As you continue to plan for the rest of 2018 and beyond, sound business practices will help maximize your architecture or engineering firm's profits and offer challenges for your best and brightest people, whether in a boom economy, a down marketplace, or a transitional phase.
Here are 10 good business practices to accomplish this in any market:
1. Target your markets. Focus on markets with potential for growth, maximum profits, and that fit your firm’s mission and culture. A shotgun approach seldom works.
2. Select strategic accounts. Focus your marketing and selling efforts on strategic accounts or quality clients who have lots of future business, who pay for value and who fit your target markets.
3. Jettison marginal markets. Don’t invest marketing overhead and proposal dollars on marginal return service areas just because you’ve always done it. Instead, invest in your strategic accounts or in growth markets for the future.
4. Align performance to goals. Staff performance objectives should be mutually developed and linked to office objectives in sales, client service, project budget performance, recruiting, and personnel development. Staff objectives should also include the individual’s career goals and a clear path for cross-training opportunities.
5. Emphasize client service. Align the staff with your client’s criteria. Get feedback from as many client connections as possible. Include face-to-face feedback from the client’s project manager and upper management as well. Get written feedback using “client service forms” on a semi-annual or annual basis. The principal needs to be involved in soliciting this input, not just the project manager.
6. Scrutinize short-term financial measures. Track and balance weekly productivity, overhead expenditures, selling and administrative expenditures, and business development ratios against the firm’s long-term objectives.
7. Close poor-performing branch offices. Close offices that don’t fit the firm’s long-term business strategy, those that are losing key people, and those that are performing poorly. Reinvest the overhead in more profitable locations, or new locations that fit future markets.
8. Use a major proposal center. Efficiency, quality, and win rates can be improved with a dedicated core staff involved in the development and production of proposals for large projects. Key project managers and technical staff can work on them from a distance and then be brought together at the proposal center to generate the final product.
9. Guard your multiplier. Don’t be so quick to reduce your multiplier to win a highly competitive job. First, provide the lowest credible scope. Then, look for ways to enhance the value and benefit to the client.
10. Be prudent with overhead. Don’t be cheap with marketing and proposal efforts. Focus instead on higher gross profit and proposal cost ratios. Cut unnecessary administrative overhead to get the best prices on supplies, travel, and equipment. Watch this in good times and bad. Make it part of your culture. Persistent and continuous attention to these tenets will result in increased performance through both upswings and downswings in the marketplace, and will maximize your profit margin.
PSMJ's complimentary e-book Successful Financial Management provides a clear and concise overview, direct from our architecture and engineering industry experts, of the complex subject of financial management…the ultimate determinant of your firm’s success of failure.
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