-cost capital.  Interest bearing debt to EBITDA rates have increased since 2013 and continued to rise this year with a median rate of 0.4.  This is a notable increase because EBITDA margin on NSR also grew again this year with a median margin of 14.3%.

Backlogs remained relatively consistent with a median of 6.5 months.  Very high profit and fast growth firms have more work in their back pocket than the other profit and growth categories, showing that they are continuing to push their marketing efforts and are winning jobs.  Both very high profit and fast growth firms had a median backlog of 8.7 months.

An interesting stat that we have been watching is the cost of group insurance plans.  Counter to the national trends of increasing overall healthcare costs, we have found that firms’ median group healthcare costs as a percentage of total costs are slightly decreasing year over year.  We have found that many firms are moving to lower cost, high-deductible plans and many are utilizing health reimbursement arrangements and health savings accounts to reduce their out-of-pocket exposure to rising costs.

Bonuses as a percentage of total costs rose significantly.  Since 2012-2015 these costs ranged from 3.0% – 4.8%.  The 2016 survey found that firms spent a median of 8.0% of their total costs on bonuses.  This did not come as a surprise to researchers as pre-tax, pre-bonus profits per employee skyrocketed to $19,671.

The 2016 Financial Performance Survey shows how firms performed on nearly 100 indicators. Each measure is described in detail so you can better understand the implications of being excessively high or low on any one measure. Firms can use this to target internal initiatives, investment opportunities and improvement efforts to match their best performing peers, or simply to determine if their metrics are moving in the right direction.

FPSurveyCover-2016Always remember that to be average is acceptable, but not optimal.  To quote the great John Wooden, “Success comes from knowing that you did your best to become the best that you are capable of becoming.” Use this year’s Financial Performance Survey to identify opportunities, set goals and develop the action plans to meet those goals.

 

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Traits of unusually successful people

all inThere are successful people and then there are unusually successful people. ‎The unusually successful people are twenty times more successful than just ordinary successful people.

I have had the good fortune to get to know a few of these – inside the A/E industry – and outside of it. And here are some of my observations about them:

  1. They make friends instead of enemies. You don’t want anyone out there shooting you in the back. The unusually successful people get this idea and live by it. That’s why they know how to treat other people so others like them.
  1. They don’t throw in the towel easily. They may get knocked down but they get up again. They just don’t give up on anything. That means people, revenue-producing units, or problems. The weak give up but the strong keep on working until they succeed.
  1. They stay “on.” That means the unusually successful folks have unusually high energy and can work a lot. Maybe 16-18 hours a day sometimes? But it isn’t work for them because they love what they do and if you truly love your work you’ll never have to work a day in your life.
  1. They’re considerate. Unusually successful people think about the other guy. They keep their appointments, don’t have their secretaries place their outbound calls and then make the person they’re calling wait until they are summoned to the phone, and much more. They ask questions and show an interest in people. And they have good manners.
  1. They are constantly looking to hire. Unusually successful people know they are no better than the weakest member of their team. So they are constantly trying to bolster their teams. And that means virtually every single person they meet they’ll be evaluating as a potential hire. And if the initial impression is good they’ll be selling that individual on coming to work with them.
  1. They see opportunity everywhere. The unusually successful people see the opportunities that others don’t. They NEVER suffer from a lack of opportunities. But they also know which ones to pursue. And which ones not to. By being able to say “No” they save their energies for the things that have the best potential for payoff.
  1. They can multi-task and hyper-focus. This takes intelligence but something more. The unusually successful get this better than anyone else. Yes they can juggle a million things – but they can also bear down and get very difficult things fully completed when necessary.
  1. They’re “real.” The unusually successful people don’t have to pretend they’re someone else. They are themselves at all times. That helps them get a positive reaction from others as people like real people. And because they aren’t putting on an act they can always sustain it. And that is essential to their success.

If successful people accomplish 20 time‎s what average people do, unusually successful people accomplish 20 times what successful people do. Who do you want to emulate?

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

This article is from issue 1158 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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It’s not you, it’s me

Screen Shot 2016-03-23 at 2.23.45 PMThe M&A process is like the dating game: there’s plenty of fish in the sea, but hauling in the big catch isn’t easy.

