Strategic M&A Search: Making a Connection

jamiekiser_hoverThis is part one of a two-part series on the acquisition process, written by  Jamie Claire Kiser, Director of M&A Services, and Ryan Renard, Financial Analyst/Consultant. Part one focuses on the search phase of an acquisition, part two will discuss the process from contact to closing.

I’ve heard the same question several times during recent strategic planning sessions that Zweig Group has facilitated for our clients: “Should we buy a company to grow?” With so much attention focused to the industry’s recent and forecasted consolidation phase, M&A is a hot topic in the media and in discussions with our clients. The question shouldn’t really be whether or not a company should grow through acquisition. The question should be if the firm is prepared to handle the acquisition process.

The decision to grow through a strategic acquisition can change a company’s growth trajectory and add immediate value to the firm’s bottom line. That’s the best case. The worst case is a firm blindly stumbling through the process, sucking up months – or even years – of time with nothing to show for it, or with a botched acquisition that drains considerably more resources. An acquisition growth strategy is a major commitment and needs to be the direction that all of management agrees to pursue. Acquisitions, even successful ones, require coordination, fast action, resolution to see the “big picture”, and, of course, a significant amount of time and money.

The purpose of this article isn’t to scare would-be buyers off. Instead, it’s to help firms considering an acquisition strategy gain a better, albeit basic, understanding of the process. There are several steps to preparing for and executing a strategic search for a new merger or acquisition target, and there are plenty of resources out there that take this discussion to a scholarly level. Instead, we are going to explain the process using a tried-and-true analogy that everyone understands: finding your soul-mate.

Creating a dating profile: Despite what we tell ourselves, everyone has a “type” in dating, and every firm needs to recognize the “type” that interests them in a potential acquisition. The work begins with a clearly defined growth strategy. Identifying the characteristics of the potential targets helps narrow your search to a manageable scale and provides objective parameters for the discussion. You don’t ever want to be in the position of pitching a firm to your partners because the owner is a “really nice guy.” Know what you want, write it down, and seek it out.

Discussing the answers to questions like these with your partners will help make sure that you are all in agreement from the outset, which will speed up the process when you actually begin courting firms. Talking through strategic objectives and goals will benefit your firm immensely, and not just in regards to an acquisition. Some questions (among many): Is your firm interested in growing their home geographic area? Improving design strength in a pre-existing sector or discipline? Or is your firm looking to strike out and diversify through a new geographic area, market sector, or discipline? How will you finance this growth? What are the characteristics of the ideal firm? What values are important to your firm, and how will you transfer your culture? What do you do well that you can immediately bring to a new firm?

Pre-dating, a euphemism for stalking: At this point, you know what you want and you’ve filled out that online dating profile, uploaded a flattering photo, and paid your subscription fees. You’ve seen a few pictures, they look like they match your profile, and now you’ve got to figure out if they’re even available or interested before you waste your time trying to impress them. It’s the exact same when you want to acquire a firm.

This is where your basic research begins; you have to start compiling a list of all the companies you think would be a good match to the criteria you set forth. Don’t underestimate the time and leg-work required for research. Have you ever seen an engineering firm with a “For Sale By Owner” sign slapped across the front door? Instead of opening up an app and swiping left and right to find a match, you have to contact dozens – if not hundreds – of firms to determine if they would even consider being acquired, let alone whether or not they meet your criteria.

The initial contact has to be made with absolute discretion, especially if you are contacting targets located close to you, to avoid scaring the employees of the target firm. We usually begin with a brief, one-page letter sent to all possible targets asking them to contact us if they are interested in learning more. The contact letter is directed to the president or owner of the firm. If we don’t get a response to our contact letter, we follow up with an email. Since we don’t take the hint as well as many online daters, we reach out to the firms that didn’t respond to either the letter or email with a phone call. Brace yourself for rejection. It stings less over time.

Flirting: After you’ve narrowed your list to only firms that are interested in talking, you have to do some more research before you can commit to taking them out for a first date. In dating, you have to look this person up, make sure they aren’t wanted for felonies, and verify that the attraction is at least based in reality (Photoshop can really work magic!).

In acquisitions, after you have a list of possible targets, and have skimmed away the ones that aren’t interested in talking to you, use as many resources as are available to you to find out everything you can about the remaining firms on the list. This will allow you to make some cuts right away and save you time later down the road.

The next step is to set up preliminary phone calls with the firms remaining on the list to try to get to know them better before you ask them on a date. Ask the firm owner or executive about their basic characteristics and maybe a little backstory. There’s very little information available in the public realm for these companies that will let you see much beyond their market sector, discipline, or geography. It’s better to have a more expansive list from the start, and whittle down the possible matches from there instead of relying on the accuracy of the internet. Even if they meet your profile in terms of all three characteristics, their website won’t indicate if they excel in their field or the portion of revenue they generate from each of their market sectors. Does the firm have a designation (such as DBE, MBE, etc.) that wasn’t obvious on the website? How many owners come with the firm? Are the rainmakers planning to retire next week? Are they a size that you can afford to purchase, or are you going to have to give up some power and go with more of a merger-style transaction?

You don’t have to get into a lot of detail at this point. The goal here is to verify that the firm fits the basic outline of your profile. You’ll have plenty of time to get to know the firm better when you’re further down the road.

Part two of this series will be posted next week and will pick up after the initial information-gathering phase of an acquisition, beginning with what we are calling “The First Date.” 

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Big trends in the A/E business

revenuehotfirmFirm leaders would be wise to reflect on current happenings in industry and to prepare for what’s next.

When you’re lucky enough to survive to a “certain age,” you suddenly become aware of “certain things.” That diet you’ve had for 55-plus years might finally be catching up to you, and you have to change your eating habits or go on diabetes and cholesterol drugs. Your friends start dying off  –  sometimes more than one in a given year  –  and you regularly find yourself reading the obituary pages in the local newspaper. Your teeth have problems they never had before, and, before you know it, you’re in a dental chair going through a painful implant process that includes bone grafts from cadavers. Let’s just say the trends become clear and will affect many of us as we age.

The same thing applies to our industry: The trends are becoming very clear to me. They will affect all of us – you, me, everyone  –  in the A/E/P and environmental business.

Here they are:

  • We’re in boom times. This means a lot of firms are overloaded with work. They’re worrying less about marketing and more about doing. Our people are overloaded and complaining about it. We’re understaffed. We’re making more money than we ever have before, and how we use that (i.e., suck it out or reinvest in the firm) is crucial to our future success.
  • There’s a merger of design with construction. You can ignore this at your peril, but the fact is more and more clients want design-build, versus design-bid-build. That means you can either get on board with this idea and figure out how to make it work for you, or fight it and get smaller and smaller. It’s a huge deal. We all need more construction knowledge and a different attitude toward risk to deal with this.
  • Firms are adding in other, nontraditional services. It might be going into at-risk construction, or strategic planning, or providing an app or piece of software, or going in the temporary help business, or any number of very different services that aren’t “normally” part of an A/E firm’s offerings. These initiatives are critical to growth and can significantly differentiate a company, giving them a leg up on success.
  • Firms are really beginning to embrace e-marketing. It is not just spam. It is a completely viable marketing tool that works. And more A/E and environmental firms are using it to promote jobs, people, market sector knowledge, poll clients, promote invents, send out newsletters and more. E-marketing works. It’s cheap and cost effective. But it takes a good list to be able to use it. And most companies in this business do not have that.
  • Some firms are spending big money on recruiting. It is so critical to be able to find the talent you need. It is also getting harder and harder to keep the people you have. Aggressive companies are recruiting like mad, and your best people may be getting called every day by your competitors and their recruiting agents. How much is a lot of money? How about $10,000, $15,000, or even $18,000 per head-hired for recruiting? This is spread across ALL hires, including neophytes and support people. Think about that. Adding 50 people and replacing 20 who leave? That’s 70 people at $10,000 each  –  $700,000  –  or 70 people at $15,000 each  –  $1.05 million. It’s a lot of money. But, if you don’t spend it, what kind of talent will you be able to find  –  if any?

