Fact 1: Work that Matters… Matters to Your AEC Firm's Employees. PSMJ research consistently shows that – contrary to popular belief - compensation isn’t the primary driver of employee engagement and retention. In fact, one of the consistent themes we hear (from both employees and managers) is a desire to feel that they are doing work that matters. Employees want to see that they are having an impact in the community around them. This goes beyond the day-to-day project work and gets at a deeper mission and community involvement with the firm. Is your firm committed to having an impact on the community…through billable and non-billable work? Think it might be time to boost your community involvement efforts? You might be surprised how easy it is to gather up a group of cross-functional, motivated employees to lead the development and execution of efforts to drive impact. If you're already giving back, consider entering to win our AEC Building a Better World Award, an annual celebration of firms large and small that are thinking globally but acting locally. 

Fact 2: To Get More From Your Board, Go Outside. Want to shake up your AEC firm's Board of Directors meetings and make them more productive? Bring on an outside director. Outside directors bring curiosity, accountability, and a contrarian perspective that might be just what you need. What makes a great outside director? Look for someone who knows your industry, who isn’t afraid to speak their opinion, and who loves to ask “why?” or, better yet “why not?”. In most cases, a three-year term is best to give ample runway to get acclimated and add value. You can even start with a non-voting advisory role to reduce risk.

Fact 3: There’s More to Good M&A than EBITDA. Ever hear that phrase “you name the price and I’ll name the terms”? In AEC M&A, this underscores the critical point that purchase price and after-tax proceeds can be very different numbers. More than that, the purchase price should be based on the future and not the past. Of course, historical Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a critical number. But determining the value of an AEC firm doesn’t even come close to ending there. Risk in areas such as client concentration, project size, business development, leadership development, and other non-financial areas can have a big impact on what a buyer will pay and on what a seller takes home after the closing. Don’t make the mistake of starting and stopping at EBITDA.

Fact 4: Stop Stressing Over Utilization.  For as long as AEC firms have been selling hours, firm leaders have diligently tracked utilization. Just keep that number up, people stay busy, and all is well. Right? Wrong. The truth is that a firm’s utilization rate (on a total dollars basis) is one driver of profitability, but that, in and of itself, has a very low correlation to profit. Multiply your Utilization Rate (Direct Labor/Total Labor) times your Direct Labor Multiplier (Net Revenue/Direct Labor) to arrive at what we call the Revenue Factor. This has a much stronger correlation to profitability and, as a result, is a metric that you should spend a lot more time tracking (it works at the individual and business unit level as well).

Fact 5: Earnings Season Says Conditions Still Generally Strong.  It is that time again when publicly-traded firms report quarterly earnings. To be sure, the AEC space is a very fragmented one with only a small handful of publicly-traded firms. Add to that, many of the internal and external factors that drive publicly-traded firm performance aren’t particularly relevant for smaller, privately-held firms. But, this can still be a valuable source of market research. To that end, AECOM President Lara Poloni stated, “We continue to win work at a record high rate, which resulted in quarter-over-quarter backlog growth to a record level and strong visibility in the second half of fiscal 2025 and beyond,” in a May 5, 2025 press release announcing the firm’s latest quarterly earnings. This supports the reality that, despite so much volatility and uncertainty in the broader economy, these remain very strong conditions for many AEC firms.