Firms close deals every day without engaging an M&A consultant to help them, but does that mean that you’re prepared to manage on your own? Consider this scenario that applies to both buyers and sellers: you identify a list of 60 or so firms that you think would be a good fit for your company. You research them to get a bit more information, and to figure out who the right contact person is at each firm. You reach out to the top ten or fifteen firms on your list – whatever you have time for, you still have to run your own business and do all of the other things that keep you at the office late – and you strike up a conversation. The person on the other end of the phone is subject to every single pressure that you’re under as a business owner or decision-maker. After an initial conversation, maybe an email or two that makes you think that this could be “the one,” they drop off the face of the earth. They don’t reply to your last email. You wait a week, then you call them to check in. You leave a voicemail. Now what?

First, it should be pointed out that the comparison to dating is more clear than ever at this point in the M&A process. You met someone interesting, felt a connection, and then – suddenly – they vanish. Is it me? Is it them? Are they seeing someone else? Were they just leading me on? Maybe they lost my number? Maybe they really are just busy with their own stuff right now? How do I remind them that I’m still available and desirable without sounding, well, desperate?

This exact scenario is reason enough to “outsource” the M&A process to a consultant, and this is just step one of the process. All of that anguish – and all of those hours – and we are just talking about the stress of identifying the target firm in the first place and keeping them interested while you reach out to dozens of other potential matches. We have not touched on what happens next – evaluating firms for fit, analyzing financials, critical review of operations, determining a value, drafting term sheets, due diligence, negotiation, and planning for integration!

A few points about this process:

  • Time is even more valuable than money. It is not uncommon to approach 100 firms in an M&A search. Is it really the CEO’s highest and best use to search for these companies and to manage this part of the process? Selling firms, especially, always need to be aware that every hour that they spend not out there developing new jobs or otherwise continuing business as usual is risking the value of their firm. Our Valuation Survey shows that the single greatest distinction in a valuation obtained for an actual or potential sale or merger (versus any other reason for a valuation), is backlog. Buyers want to know that they understand what they are buying and that the revenue is predictable in order to minimize risk.
  • It’s not what you say, it’s who says it (and how long it takes). A consultant acting on your behalf can “follow up” with the target that’s gone MIA many (many!) more times than a firm can on their own. The consultant, although always professional and courteous, can be perceived as pushy, at worst. The firm that leaves five voicemails? Desperate. No other options. In addition, the first-date jitters are only exacerbated when it takes two business days to hear if there will be a second date. Having someone whose job it is full-time to manage the communication process and to be one step ahead of the conversation helps relieve that burden. The more time spent between a conversation and an “action item,” the more likely someone is to get distracted by work or other prospects. M&A is about clear communication and decisiveness, and that’s hard to do well when it is not your focus.
  • Breaking up is hard to do. It’s just as unpleasant to be the one that gets cold feet (“It’s not you, it’s me”), as it is to be the one left wondering what went wrong. It is hard to tell a firm owner – whether the firm is one that you initiated the conversation with through research, or one that you have worked with on projects for years – that you just don’t want to try to make this deal work. I worked with a client that felt that the right thing to do was to end the discussion with the target firm directly (versus asking us to help). The client was so complimentary of the target that the target didn’t even realize that they had just been dumped. I got a call the next week from the target to discuss deal structure! They had no idea the wedding was off.
  • The risk of “falling in love” with the wrong target is minimized when you incorporate a level of objectivity. The CFO is often a voice of reason in these circumstances. So can a board member who sees the train wreck up ahead before the first-class ticket is bought. The right level of push-back is important in M&A, whether you have assembled an internal or external deal team. There is a fine line between “over engineering” the target firm profile to the point that you have excluded plenty of great options, and having no idea what you’re looking for when you start the process. Firms in the former category never find what they’re looking for, or they get exhausted from the pursuit of perfection and end up overpaying. Firms in the latter category are at higher risk for wasting time with firms that don’t make a lot of sense for them.

Although it might sound like it, this article is not necessarily a plug for hiring a consultant. Instead, the purpose is to make sure that firms enter into M&A with their eyes open as to the unique challenges that arise in transactions, and that they are honest with themselves about their own skillsets.

Jamie Claire Kiser is Zweig Group’s director of M&A services. Contact her at jkiser@zweiggroup.com.