Time marches on, and things do change over time. Be thinking about all of these trends: You must look ahead, or you will suffer the consequences of not doing so.

Mark Zweig is president and CEO of Zweig Group. Contact him at mzweig@zweiggroup.com.
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Assembling the M&A Deal Team: When to Bring in an M&A Attorney

jamiekiser_hoverBy Jamie Claire Kiser, Director of M&A Services

As experts in finding buyers and sellers for architecture, engineering, and environmental consulting firms, Zweig Group’s M&A team generally speaks with business owners at the inception of the M&A process. One question that I am asked frequently by our clients is “when do we need to get the lawyers involved?”

I should note that “lawyers” is often said with a slight tone of disdain – the implication is that things will grind to a halt and bills will run through the roof when you get a lawyer involved. As a lawyer myself, I both recognize this aversion, and can somewhat understand it. That said, if you’ve got the right lawyer – one who is highly qualified, familiar with our industry, and busy helping lots of other firms through their transactions – you don’t need to worry.

Think of a general corporate attorney as your general practitioner; the doctor you go to for annual check-ups and as the first person you call when you think you might have a medical (or, in this analogy, legal) issue. When you are working on something as complicated and nuanced as selling your firm – the business that you have spent your career building to this very point – or buying another firm – a process with more unknowns than knowns – you need to call in a specialist. You need an attorney who is experienced in mergers and acquisitions, and we always recommend someone who works in our industry.

What is a qualified M&A attorney? It’s not me, it’s not your general corporate attorney, and it’s not your brother-in-law who practices insurance law and said he can help you draw up a contract for free. General business attorneys simply do not have the specialized M&A experience and skills needed to help you evaluate or prepare contracts. In addition, keep in mind that if you’re a seller, your general corporate attorney stands to lose a client if you successfully sell your firm. When we work with attorneys who seem to “slow down the process,” it’s almost always because a firm is using a general corporate attorney who is either in over their head, or is aware that they are losing a significant portion of their customer base as they negotiate the sale of your company. The M&A attorney will understand the legal aspects of the agreements that you will negotiate, and ultimately sign, as part of the transaction, and is an objective collaborator and partner as you evaluate your options.

The M&A specialist, much like a surgeon, will come with a higher hourly bill rate than your normal business attorney (and higher than your brother-in-law, for that matter). However, don’t get sticker shock too quickly. An M&A specialist often concludes services with a lower overall bill than someone who charges much less by the hour. The specialist acts deftly and knows what they’re doing. They work fast and thoroughly. There will be fewer re-writes when you work with these attorneys, and you will never have to worry about whether you’re paying your regular attorney by the hour to figure out how to handle your transaction.

Remember, just as with your brain surgery, you can’t afford not to invest in the highest quality services available. A mistake in the acquisition or sale of your firm could be incredibly costly. Overlooking something simple in a contract, or being unfamiliar with the due diligence process as it relates to our industry, could cause you to leave money on the table (if you’re selling) or could cause you to purchase more risk than you bargained for (if you’re buying).

A great M&A lawyer sees himself or herself as a member of your team and doesn’t want to drag on the transaction to hit more billable hour goals. This person’s job is to thoroughly protect your interests and to get you to the closing table with eyes wide open. These lawyers are busy, highly sought-after, and diligent. They’ve seen many transactions and can work quickly, but you have got to make sure to utilize them as soon as you get serious about a target firm. You need the input of your qualified M&A attorney before you put anything down in writing that could be construed as a commitment.

A myth that I’d like to dispel quickly is that you should take the deal as far as you can on your own before you get an attorney involved. We talk to firms who want to use their general attorney to draft LOIs or non-binding outlines of what a deal might look like – or, rarely and much more deleteriously – want to draft initial documents themselves. The risk here is that you will be actively creating a mess for your M&A attorney to clean up later in the process, which will delay closing, cause a perception of higher legal bills, and could even damage the foundation of the transaction if you promise more than you can deliver. Retain a qualified M&A lawyer on the front end, and use them as you proceed into negotiations. The entire process will be streamlined when you partner with expert advisors, and, often, your legal bill will be lower than if you partner with someone who doesn’t know what they are doing.

Depending on the complexity of the transaction and the background of the M&A attorney you retain, it also may be in your best interest to retain a tax attorney in addition to your M&A attorney. Note that M&A attorneys have tax expertise that is almost always sufficient for the needs of the businesses in this industry, but in highly complex transactions (such as international deals), your M&A attorney may recommend bringing a tax specialist into the deal as well. A tax attorney (which, by the way, is generally an individual who holds an accounting degree, is a qualified CPA, went to law school, and generally holds an LLM – a “master’s degree” for lawyers – in taxation). Generally, a firm’s CPA working with the M&A attorney is appropriate, but if the transaction is more complicated or unique, talk to your M&A attorney about whether an additional tax expert would be appropriate.

Although we pretend to hate the lawyer jokes, most attorneys I know and work with recognize the ounce (or gallon) of truth hidden below the surface. So bring the jokes, but, more importantly, do not move toward closing a transaction without bringing your specialized M&A attorney with you at the outset.

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MZ’s travel tips

iphone 077Years of travel have led to some rules-of-thumb that firm leaders can implement while building their companies.

In the “good ol’ days” I used to fly 150,000-200,000 miles each year. Now I am down to probably 50,000-80,000 miles a year, but I still go somewhere about 35-40 weeks out of the year. As someone who has been doing this for a long time, I’ve learned some things that help make travel easier. A lot of you are in the same boat – travelling more than ever as you build your companies from local firms into regional, national, and even international ones.

Here are some of my best travel tips:

