A/E Firm Profit Margins On the Upswing

Margot Suydam
Posted on: 06/19/15
Written by: Margot Suydam

download_1-5.jpgWith the final impact of the most recent economic slowdown and recession now behind us, the performance of architecture and engineering firms responding to PSMJ's 2015 A/E Financial Performance Benchmark Survey Report reflects a design industry that is experiencing steady growth. 

One indicator of such growth is that A/E firm operating profit margin as a percentage of net revenue (before incentive/bonus payments and taxes) has been on a steady rise in recent years, with the median reaching a six-year high of 14.3% this year, according to the recently released report.

FNP15graph_24849_image002


After posting all-time highs in 2007, and remaining stable in 2008, profit margins started to decline significantly in 2009 due to the severe economic downturn. And then, from 2010 to 2012, the median hovered below 10.0%. The good news is that this number has been on the upswing in the past three years, hitting 11.4% and 13.0% in the 2013 and 2014 surveys, respectively.

It is certainly encouraging to see profit margins trending upward, notes Frank A. Stasiowski, FAIA, Founder and CEO of PSMJ Resources.  But, there is another side to this coin that can't be overlooked. 

"Just because the median has reached 14.3%, that doesn’t mean it should be an acceptable profit margin at all for an A/E firm,” says Stasiowski, “There are plenty of A/E firms that can and do deliver margins far higher than this. These are the firm leaders who are able to really think differently—about project delivery, about marketing strategy, about value. Deliver a higher value and you can command higher fees…and yield higher profits.”

Key questions to ponder for your firm's success

  • How does your firm's financial performance stack up to industry trends?

  • How can you make informed changes to overhead, operations or policies that improve profitability and cash flow of your A/E firm? 

  • What metrics can you use to set the bar and drive accountability?  

Order Now!

 

 

 

 

 

 




 

SUBSCRIBE TO BLOG:
March 26, 2021

5 TIPS TO MAKE 2021 THE YEAR TO SELL YOUR FIRM

The M&A market is very hot right now, with buyers aggressively pursuing acquisitions, so is 2021 the right time to sell your firm? “Yes, but it depends on how your company fared..

Read More
March 18, 2021

WFH BECOMES THE LATEST A/E/C CHALLENGE

Is the bloom off the rose for the work-from-home movement? Mike Complita thinks so. In the early days of the pandemic, many A/E/C firms were pleasantly surprised by how well they..

Read More
February 12, 2021

‘COLLECTIVE’ REDESIGNS PROCESS, DELIVERS VALUE

While collaborating in late 2019 on a high-end, single-family home reconstruction in Southeastern Connecticut, architect Hope Proctor and interior designer Caryn Paradis had a..

Read More