This article is from issue 1158 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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Hire for charisma, train for skills

Death_to_Stock_Photography_BodyTruths_6We have all heard the adage, “Hire for character and train for skills.” A/E/P firms really need to “get” this idea. Most don’t do it. They’re focused on PE registrations and degrees and knowledge of specific types of software when in reality most of that stuff can be taught/overcome by the right orientation and training.

Character, however, cannot be taught. If you are dishonest, unethical, mean-spirited, negative, hostile, antagonistic, or too ego-centric you will ultimately fail in spite of degrees and years of experience. But that’s not what I want to talk about today. I want to talk about charisma.

I think charisma has a bad name today. Thanks to “Good to Great,” so many people believe charismatic leaders are a bad thing – they aren’t “Level 5” leaders. I have already written about that. I think it’s B.S. A/E firms are not (for the most part), multi-billion dollar, publicly traded enterprises. By and large they are closely held private professional service firms – with the emphasis on “professional.” That means you need more than a brand or institution to succeed. You need professionals. Lots of them – lots of good ones – ones who can inspire people and create a following.

Charisma is a big part of that. It is a hard-to-define quality that some people have and some don’t. It is, in part, how they look. It is how they carry themselves. How they dress. How they communicate. How they act.

Here’s the difference. The charismatic‎ person walks into a room of strangers and 30 minutes later has a crowd around them – talking, laughing, smiling – and they’re forming new relationships, some of which could last a lifetime. The non-charismatic person may join in but no one really notices them or pays any particular attention to what they say or do. And I’m not talking about extroverts versus introverts here. I have seen charismatic introverts in this business. ‎One of the best examples was the late Joe Lalli, FASLA, former CEO of EDSA. He was a charismatic introvert if there ever was one.

These charismatic people don’t have to be leaders/managers/owners, either. They can start out as simply professionals, working on projects and interfacing with others. Of course, they will probably grow into leaders because they can – and that’s good because we all need more leaders. Our organizations’ growth rate is directly related to it.

Are you specifically talking about charisma as a job qualification? Are you looking for people with it? Or are you falling into the same old traps everyone else is? If you want a hunting dog – you’d better pick one that has the qualities needed to be a good one. Make sense? Think about it – and better yet – act on it.

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

This article is from issue 1157 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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Inbound marketing explained for the simple man

Death_to_stock_photography_Wake_Up_2If your content is consistently valuable, potential clients might give up their personal information to have it, and chose your firm over others when it’s time to close the deal.

Are you lost in marketing jargon about inbound marketing, content marketing, thought leadership, and converting leads?

Here’s a no-nonsense explanation of inbound marketing and where I think this concept is going:

To first understand inbound marketing, you have to understand outbound marketing. Outbound marketing relies on “old-fashioned” tactics like buying ads, buying mail lists, cold calling, and mass-emailing direct promotions of products/services. Outbound marketing is a billboard on the highway that says: “Use my firm because it is the best!”

Inbound marketing works in a more subtle way: First, a firm creates something valuable. This is called “content.” The key to creating valuable content is putting yourself in your clients’ shoes and understanding what interests them. Some examples include a fascinating article on a person your audience wants to know, a presentation of research that might help your clients do their jobs better, or a white paper on a new approach used to tackle a project.

No matter what you create, you have to be able to effectively get it out into a public space where your potential clients can find it. Inbound marketing usually relies on internet based methods. This piece of content has to be so appreciated and so valuable that not only will your potential clients like it, they will also pass it on to others they think might be interested. Content sharing happens when a news or industry website picks up your content and re-publishes it, social media posting, liking, sharing, and retweeting, or simply by forwarding an email.

Inbound marketing really works when this content is not only virally shared, but so incredibly wonderful that people are willing to give up something for it – their personal information. By hiding parts of this content behind forms, or dazzling them with something so interesting right from the start that they are willing to give you their information in the hopes of receiving something similar in the future, you can effectively begin to collect names and addresses of people who have a much higher likelihood to use your firm than others.

From this point, firms should now have a growing list of potentially interested clients coming to them, but the work isn’t over. All these potential clients have to be followed up with and, ideally, consistently impressed with more content. From this point on, much like outbound marketing, firms have to close the deal, and do the job.

Make something cool, put it on the internet, collect information from people who are interested in it, give them more, get them to share it, collect new information, follow up, and repeat over and over. Inbound marketing really isn’t that difficult.