  1. Have a toiletry bag pre-packed. There’s no reason to be trying to remember to bring your toothpaste and prescription drugs or to pack a razor before each trip. I include everything I might need in one bag and leave that in the bigger bag I travel with. Deodorant, nail clippers, sewing kit (for buttons that fall off), cold meds, Advil, Aspirin, beta-blockers, Band-Aids, sharp razor, hair brush, toothpaste and toothbrush, dental floss, phone charger, and more – all are there, so I never forget what I need and have it every time. I keep all liquids and gels in a separate Ziploc bag, even though, as a recognized frequent traveler, I rarely have to pull them out these days. I keep this toiletry bag on the same side of my bigger bag and zip it such that I can quickly pull my liquids and gels out, if needed. One more thing: It is a good idea to check your inventory periodically to be sure you have everything you need.
  2. Get a good soft-sided bag. I do not use a bag with wheels. Why? Because I can ALWAYS fit my bag on the plane – even a small commuter. This is critical when you have frequently tight connections between flights, as we do flying out of Northwest Arkansas Regional. I usually go to Dallas, Chicago, Atlanta, or Charlotte on my way to most other places, and the fact that I don’t have to wait in a long queue in the jetway to retrieve my plane-side checked bag gives me a good 5-10 minutes that I may need to catch my next flight. It also relieves stress. And, if I do stand-by and get on a crowded flight at the last minute — trying to get home early — I never have a problem with my bag. I can fold it in half and jam it under the seat in front of me, if necessary. You CANNOT do this with a bag that has wheels, yet everyone seems to want them.
  3. Have multiple charging devices. I have my beloved BlackBerry Classic phone plus an iPad, and I bring portable rechargeable batteries that will work with either. I have more than one wall charger and cord for each, in case I have problems. I have the lighter socket plug-in, too, as some planes have those types of sockets, and I may need a charge. Not much is worse than running out of power on a trip: You are completely cut off.
  4. If there is GoGo internet on the flight, pay for it every time. Why? I can get more done, instead of sitting there reading Skymall (yes, it’s back in the seat pockets again), and when I land, I only have phone calls and texts to read and respond to, without an additional 47 emails. That reduces stress greatly and makes me more responsive.
  5. Get the Uber app. I rarely rent cars, doing so just slows me down and is expensive. Only if I have to go from SFO to Napa, or something, would I even consider it. Otherwise, I use Uber, if it is available. Uber is faster and better in every way than a stinky cab, piloted by someone who just got to this country three weeks ago and who does not know anything about where they are going. And, believe me, that is the profile of the typical cab driver who will wait in a two-hour line at the airport to pick up a single fare. Cab drivers who wait in that line are kind of like hair stylists who work at Supercuts: They are neophytes, just starting out. Their cars are clapped out and, nine times out of 10, they don’t even have a clue about where you want to go.
  6. Concentrate your miles on one airline. For me, that’s American. It depends on where you live and where you go, but the dominant player is the one you want to invest your miles in. That way, you are more likely to get a higher status frequent-flyer certification – and therefore more miles, faster, and more free tickets and upgrades. And the upgrades really do make flying better, believe me. It isn’t just the free drinks in first class that I rarely take advantage of, it’s food that may not be too bad and a lot better seating, where you aren’t jammed between two other people who are spreading into your personal space. (Most airline seats would be perfect if everyone was 4’8” and weighed 86 pounds!)
  7. Bring a book. If all your powered accessories fail or prove to be unusable, you will always have your book to read. If not a book, stock up on your back issues of The Zweig Letter, Civil + Structural Engineer, and Inc. Magazine. Have something worth reading, better than The American Way (American Airlines’ magazine).
  8. Expect things to go wrong. They always do, and if you expect it, then maybe you won’t be so bothered when it happens. Don’t get upset when you get stuck in Chicago for the night, or the plane develops a malfunction that they cannot fix and you miss your connection, or the crew needs to be changed out because they just worked too many hours and your departure is delayed because of it. All of these things – and many more – will happen. It is amazing the system works as well as it does and we all get where we are going safely. Any trip where I make it where I am going is a good trip, as far as I am concerned. I cannot stand it when I see someone yelling and cursing at a gate agent about a late flight – as if the gate agent can do anything about it. Be calm, be nice, and relax, and you and your fellow travelers will all be a lot happier.

I could go on – but I am out of space. What are your favorite travel tips you’d like to share with our readers?  Email me, and maybe we can publish them!

Mark Zweig is president and CEO of Zweig Group. Contact him at mzweig@zweiggroup.com.
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‘Coopetition’ is good business

Strategic cooperation among competitors can result in big gains for each firm and better projects for clients.

FriedrichsI hadn’t heard of “coopetition”  –  a contraction of cooperation and competition  –  for a while, but it has come to mind several times lately, as I have listened to some recent conversations. The obvious ones have had to do with politics, where our nation has become radically polarized. There seems to no longer be a middle ground or any attempt to compromise. The last two people in government I remember embracing the notion of cooperating, even though they held competing views, were Ronald Reagan and Tip O’Neill.

Applied to our professions, coopetition refers to cooperating, or collaborating, with a competitor. I’ve suggested to a few clients that, for any number of reasons, it would be a good idea to partner with another firm that, in their mind, might be considered a rival. There are a number of reasons why this could be advantageous: the other firm is geographically closer to a client that it would be both expensive and difficult to serve, they have a unique specialty that would help do the project better, they have the horsepower to actually deliver the work, and/or your firm is over-subscribed at the moment.

“Why on Earth would we want do this? They’ll steal our ideas or our people. We compete with them frequently, and they’ll learn our trade secrets,” are the typical reactions.
Rarely do I hear: “That would be really good for the client” or “We might learn something from them.”

The world, and the nature of our projects, has become much more complicated. In many circumstances today, I find firms lacking any number of key ingredients required to do the complete scope of what a client needs. But these firms feel partnering would somehow compromise their organization, its reputation or stature.

During my tenure at Gensler, we frequently teamed with other firms. We even learned that we didn’t always have to be the “design architect.” We would do project management and production, if that would serve the client best. The relationship didn’t have to be equal. Either of us could play a stronger role, while the other was in a more modest one. We could even play a subservient role on a project we had brought to the table. We had a singular filter for determining how to structure the relationship: What’s best for the client?

Though most collaborations worked extremely well, leading to productive, long-term friendships, mutual respect and, often, continued collaboration, one of them proved awkward. A firm was working on a project where the client was unhappy with the design direction, particularly the interiors. We had a strong interior design capability that could augment the other firm’s architectural skills, so the firm invited us to join the team.

Things were going fine until I got a call from the client saying they would prefer to work just with us and would like to terminate the other firm.

I said: “Let me get back to you.” I told my colleague at the other firm what had happened. He acknowledged things had been going poorly for him with the client. We agreed my firm would only take on the complete assignment if he were immediately fully paid for all work to date, along with a termination fee. I went back to the client, insisted on those payment terms, and we proceeded. The best part? We remained friendly with the other firm. They shared our attitude about doing what is best for the client.

Coopetition can reach beyond projects. When our office was in Santa Monica, we had a great relationship with Ellerbe Becket (now practicing as AECOMM), which was in a neighboring building. We shared staff members: If either of us was very busy and needed help on a short-term basis, we would reach out to the other. We negotiated a prearranged hourly rate structure for borrowing and lending and worked this way for years. We were lucky, too. Their slow periods seemed to coincide with our busy times and vice versa.

Weren’t either of us afraid the other might try to steal our staff? Of course! But we also understood it was each firm’s responsibility to create an environment and team camaraderie that bound each person to his or her respective firm. In all the years we did this, only one person left Ellerbe Becket to join Gensler. He had gone back and forth several times, and both firms agreed he was better suited, based on his talents and interests, to be with Gensler. There were no hard feelings, and our relationship continued for many years.

I encourage you, as I wish I could influence those in the public sector, to “reach across the aisle.” Keep your mind open to opportunities to collaborate, even if it’s with a competitor, to find the best way to serve your client.

Edward Friedrichs, FAIA, FIIDA, is a consultant with ZweigWhite and the former CEO and president of Gensler. Contact him at efriedrichs@zweiggroup.com.

© Copyright 2015. Zweig Group. All rights reserved.

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Why Zweig Group M&A?

jamiekiser_hoverThere are plenty of consultants out there who offer M&A consulting services, but there’s only one Zweig Group. We are a small team of professionals dedicated to finding the best candidates for deals in the AEC industry. Our goal is to allow you to stay focused on doing what you do best – running your business – while we deliver candidate companies – be they acquisition prospects if you’re buying, or potential suitors if you’re selling – that are a perfect match for your unique needs.