So where do firms in the A/E industry go wrong with inbound marketing?

  1. Not following up. Once you start finding out who is interested in you, you have to follow up, and follow up in the right way. It’s unlikely that a random person who was forwarded an email is going to immediately call you looking to give you work. They will need more exposure over time. Continue to impress them with more useful content (see #1).
  2. Not understanding what is “valuable” content. For this to work, your firm has to create something useful. A press release on a new hire is not valuable content. I’m not recommending you don’t ever send these out, but they won’t work as the cornerstone of your inbound marketing campaign.
  3. Not closing the deal. At some point, you need to have someone good who can sell your work.

While the term “inbound marketing” may be long gone five years from now, the idea that you want to find ways to draw potential clients to your firm is not something that is going to go away anytime soon. So give it a try, you don’t have much to lose.

Christina Zweig is Zweig Group’s director of research and marketing. Contact her at christinaz@zweiggroup.com.

This article is from issue 1156 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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Quality is (not) job one

Chad ClinehensThe marketing of ‘quality’ is ubiquitous in the A/E industry, but oftentimes, the difference between perception and reality can undermine a firm’s brand equity.

Many firms are dealing with record high workloads. That translates into tight deadlines, long hours, and, unfortunately, problems with quality. We see increasing data that suggests quality, or lack thereof, is becoming more of an issue for A/E firms. What this means is that quality is not Job One. Firms are just simply getting the work done. The threat this poses to your firm is obvious and includes long-term damage to your brand. The effects will become more evident when the market cools down and your clients are able to be choosier with their distribution of work.

To better illustrate the significance of this problem, we need to zoom out and review the definition of brand equity. Brand equity is the net sum of your brand assets minus your brand liabilities. So think of brand equity like your net worth. A brand has high equity and is valuable when it has lots of assets and few, if any, liabilities. The major brand asset categories are:

  • Brand name awareness. Strength of a brand’s presence in the client’s mind.
  • Perceived quality. The client’s perception of the overall quality or superiority of a product or service with respect to its intended purpose, relative to alternatives.
  • Brand associations. Extent to which a particular brand calls to mind the attributes of a general product or service category. An example is asking for a “Kleenex” instead of a tissue.
  • Brand loyalty. Brand loyalty is when clients become committed to your firm (brand) and make repeat purchases over time.

Your professional services company has a strong brand when your firm’s name is at the top of the list, your clients perceive a high level of quality from your firm’s services, and you enjoy a high repeat client rate. Of course, problems in any of the asset categories can be a liability as well, especially for perceived quality.

Among all brand associations, only perceived quality has been shown by research to drive financial performance. Perceived quality is often a major strategic thrust of a business and is often heavily promoted by A/E firms. Perceived quality in professional service firms can drive other aspects of how a brand is perceived. Most A/E firms promote quality and talk about innovation when neither matches up with the perception of their clients.

That is why we use the term “perceived quality” as opposed to just quality. Quality is subjective. When we talk in terms of perceived quality, it forces us to look through the lens of our clients and face reality. For firm leaders, this is about bringing marketing, sales, and project management into alignment, and closing the gap of our beliefs versus reality. Unfortunately, these groups are separated from each other in many A/E firms. Here are a few things to consider implementing to improve perceived quality in your firm:

  • Connect marketing and sales with project management. Marketing staff needs to be more plugged into projects and clients. And likewise, project management needs to be more plugged into marketing, messaging, and branding. The first opportunity to fumble here is not following through on perceived promises made during proposals and interviews. Develop a list of all of the things you said you would do in the business development process and give that list to the project manager before they write up the scope and fee estimate. This assures that all of those services have a cost associated with them, and offers the client the opportunity to pay for them or not. Additionally, invite your marketing and BD staff to meetings where projects and upcoming work are discussed.
  • Implement a continuous client feedback system. The goal here is to get real feedback that you can use to improve your services and close the gap on what is believed to be the quality of your service versus the reality. Firms are not doing a good job of getting feedback, and even when they do, too many are not using the info. Part of the reason for this is that firms like to check the client feedback box and then get back to work. Feedback without action is a waste of resources. View client feedback as a two-way street. Consider having your PMs send out regular reports to clients outlining the work completed so far, any needed resources, and what is next. It is a tremendous communication builder, and considering communication problems are the number one cause of quality problems, this practice should improve real quality and thus the perceived quality.
  • Make quality Job One. This does not mean that everything else comes second. It means that everything else supports a true commitment to quality control. That means that during a tight market like the one we are in now, we are hiring people to keep the workload at reasonable levels and the quality high. If you are trying to hire and are having trouble, then ask yourself why. Do you need to outsource your recruiting? Do you need to improve your pay and benefits? Do you need to consider an acquisition? A serious commitment to making quality Job One means that someone in the firm is making this their mission and they are addressing any problems that get in the way.

To conclude, stop talking about how great your quality is and actually measure it. And then, no matter how good it is, make improvements to close the gap even further. If quality is good, look at threats down the road. Are your people working so hard that you are going to lose them, thus threatening quality? Put a high-level person in your firm in charge of monitoring quality, a most important feature of your business.

Research shows that perceived quality of your firm’s services can drive financial performance, one way or the other. The next time you talk about branding and someone in your firm rolls their eyes, break out the definition of brand equity and give them the mathematical perspective on this and tie it into project management. That should get their attention. Become the firm that walks the walk when it comes to quality. Trust me, it will differentiate you from your competitors, many of which talk about it, but provide average service.

Chad Clinehens is Zweig Group’s executive vice president. Contact him at cclinehens@zweiggroup.com.

This article is from issue 1156 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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Improving project management in your firm

Mark Zweig, The Zweig LetterEveryone wants better project management. That’s why principals of AEC companies spend more time and money on PM training than any other type of business training.

But I’m not here to talk about training. I am here instead to talk about some things you can do to improve your overall PM effectiveness firm-wide. Here are a few ideas for you:

  1. Stop using your lowest rated PMs as project managers. In most companies, about 30 percent of your PMs should never manage another project. Rarely is being a PM a full-time role. So just use those people doing stuff they can do and give their projects to your top-ranked PMs.
  1. Stop making the wrong people manage projects. You know what I’m talking about here. ‎And you know when you give someone a PM role and it’s a mistake, too. People with short tempers, people who don’t listen, people who can’t influence anyone – just stop doing it. Give your best managers more projects to manage.
  1. Stop using PMs as bill collectors. Most of them are lousy at it and it puts them in a tough role with their clients. And stop telling me this is a cop-out and PMs need to do this job. They don’t. Let your F&A people do the job and only involve your PM if there’s a dispute on scope or deliverables.
  1. Stop making your PMs do stupid stuff that demotivates them. It’s hard enough doing the job when few or no people actually report to you on a permanent basis. So why make your PMs suffer through needlessly long meetings or fill out unnecessary internal forms for things?
  1. Track and publish PM performance metrics for all to see. Just showing the numbers to the PMs themselves will not work. You have to create peer pressure and complete transparency so everyone can see numbers such as budget-to-actual variance, WIP write-offs, dollar amount of work managed, average collection period, and more – all by individual PM.
  1. Make everyone do a weekly job status report. Send this to your client, your client’s boss, and everyone on the entire project team inside and outside of the company. Keep it simple – what you did this week, what’s happening next week, and other “issues,” such as you need to get paid for a bill that is now 60 days old (or anything else). These reports are essential!! Don’t wait for your client to demand one to do it. Make it part of your PM process.

If everyone who runs an AEC firm would just do these things, their companies would be so much more successful and their lives so much better!

Check out:  Introduction to Project Management Seminar and Advanced PM Seminar.  6 PDHs/CEUs

2016 Project Management Survey 

Successful Project Management for A/E/P Firms

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

This article is from issue 1156 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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Thinking About an Acquisition? Make Sure You Are Ready First.

In a recent article, I wrote about how important it was to prepare your firm for sale even if you are not thinking about an external ownership transition. You can read that article here. This week, I want to take a look at the buyer’s side and the questions that should be asked before making an acquisition or merging with another company.

The A/E/P industry is experiencing fantastic growth in many markets around the United States and M&A activity has been at an all-time high since the great recession of 2008. Capital has remained steadily available and that generates a lot of excitement around making an acquisition as part of your growth strategy. There are also several good reasons to consider buying another firm:

  • Inorganic growth immediately:
    • Increases your firm’s assets and income
    • Diversifies risk
    • Expands market presence and adds additional services and competencies
  • You will have the opportunity to increase your firms value.
  • It can help eliminate competition.