  • Our size: Our small teams of experienced professionals handle each client with a one-on-one touch that gives you the best possible experience. We can move quickly and work on your time frame. You will be working with a group of people are familiar with you on a first-name basis and who all understand the goals of this transaction and your company’s specifics.
  • Our responsiveness: We are always on call for our clients. Sudden change of plans or new information? Shoot us an email. Just remembered something that you wanted us to keep in mind? Text us. Deal keeping you up at night? Call us. Our small size allows us to put your needs first and to respond immediately to new information or questions.
  • Our industry experience: We aren’t just here to close the deal and move on. We live and breathe AEC. Zweig Group has built its reputation over almost 30 years devoted entirely to this industry. We know the ratios that matter and we know what your firm does. We understand the unique challenges and considerations facing your industry better than anyone else. You can count on the Zweig Group team to bring professionalism and a seasoned approach to each and every conversation.
  • Our responsibility: We know what it takes to get the deal closed – and we know what the other guys charge for extras that you don’t really need. The key to Zweig Group’s success is referrals from our completely satisfied customers. We only work in this industry – if you aren’t happy, we aren’t finished yet. We will never propose a service to you that you don’t need. We start small, and add on as we go. Each transaction is a customized interaction. We can’t tell you how many times we get clients from our competitors after they are tired of being charged for hidden costs and paying for services that don’t yield results.
  • Our contacts: After a third of a century in AEC, we know who the key players are – and we have been doing business with them for years! We have extensive industry contacts in all niches of the market and with firms of all sizes. We know who to call and how to research.
  • Our capabilities: We can work with you on a single transaction or help your team develop an acquisition strategy program.  We can work with you to accomplish all of your needs associated with the transaction in-house, from ownership transition modeling to a comprehensive post-deal re-branding.

Jamie Claire Kiser is Zweig Group’s Director of M&A Services. You can reach her via email at jkiser@zweiggroup.com

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Endless possibilities

January 2015 [ocs 051When it comes to generating opportunities for your firm, the more, the better.

Entrepreneurial architects and engineers all do one thing well – they create lots and lots of possibilities. The more possibilities, the greater the chance something good will happen. This is confirmed to me every single day through observing our clients and seeing it in my own businesses.

Here are some specifics:

  • More clients. The more clients you have, the greater the chances that one of them is going to need you to do something  –  maybe a whole lot of something. One hundred clients is better than 10 clients. A thousand clients is better than 100 clients. The more clients you have, the easier it is to part with those who won’t pay good fees, won’t pay their bills, won’t do what they should, or who are just plain difficult and no fun to work with!
  • More services. The more services you provide, the greater the likelihood that one of them will be in short supply and high demand. Something is always hot; something is always not. Minimize the odds of being in a dead service area by having lots of diversity in the services you provide. Don’t define what you do so narrowly that you reduce your possible points of entry to a client.
  • More locations. One area may be hot and another not. It’s good to be somewhere hot, though, so you aren’t fighting uphill battles in every location. And when one area is hot – and doing well  –  it can help feed your other locations and prop them up until they are hot again. Yes, more locations do create a certain amount of redundant overhead and inefficiency. But, when it comes to the sustainability and consistent financial performance of the enterprise, they often make sense.
  • More proposals. The more proposals you’re writing the greater the odds you’ll win some new work. Not to say I believe in throwing balls of mud against the proverbial barn wall to see what sticks – these should be quality proposals, well-researched and thought-out. But numbers (i.e., possibilities) ARE important to your chances of winning new projects. Keep writing proposals even when you don’t need the work to make sure you won’t have a problem.
  • More job candidates. The more people you have to consider for any job you want to fill, the better off you are. You’ll make a better decision AND be more likely to fill the job, because your top-ranked candidate may turn down your offer for any number of reasons. Choices  –lots of them  –  improves the quality of your decision making. Don’t stop recruiting when you have just one or two possible hires. I see a lot of firms making this mistake. Keep recruiting until you have a signed offer acceptance letter.
  • More people selling. The more people you have in your firm who can sell work, the better off you will be. More people equates to more possibilities to make a sale. It also greatly improves the value of the enterprise when selling activities are not restricted to one or a few people. That reduces the overall risk associated with the business. This is why everyone needs to be trained in how to sell!

Isn’t it time you started creating more possibilities in every area of YOUR business? Time’s a’wasting! Get with it!

Mark Zweig is president and CEO of Zweig Group. Contact him at mzweig@zweiggroup.com.

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The moving sidewalk

i-BZbRLwn-LThe current momentum of the A/E market is like a moving sidewalk: Are you in a hurry to pass your competitors or just standing still?

What do you do when you are on one of those moving sidewalks at the airport? Do you walk (or run) on the left or do you stand on the right?

In this industry, you and all of your competitors are on a moving sidewalk – the A/E market – that is moving you forward. For many years, our moving sidewalk was broken, leaving many of us idle. Now, times are great and our moving sidewalk is functioning again. A/E firms’ revenues are growing. Profits are growing. Hiring is strong. M&A activity is sharply up. The market is hot, and we are finally reaping the benefits of it.

So, are you standing still on the moving sidewalk – simply moving along at the same pace as your competitors – or are you walking – or even running – to pass them?

There are a lot of firms patting themselves on the back for a job well done right now. The market wave we are all riding has everyone on a high and feeling very successful. It’s a great feeling! It is important, however, to distinguish between market success and individual firm success. Because the market is so strong, it might actually cause you to relax on some very important activities as you are working to get projects done. Right now, you should be marketing, selling, and recruiting harder than ever, while strategic planning is top-of-mind.
Making key investments with profits is more important than ever. Now is the time to build something meaningful and strategic with the resources that are available. Now is the time to prepare your firm for the next downturn. It’s not fun to think about these things when you are enjoying seeing those days in your rear view mirror, but unfortunately, they are also on the horizon in front of you at some point. Consider these activities to keep you focused on the long term:

  • Update all marketing. Branding and re-branding activities can be expensive. Many A/E firm websites are stale after little attention for years. Update all of your marketing materials now. Upgrade your website and add functionality and search engine optimization to set your firm apart from the competition. Investing in this now will bring rewards later, when you really need them.
  • Train your staff to sell and perform. Invest in in-house training, lunch-and-learns, and so forth. Now is the time to focus on selling and doing. Train your project managers to be more efficient and keep jobs moving without numerous meetings and other time-wasters. Also, invest in an on-boarding process that gets new employees engaged and productive quickly and efficiently.
  • Invest in growth. Develop your in-house recruiting team or hire a third party to create a constant pipeline of top-shelf talent. Line up candidates for anticipated open positions and replace under-performing or negative staff. Get serious about developing new capabilities and revenue streams now, while you have the funds and time to do so.
  • Update that strategic plan. Get a group together that can truly affect change and spend a few days talking about your business. Commit to some simple yet powerful initiatives that improve current operations and force you to invest in long term initiatives.

The summary of this is to invest now. Feel good about the times that we are in but keep working as hard as you did in the recession to create work and build your company. Feel the exhilaration as you speed down the moving sidewalk, passing your competitors, who are standing there enjoying the free ride the market is providing. At some point the sidewalk will slow again, but you will be far ahead of where you are now and you will see your competitors in your rear view mirror instead of only seeing the good times of today.

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

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When PM meets FM

Several organizations have found that bringing financial management staff onto the project management team results in heaven-sent synergies.

In Zweig Group’s consulting practice, we see many firms grapple with the interface between project managers and financial management staff. It sometimes feels like there is a distinct difference in thinking, approach, processing of information, and communication. It’s almost as if, to coin a well-known book, “Project Managers are from Mars, Financial Management Staff is from Venus”!

Best-practice firms that value the technical staff for their expertise and the administrative staff for theirs often find powerful synergies develop between the project managers and the financial management staff. In some cases, these connections are so powerful that the financial team integrates into the project team, supports and leverages the project managers’ time, and adds tremendous value to the team and the firm, and contributes to the success of both.