Contemplating the idea of making an acquisition is exciting. It can be easy to get swept up in all of the possibilities, but before making a commitment, start by asking yourself a few questions.

  1. First and foremost, are YOU ready?

I’ve written before about the steps that sellers must take to be ready and these all apply to buyers as well. Buyers are not the only party that performs due diligence. Sellers will want to know that the foundation of the company that is buying them is strong. There are dozens of studies that estimate the number of M&A deals failing to meet financial expectations anywhere from 50 – 90 percent. Odds are better for the A/E/P industry, but it still behooves you to take a step back and analyze whether your firm can withstand the disruption that an acquisition entails.

The cost of an acquisition goes beyond the purchase price of the business you are looking to buy. In addition to capital, you will expend a lot of time and energy to make the integration or partnership with the acquired company work. You will need to have your house in order financially, structurally, and strategically. Consider performing internal stress tests to determine whether your firm has the infrastructure and resources to handle the change.

  1. Do your values and culture align?

Possibly THE most important factor when considering a deal is the cultural and philosophical fit between the two companies. It is easy to get wrapped up in the numbers, but it is hard to put a value on values. I like to get buyers and sellers together on the phone, and in person, as soon as possible. M&A is a lot like dating and making sure there is chemistry between the executive teams is crucial to a successful deal.

This takes a lot of time, phone calls, and face-to-face meetings, but the dividends you will reap are immense. Your conversations should center around culture, values, company structure, firm history, as well as financial history. Do you feel like the target firm is a good fit?

  1. Who are the key players that will be crucial to the success of the firm after the acquisition?

While you do not want to share that you are looking at a possible acquisition until the time is right, it is important to be as transparent and authentic as you can be. Especially with key personnel that are going to be essential for the success of the firm during and after the acquisition. Millennials, the future of the industry, consistently rank authenticity as the most important trait that can be possessed by a company or leader.

Some estimates put the turnover cost for mid-level employees at 150% of their annual salary, but more importantly, gaining these key players trust can go a long way in ensuring a successful partnership. These people can act as ambassadors that make integrating two firm cultures much easier. To gain their trust, executive leadership must be clear about their intentions, flexibility, and commitment to the partnership. If executed correctly, these key players will be growth drivers long after the deal has been closed.

  1. Is this firm a good strategic fit?

This one may seem like common sense, but it is easy to get distracted from your initial vision and start rationalizing the integration of the acquired firm. Focus needs to be on the business plan and vision for your firm. Does this firm objectively fit into that strategy?

An acquisition provides immediate inorganic growth. In the A/E/P industry, the value of a firm pursuing an M&A strategy and a firm with a purely organic growth strategy can be vastly different. Mergers and acquisitions can be a tremendous value driver.

In addition to inorganic growth, you may see benefits from economies of scale and efficiencies. Will the acquisition open geographical markets or new market sectors? Are you seeking to add new services to your product offering? These questions must be answered before moving forward with any deal. M&A has the potential to make your business, and the potential to break it. Therefore, it is imperative that careful consideration be given to whether the seller fits into your strategy.

  1. Finally, where should you focus your due diligence efforts?

OK, you’ve determined you are ready for an acquisition, you believe that the seller’s values align with your firms’, you have identified the key players, and the company fits into your long term strategic vision. Now, it is time to perform a thorough examination of the company’s history and portfolio to determine its value and reveal any red flags.

Items that should be reviewed will be detailed by your attorney once they understand the particular risks of the specific target firm. In general, due diligence items will always include financial statements for the last three to five years, paying close attention to current assets (especially accounts receivable) and liabilities. Backlog and contracts, projections, revenue concentrations, bonus plans, benefits, equity arrangements, leases, credit reports, employment contracts, compliance records, and many other contracts that might affect the success of the deal should also be reviewed.

Change is difficult for any organization. Careful evaluation of these key areas, management of emotions and expectations, clear communication of intentions, and an executive team that champions the change will go a long way to ensuring a successful transaction. This is a good start to thinking about the exciting world of M&A.

Phil Keil is a client consultant in Zweig Group’s M&A division.  You can contact him at PKeil@zweiggroup.com

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A pattern of inaction

If you are you stuck in neutral, break out of the rut by asking questions, altering your approach, and accepting the possibility that there may be a problem.

Some of us have a hard time taking action when it’s needed. Sometimes we deny that we even have to take action.

I’ve been a consultant for a local business for most of the past year and have been frustrated by my client’s lack of action. Granted, I’m a consultant and don’t have a financial stake in the business, but I treat the company as if it were my own and I don’t like to see a company fail. This company is on the path to failure due to the owner’s pattern of inaction.

The owner opened the business two years ago with a very small capital investment, no line of credit, and no business plan. As a result, the owner has no financial resources to rely on during the negative-revenue months. The business’ gross revenue has increased by less than 5% in the past year, but its net revenue has decreased by more than 10%. In short, the company is losing money almost every month, but the owner has not done anything to correct the downward spiral.

Like some firm leaders in our industry, this owner acknowledges that significant changes are needed to save the company, but won’t take the steps necessary to enact those changes. It’s frustrating for me, but even so for the employees, because they can see where the company is heading.

The owner has never had a business class and everything about operating a business has been learned through trial and error. There are some firms in our industry that started the same way. They began with a great idea, but never felt they had the time to obtain formal training on how to actually lead a company. Now, after the firm has expanded, they’re too busy to take the time needed to understand how to run a business. They, too, are stuck in a pattern of inaction.

Despite my best efforts to explain basic accounting principles, the owner can’t understand where the money is going. There’s an antiquated process for analyzing monthly cash inflow, but no accounting of the cash outflow. Some of the accounts payable are in arears by more than 18 months.

It’s like a train barreling down the tracks and the engineer is ignoring the flashing lights warning that the bridge is out. Hopefully, your firm isn’t in such dire straits, but how do you know if you’re stuck in a pattern of inaction?

  • Your first response to any difficult question is “I don’t know.” The business owner I work with loves this phrase. When asked why a specific action was taken, the response is, “I don’t know.”  Where are your 2015 receipts? “I don’t know.” How much are you paying for marketing? “I don’t know.” For the owner, it’s easier to deflect uncomfortable questions with a simple brush off, because any other response would require action.
  • You would rather make no decision than to make a bad one. A bad decision typically leads to bad results, but the assumption is that if you don’t make a decision, nothing can go wrong. In reality, quite the opposite can be true. The decision to not make a decision can lead to lost proposals and missed deadlines, resulting in lost revenue.
  • You refuse to accept, or you dismiss, bad news. Accepting bad news typically prompts people to take some action to correct the problem. If you don’t accept the bad news, why would you have to act? This is the equivalent of covering your ears and shouting, “I can’t hear you!”
  • You don’t get involved in details when numbers and statistics are concerned. Looking at “the big picture” and “staying out of the weeds” can be useful tactics if you’re trying to avoid becoming a micro-manager, but not if you’re trying to keep your firm on track to meet its strategic goals.

Becoming a deliberate leader can help you break the pattern of inaction.

  • Replace the phrase “I don’t know” with “I’ll find out.” By making this statement, you’re committing to others that you’re going to look for an answer or solution to an issue, but you have to take action or you’ll lose credibility.
  • Start with the premise that there may be a problem. When you accept that there may be a problem, you’ve already committed to taking the necessary steps towards improving your business.
  • Don’t accept the phrase, “Because that’s the way we’ve always done it,” unless it’s been documented as the best, most efficient or effective way of accomplishing a task. Accepting that phrase in any other circumstance is just another way of saying, “I’m too lazy to come up with a better way of doing things.”
  • Attend a business management program with other peer company leaders. These types of events are great opportunities for learning from other peoples’ successes and failures. When confronted with a similar situation, you’ll already have an idea of what does and doesn’t work and will boost your decision making confidence.

Doing nothing is easy, but it will lead to problems, much like taking your hands off the steering wheel while driving on the highway. My client’s company has much potential for growth, if only the owner would make some decisions to put the company on track for success. Take a look at the decision points in your business. Are you actively guiding your firm or have you fallen into a pattern of inaction?

Zweig Group has a number of options to help you break out of this distructive pattern.

Bill Murphey is Zweig Group’s director of education. Contact him at bmurphey@zweiggroup.com.

This article is from issue 1158 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.

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