The starting point of these synergies lies in a clearly delineated organizational structure within the firm in approaching client relations:

  • Principal in Charge – Firm  ->  Client PIC
  • Project Manager – Firm  ->  Client PM
  • Financial Staff – Firm  ->  Client Financial Staff

Architectural, engineering, and planning schools do not place a great deal of emphasis on the financial and management aspects of firm management. Most technical professionals that we encounter are reluctant to deal with the financial aspects of contracts, fees, and collections.

Who better to hand those responsibilities to than the folks who like to deal with dollars?

This relationship is communicated and clearly defined during project kick-off, when the contract is reviewed with the client for scope, schedule, and fees. It is critical during that meeting that the financial staff and elements of the project are introduced and defined. The firm’s PM and PIC should walk away from the kick-off meeting with the client’s financial team members’ names, phone numbers, and email address.

This allows the firm’s financial staff to immediately connect to the clients staff and work out all the contractual details: how the project will be tracked, what the invoice format and required contractual constraints are, and when the invoice is due to the client for review and payment. The process also establishes a dialogue that is invaluable during the duration of the project.

The financial team is also best adept to manage the collection process for the firm, as they have the relationship with the client’s financial staff. Working with the PM, the financial staff can quickly flag when things are starting to go south with the client. With the firm adopting a clearly defined billing and collection process, the financial staff allows the PM to remain the prime client relations manager.

The following process allows for clearly defined expectations and mitigates risk of nonpayment by the client. This is clearly dependent on client contractual terms and applies to both new and existing clients as a standard operating procedure:

  • Day 1: Monthly close of firm’s financial data produces invoice draft review; allow one to two days for PM review.
  • Day 5: All invoices are emailed to client (or uploaded to client defined site). If contractual requirement is to create physical copies, the financial team emails all invoices in addition to hard-copies.
  • Day 10: A/E/P firm’s financial staff emails client’s financial staff to confirm receipt and request a date when payment will be made.
  • Days 30-35: A/E/P firm’s financial staff reviews aging status; call is made if payment is not received.
  • Day 35: A/E/P financial staff asks PM to contact client’s PM.
  • Day 37: A/E/P PM determines there is an issue, reviews with PIC.
  • Day 40: A/E/P PIC contacts client’s PIC for clarification; if positive, he/she requests date and amount of check.
  • Day 45: A/E/P financial staff advises PIC and PM on nonpayment.
  • Day 45: A/E/P PIC stops services until resolution is clear.

Often, this process does not occur until 90 days. By that time, the damage could be done, deliverables turned over, and resolution unreachable, if there is a problem with this client.

One of the more valuable ways firms integrate the financial staff into the project management process is by utilizing them in the role of assisting the PM with project controls. This role leverages the PM by allowing the project controls staff members to assist in the financial management of the project. They become adept at the project scope, schedule, and resource allocation management. They are full billable, working with multiple PMs and multiple projects, and allow the PM to focus on managing the project team and the client. Firms that integrate this role find it to be invaluable, because the PM is able to focus on his/her expertise.

This was recently illustrated with a client who integrated Newforma as a project management tool that interfaced with Deltek Vision. They had implemented the Newforma tool, to the degree that all fee planning, scheduling, and resource allocation were done by the financial control staff during the proposal and fully integrated with Deltek.

Once the project was awarded, the PM tweaked the system with staff, addressed any changes in scope and fee based on contract review with the client, and the project was part of the firm’s backlog for weekly review. Staffing was defined for each team, office, and the firm, and the predictability allowed senior leadership to make resource decisions for new staff, computer hardware and software, and other equipment needs.   The system also assisted in the evaluation of the pipeline of opportunities and the modeling of a predictable cash-flow review each week for the life of the project. The project controls staff provided accurate input of all information, which made the firm highly fluid in its decision making process.

Imagine that: One point of entry, fully integrated! When synergy develops between PMs and financial staff, it’s truly a match made in heaven!

Ted Maziejka is a Zweig Group finance and management consultant. Contact him at tmaziejka@zweiggroup.com.

© Copyright 2015. Zweig Group. All rights reserved.

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Reaching the right people

Today’s competitive market – and the fact that the best employees aren’t necessarily looking for a job – means your digital footprint must be big enough to reach everyone.

Creating a game plan for recruiting and retaining the best and brightest talent is not for the meek at heart. In the AEC industry, we are constantly faced with new opportunities and project deadlines, all at the same time. It’s a constant reminder for us that we have to ensure that we have the best people in place to get the job done. No one ever hires a structural engineering firm to design or build half a building. Everyone wants a finished product, and that requires manpower.

In my past few months back at the helm of Zweig Group Recruiting, I have realized how important it is to have a solid plan to create a digital footprint in the area of recruiting for your firm. It’s certainly a part of the overall strategic branding effort that most of our clients are undertaking to make their firm’s websites more user-friendly, informative, and responsive to the needs of the client and general public. This is no longer an option, but a necessity.

In order to be successful in the AEC industry, there are several areas in recruiting that need to be fine- tuned to the point that they become second nature: You must have a strong applicant tracking system, also known as an ATS; you have to make sure that you can communicate the narrative or story that makes your firm a compelling place to work; and you have to be everywhere online with your job opportunities. I don’t have enough space in this article to focus on all of these areas, but rest assured I will address them one by one in future issues. I want to first talk about Job Boards and what it takes to “be everywhere” with your job postings.

Since the early 1990s, job boards have slowly become one of the dominant ways for firms to get their job postings out. What used to be strictly word-of-mouth, the Jobs section of the local newspaper, and internal job postings has now taken on a different form that is more deliberate and available.

But now, even the strongest of the Job Boards are taking heat from Social Media: The LinkedIns, Facebooks, and Twitters of the world are becoming fertile ground for recruiting.

According to Jobvite’s statistics gathered on recruiting in 2014, 94 percent of recruiters use or plan to use social media for recruiting. In addition, this same report cited that 73 percent of 18-34 year olds, also known as Millenials, found their last job through a social network. I could keep killing you with statistics to make my point, but I just want to make it very clear that we are in a changing environment.

Of course, you may be wondering: What does all of this mean to me and my company?

It could mean nothing or everything, depending on where you stand with technology and how well you market the opportunities that exist within your firm. There are big and small job boards out there, and almost every job sector and discipline has a job site that is geared almost exclusively to it.

One of the biggest challenges I hear from clients and potential clients is that they don’t know where to look for good people. I’ve said it before: “Good people are not necessarily looking!”  But, it can’t hurt to be where they may look. At Zweig Group, we advertise positions on several job boards for our clients, and we’ve even found that it can really be hit-or-miss when looking for the right engineer or architect.

Recently, Zweig Group decided to resurrect a job board we had started several years ago, and AECWorkforce.com is back up and running!

We jump-started this brand to offer AEC firms a place to advertise their most important positions and to identify talent that is appropriate for their needs. We are adding new AEC industry-specific jobs and encouraging AEC workers looking for new opportunities to visit the site and review all of the postings related to their expertise. It’s not yet a perfect solution, but it’s certainly a great start.

I believe that you have to “be everywhere” when it comes to recruiting, and a good place to start is posting on niche job boards like AECWorkforce.com and ramping up your social media presence so that the good people that are actually looking for work can find you. I know it sounds like a lot of work, and it actually is, but I’ve found that once you build a solid digital foundation for your recruitment program everything else can fall easily into place.

To find out more about AECWorkforce.com or to post a job for FREE, visit the site.  In addition, if you haven’t already, start taking social media seriously or if you are just perplexed about where to start, give me a call, shoot me an email, or hit me up on Twitter @RandyWilburn or @ZGRecruiting, and I will see what I can do to get you pointed  in the right direction.

Randy Wilburn is Zweig Group’s director of executive search. Contact him at rwilburn@zweiggroup.com.

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Killing your profitability

Highly profitable firms differ from others in 5 main areas; how does your organization stack up?

When you see some A/E and environmental firms making record profits right now – and others still barely breaking even – you have to ask yourself: “Why?”

The truth is, there are some MAJOR differences in how highly profitable firms operate, how their people feel, and even how you feel when you walk in their doors, as opposed to the operations and feelings associated with firms that aren’t highly profitable. Here are some of those differences:

  • Highly profitable firms are NOT slaves to conventional wisdom. They don’t constantly look outside their firm to other mediocre-performing firms for management and marketing practices of that they can imitate and implement. They have confidence in their own abilities and instincts and instead only do what is best for their own firm. For example, just because many firms have a 12-to-one staff-to-owner ratio, doesn’t mean they automatically strive to have a 12-to-one staff-to-owner ratio.
  • Highly profitable firms eliminate unnecessary activities. How many times have I written that too many meetings kill productivity and morale? Highly profitable firms get this idea. They know more people involved doesn’t necessarily improve the quality of decision-making. They respect everyone’s time and don’t call meetings for things that don’t require a meeting. Those big marketing meetings to discuss potential projects, for example, are usually a waste of time. Why have them? Ditto for formal performance appraisals. Tell people what they’re doing well and poorly as it happens. And, why review time sheets before entry to the system. These and many other needless activities can be eliminated, and everyone can go back to work.
  • Highly profitably firms have strong leaders who focus on their clients and markets. The less profitable firms focus on internal matters and politics. Every highly profitable firm I see has someone(s) acting like competent leaders. These leaders minimize distractions for their people so everyone can stay on task and focused on what’s really important. In unprofitable firms, ineffective leaders are constantly distracted with some minor problem or side-tracking opportunity or another.
  • Highly profitable firms know their numbers. They have good accounting that quickly closes out the month, cleans out the WIP, bills, and collects, and gives everyone in the firm the information they need to make good decisions for the present situation and the future. The numbers are so incredibly important and the profitable firms have good CFOs and Accountants who “get it” and are valued. The less profitable firms are in a constant state of confusion and debate about what’s working and what isn’t.
  • Highly profitable firms won’t tolerate non-performance from their people. Everyone is productive – moving up – or, if not, moving out. The unprofitable firms have tons of dead weight – most often in the highest levels – that their leaders resolve themselves to carrying until the end of time in the name of “family” or some other nonsense. Highly profitable firms know you are only as good as your weakest link AND that good people absolutely hate being dragged down by duds.

So, where do you stack up? Are you highly profitable and enjoying these high times, feeling good about your future and that of your employees? Or, are you missing out? Maybe it’s time to do things differently.

Mark Zweig is president and CEO of Zweig Group. Contact him at mzweig@zweiggroup.com.

© Copyright 2015. Zweig Group. All rights reserved.

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Diligently Do Your Due Diligence Dutifully

Forbes released an article today titled Trying To Sell A Business? You Need To Look At It The Way A Buyer Would by Steve Parrish outlining the process potential sellers should follow to make themselves more attractive to prospective buyers once the Letter of Intent is signed.  I found this article to be a great summary of how to best prepare yourself navigating the due diligence process, and it all begins with preparedness.

Trying To Sell A Business? You Need To Look At It The Way A Buyer Would

Within our company, we would call an intense self due diligence process an operational audit.  The audit includes operational and financial review, interviews with key personnel, and a preliminary strategic plan.  If you are beginning to consider selling your firm, we can facilitate the process and help set you up for success to get the most return on your years of hard work.  If you’re interested in how to best prepare yourself give myself of Jamie Claire Kiser a call at 800-466-6275, or email me at rrenard@zweiggroup.com.

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Is that light – or hell fire – at tunnel’s end?

Industry prosperity can’t last forever, but preparation now can help you be ready if – and when – the cycle ends.

Tlight-tunnel-01he A/E industry is hot right now, People! The overall industry is as healthy – or healthier – than I have EVER seen it in 35 years in this business. We have seen some companies doing incredibly well. Growth rates are up. Profits are high. More people are making more money in this business than I have ever seen. It really is something.

But, a word of caution: If you are successful right now, make sure it is because of what you are actually DOING as a company and not in spite of it. If you are just riding the wave of a supply shortage combined with high demand, you could be in BIG trouble when the cycle ends (which it always does).

Here are my thoughts:

  • Make sure your marketing is working and you are getting good jobs with clients who enhance your reputation and pay their bills promptly. A good brand will help you survive the next downturn. Minimizing marketing investments NOW because you can get away with it will ensure suffering later.
  • Take care of your people. Yes, you may have made a lot of sacrifices, cut your pay every which way to Sunday, and made less in the bad times and now are making hay and feel you deserve it. You probably do. But don’t forget about the good people, too, who are making it happen every day. I’m not talking about everyone in the firm – everyone has some less-than-star-performers – but your best people can’t be forgotten now that times are improving. If you do take them for granted, they could be gone.
  • Get some money into some other assets. Look – I love private firm ownership and love to see people reinvesting in their own businesses, ones they understand and ones they control. But I also realize the benefits of SOME diversification. Your 401K is part of that, but let’s face it, we’re all pawns in the scheme of things when it comes to the public markets. Someone always knows more than we do. I would be looking at real estate (it is still favored tax-wise), other businesses you have an interest in or want to get your kids or other family members into, and even investing in hobbies such as classic guitars or antique cars (antique cars, by the way, have done better supposedly than any other investment over the past 20 years). Get some money into some other stuff, so if it gets ugly, you won’t wash out.
  • Look ahead. Think about what you really want to do with what’s left of your life. You may live into your mid-‘90s like my parents, who still live in their own house and drive daily. Or you may die next week from an illness you don’t even know you have. Either way, you should be planning for your exit from the company. Who is your successor? Does this person know it? Does everyone else know it? If not – or if you don’t have one – get on it NOW. The value of your ownership – the very fate of your company – depends on it.

I hope these good times continue. But if they don’t – and you know they won’t – it’s best to be prepared.

Mark Zweig is president and CEO of Zweig Group. Contact him at mzweig@zweiggroup.com.

© Copyright 2015. Zweig Group. All rights reserved.

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How Many Hats Can a Project Manager Wear?

 

SPM-4-14Here’s another snip-it from the 2nd Edition of Successful Project Management by Ernest Burden.  

Many project managers are more comfortable with the technical side of the business. The marketing hat that firms are now asking the project manager to wear is just another example of the “PMs are responsible for everything” concept. The project manager gets pressure from both ends. Administration asks them for the financials, then marketing asks for project write-ups, and meanwhile they have to manage the project.

The Zweig Group Project Management Study of Architecture, Engineering, Planning & Environmental Consulting Firms, identifies the multiple tasks that project managers have to perform in the marketing/business-development are firms that have project managers assisting in the preparation of proposals (81%), participating in business development/sales (55%), conducting presentations (60%), making teaming arrangements (47%), and assisting in the promotion of the completed projects (27%). Only 4% of those surveyed indicate that their project managers have no involvement in marketing. Since project managers touch every single part of the business, it’s safe to state that they are the backbone of a firm.

According to Jerry Novacek, President, NovaConGroup,  project managers are also expected to perform a long list of other responsibilities in a firm, and he points out the three different models of project managers, which are:

  • Model 1  The project manager does some technical work but has a few other people working under his or her direction.
  • Model 2 A project manager who has developed interpersonal skills and some marketing and planning expertise and spends less time producing deliverables than the Model 1 project manager. He or she is looking for 40-hour blocks that are billable  but is partnering with the technical project managers on a continuous basis to learn their skills. Jerry says that you only need one project manager for every five technical people involved in projects.
  • Model 3 Project managers are usually the market sector leaders of a group and can manage all Model 1 + 2 project managers. They are highly developed in marketing activities and are able to handle multiple market sectors.

According to Novacek, there are four primary knowledge areas and 12 skill sets – three for each for each knowledge area – that Model 3 project managers are involved with.

The Four Primary Knowledge Areas:

  1. Marketing and Business Development
  2. Project Planning
  3. Work Execution
  4. Project Administration

The 12 Skill Sets

Knowledge Area #1: Marketing and Business Development

On the client front, Novacek identifies the first three skill sets by dividing a firm’s clients into three distinct groups, as follows:

  1. Maintenance clients: Repeat clients based on good client service.
  2. Replacement clients: New clients from the same project types or same market sectors, but clients that may have run out of work, or sectors that the firm is trying to expand their services into.
  3. New growth clients: New clients in other market sectors.

Knowledge Area #2: Project Planning

The skill sets required in this area are:

  1. Project workplan: Laying out the tasks for the project in a logical sequence.
  2. Project contract: Participating in or assisting with developing contracts.
  3. Project negotiation: Participating in negotiations for terms of the contract.

Knowledge Area #3: Work Execution

  1. Standards and guidelines: Governing the execution of the work effort.
  2. Products and deliverables: Items that the client receives.
  3. Project phases: Production management within the project team.

Knowledge Area #4: Project Administration

  1. Client management: Beginning with identifying expectations of the client.
  2. Financial management: Including project budgeting, billings, and collections.
  3. Communication management: Control of the entire team throughout the project

Marketing and Business Development

The project manager’s task in the marketing area is to identify all present and past clients that should be listed as targets for the next year’s marketing plan. Most project managers also take responsibility for keeping in touch with these clients. As they become involved in the sales process, they are more likely to discover other work that the client may need in the future that the firm could perform. The next step for the project manager is to take on potential new clients with whom they have something in common.

Other marketing activities that the project manager is accountable for include knowledge of the firm’s marketing plan, marketing materials, and database functions; active lead development; and securing follow-on work from existing clients. The project manager must contribute significantly to the firm’s efforts in all areas of the firm’s practice, including a marketing role with both existing and previous clients as follows:

  • Bring in additional work from current and previous clients.
  • Participate in initial marketing meetings to discuss proposal requirements.
  • Assist in formulating and preparing proposals.
  • Manage the project team in presentations for new work.
  • Expand the scope of existing work contracts.
  • Get the client to hire the firm for an upcoming phase or new project.
  • Actively seek opportunities for referrals to other prospects.
  • Maintain contact with previous clients to identify new projects.
  • Cross-sell and up-sell all the services the firm has to offer.

Clients should be asked about the next phase in the present project at that facility, related work at that facility, or other operational and maintenance expenditures at that facility. They should also be asked about any of the above at other facilities within the  organization. The project manager’s ability to sell both actively and passively can be one of the most significant factors in the selection process for add-on or future assignments.

Other marketing skills will be highlighted in the following three chapters, and the remaining three knowledge areas and nine skill sets will be dealt with in subsequent chapters.

Project Manager versus Marketer

There is traditionally a push-pull that goes on between project managers and the marketing staff. Marketing directors say they need specific for a proposal, such as project information for resumes, project solutions and the project schedules. Project managers say they are spread too thin. Is there an answer to this pervasive dilemma? The following viewpoints have been expressed by veteran marketers relating to project managers and seasoned project managers relating to marketers on a variety of subjects where their responsibilities may overlap in an integrated AEP and Environmental firm.

About Marketing

The marketer points out that his or her job does not end until there’s a comfort level with the client. They must get the project managers involved up front. Project managers need to be at the meetings with the prospective client to get a sense of any urgency that may be discussed. If the project manager falls down at the beginning of the job, he or she has let the marketing arm of the firm down.

The project manager indicates that when a project is signed up, a marketing form is filled out, naming the client, location, size, and services expected. After a project is completed, the same form asks: Can you take pictures, and was it successful? The photographer takes the pictures, the project manager does a write-up that produces a project sheet on details of the success of the project that goes into the firm’s marketing database.

About Social Connections

The marketer is tasked with making sure that proposals go out on time, as well as making new connections through existing client relationships. There are also social events and personal connections, such as golf outings, dinners, and attending conventions, that keep the marketer connected to current and future clients. In one week’s time the marketer can touch 10-20 clients all in one place, and it’s all budgeted right into the firm’s revenue stream.

The project manager recognizes that one of the most important roles is communication; socializing, developing relationship with the project sponsors, understanding how the project is going to be handled, and preventing surprises. That’s part of the ongoing marketing for the next job from the same client.

About Proposals

The marketer knows that proposals are the best vehicle to show a firm’s expertise, and you really need good marketing materials. Quality is everything. It sends a message to your client that you care about the project.

The project manager explains that part of the deliverables in proposals is scheduled meetings, and looks for reasons for the client to periodically review the work in face-to-face meetings. In this environment, something usually comes up – and it often leads to new work.

About Trust

The marketer advises that, if you have invested a lot of time on a potential client, there has to be a level of trust that the project manager assigned to that client is going to do a great job and that he or she will successfully market that client for future work as well as manage the project.

The project manager looks for someone who can step in and take the ball and run with it. The hand-off is really based on the trust that the client has in you.

About Opening Doors

The marketer can often hold a client’s interest in conversation, then as soon as it gets technical, the project manager can step right in. That technique opens up door after door after door.

The project manager sits down with clients and their representatives all the time and has the opportunity to have a foot in someone’s door every day. That has to be capitalized on to keep your company afloat and growing.

About the Firms Direction

The marketer feels that principals may not want project managers to influence the destiny or the direction of the firm.

The project manager knows that principals have always turned to the project manager to see where the coming market would be and where the future of the firm would be. Project managers definitely have the ability to shape that vision

These scenarios show just how the project-delivery and marketing functions intermesh, and why integrated management practices are needed throughout the firm in order to effectively control the process. The Zweig Group Project Management Study of Architecture, Engineering, Planning & Environmental Consulting Firms, showed that a large majority of firms (62%) track revenue from new clients versus repeat business, and that the firm’s repeat clients (72%) account for a large percentage of the their gross revenue. There is good reason to thank project managers for those numbers.

How Firms Assist Project Managers in Marketing Efforts.

Some firms have developed “Sales Survival Kits,” or manuals, which teach project managers how to market. They explain what materials are available from the company resources and give pointers on proposals, techniques for cold calling, Go/No-Go forms, and other information from published articles. These manuals offer help to get started in the sales process, since it’s not something that comes naturally to most project managers.

Other firms use a client relationship management (CRM) database program that keeps detailed information on all items relating to a client and their project. Salesforce ( www.Salesforce.com) is a widely utilized CRM. Notes on meetings as well as research are all stored and easily accessible in a CRM. Project managers have access to it, not just the principals or marketing directors. Critics of CRMs say that some systems are complicated and not very popular with the project managers, since they not only have to do their jobs, but also put their information into the system. On the other hand, people in the design and engineering profession are numbers-oriented, so it can help to keep track of this information in a database. Technical people may not always keep track of how many proposals they worked on or how many times they were rejected. If it’s kept in a database, it’s far better than not knowing. For example, those results help firms stop chasing projects they are losing and start concentrating on those they are winning.

Another helpful source for information is the Project Management Institute (www.pmi.org), an international organization of over 100,000 members worldwide. Initiated in 1969, it has been recognized as the international standard for best practices in project management. PMI publishes a body of knowledge which has become an ISO standard for best practices as to the way a project should be addressed for different processes and nomenclatures. PMI has a certification program, with a written examination where you have to requalify every three years through continuing education. It is the protocol of choice, and some governmental agencies require a Certified Associate in Project Management (CAPM) to run their projects. You can capitalize on PMI and certified project managers in your marketing efforts by promoting that this is considered as industry’s best practice. However, according to the Zweig Group’s Project Management Study of Architecture, Engineering, Planning & Environmental Consulting Firms, a negligible few firms (1%) require their project managers to hold management-specific certifications. Of those that do, the most common is the Project Management Professional (PMP) certification.

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Managing AR drift

Allowing late payments because ‘this is the way the client has always paid us’ is a cash-flow killer.

Accounts receivable is, for most of our clients, the source of all the cash that fuels the firms operation. The timely collection of AR is a critical component of the cash flow machine for the firm.

The CFO, controller, business manager, and financial team spend a good deal of time projecting, reviewing, and collecting the funds that drive the firm. And project principals and managers are called on to update the status of outstanding AR.

Some firms even have a dedicated AR collection staff member, whose only function is to manage the collection effort and AR. There is a large amount of time and effort devoted to collecting the firm’s funds.

One of the biggest issues that firms encounter is “AR drift.”

AR drift is the gradual lengthening of the days outstanding – from 30 to 60 to 90 days and beyond – for the same client or clients. Work continues, the client does not pay, and there appears to be no consequence to the client, who takes advantage of this, and the firm’s principals and project managers accept that “this is the way this client has always paid us”

Sound familiar?

If so, it might be time to take a serious look at why this has been allowed to occur and what the broader impacts are to the firm.

Contract Terms. Your firm’s contract with the client is the starting point for all issues related to collections. It outlines, from the project kickoff meeting forward, the adherence by your principal in charge and project managers to the terms that govern how your firm will manage the AR process.

Your client hired your firm for superior qualifications, expertise, and value. Your contract, which establishes the ground rules for performance, allows your firm to provide those services, and you are authorized under its terms to invoice and be paid by the client. The AIA has established “pay upon receipt” as standard language, other contracts specify payment 30 days after invoice date, and your contracts have your unique terms and conditions.

Why are you not holding your clients to the terms of the contract? More importantly, does your contract have terms and conditions that govern the invoicing, collection and suspension of work for non-payment?

By not providing a sound business approach and adherence to the contract terms, your firm runs the risk of fostering and condoning AR drift.

Client Communication. Are the firm’s project managers practicing effective client communication?

A weekly short email that informs the client of progress on the project and delineates completion of milestone goals is a critical component of effective cash-flow management. If the PM sends out a weekly status report, the firm’s invoice is less likely to receive scrutiny by the client, who has been informed of the progress of the project.

The invoice will most likely be paid faster, and this will break the AR drift cycle.

Collection Policy. Does your firm have a collection policy that is adhered to and written down? Do the PIC, project manager, and accounting department all adhere to the terms of the policy? Here is a guide, though other factors – such as prime versus non-prime contract agreements and specific unique contract terms – should be taken into account. The following policy is based on payment upon receipt:

  • Five days after invoicing: Accounting emails client to confirm receipt and ask when payment can be expected.
  • If payment arrives as scheduled, no further action, if not:
  • 35 days: Accounting calls client to ascertain  the payment status, if no acceptable answer, accounting contacts PM.
  • 35-37 days: PM contacts client PM to determine issues.
  • If corrected and payment is received, no further action, if not:
  • 40 Days: Your PIC calls the client PIC to determine the issues, and if resolution will result in payment.  The date of payment and amount should be confirmed by PIC and communicated to PM and accounting team. No other response is going to aid in establishing payment. Statements from the client such as: “Payment is forthcoming; we will get it out to you” are meaningless without disclosing when and how much!
  • 45 days:  If no payment received, the PIC calls the client and stops work until payment is resolved.

Clearly, the best way to ensure that cash will flow is having expectations clearly defined up-front at the start of the project.

One further way to avoid this is the review and approval of a project cash flow with the client. The cash flow mirrors the deliverable schedule, shows the client that you are concerned about the organization’s resources, and will allow the financial team to have a much more predictive way to manage the flow of funds on the project.

Adherence to the collection policy will also break the AR drift cycle.

Monitoring the Average Collection Period. The critical metric that assesses collection performance is the average collection period. This metric should be reviewed for the firm, office, line of business, PIC, and PM.

An annual review of ACP compares the outstanding accounts receivable, divided by the gross revenue over 365. For example:

  • Annual AR = $ 3,600,000
  • Gross Revenue = $ 11,500,000
  • ACP = $3,600,000/($11,500,000/365)
  • ACP = 114 days
  • The ACP can be reviewed by month, accounting for the period being reviewed:
  • March AR = $ 1,950,000
  • March Gross Revenue =    $ 3,600,000
  • Days through March = 90
  • ACP = $ 1,950,000/($3,600,000/90)
  • ACP = 48.75 days

Zweig Group publishes annual metrics that address the ACP in its Financial Performance Survey of A/E/P & Environmental Consulting Firms. Based on the 2014 Survey, the mean ACP was 72 days outstanding.

How does your firm compare? Comparisons of AR outstanding by PIC and PM are some of the most effective tools that a firm can employ in reviewing, assessing, and monitoring cash flow in the firm. Collaborative and cooperative review of the AR by the financial team and the project team will go a long way to improving the cash flow performance of your firm. By consistent monitoring, the ACP review will aid in identifying where AR drift is occurring.

Your Banking Relationship. Those of you that manage the banking relationship, line of credit and loans with the bank know that your firm’s accounts receivable is normally the primary asset that the bank will review on a consistent basis.

Most banks tie the line of credit and loan values to the age of your accounts receivable. Your firms’ loan ability is directly tied to the firms’ performance on collections. Any AR over 90 days is normally deleted in the analysis of the loan or line values.

Some banks will assess loan ability at 80 percent of the total AR. Others review the client-percent of total; any client over 25 percent is eliminated. Others look at AR that is 30 or 60 days, and where there is 90 day AR, the bank reduces the 30- and 60-day amounts by 50 percent!

By allowing the clients to drift, you risk putting the firm’s access to cash at risk for both the short- and long-term.

AR drift does not have to be the norm for your firm. Effective client, project, and financial management are the keys to breaking the cycle.

Ted Maziejka is a Zweig Group financial and management consultant. Contact him at tmaziejka@zweiggroup.com.

© Copyright 2015. Zweig Group. All rights reserved.

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You need to make more money

A/E owners should consider whether their ‘average’ income is contributing to a culture of mediocrity.

It’s interesting to me to see how the owners of A/E firms seem to fit into one of two categories: A few make a tremendous amount of money – high six figures or, in some cases, millions, annually. Then there are the rest, people who are happy IF they can pay themselves whatever a salary survey says is “normal” for someone in their position in a similar sized firm, located in the same geographic area. Obviously, this is a whole lot less than the first group.

What I am going to say may seem odd to many of you, but I will go ahead and say it, just the same: You need to make more money NOW, and it will actually be good for your firm and the other people in it if you do.

You and your fellow principals are the role models for everyone else in your company. If they see you being successful in this business, there’s a chance that they will believe that they, too, can be successful in it. That will hopefully inspire them to work hard and stay with the company, in contrast to believing it is futile to do so and that one has to leave the company or worse, leave the industry, to be successful.

Many years ago (about 30?), I was giving a seminar at the NSPE National Convention in Austin, Texas. I was the overall moderator for a group of engineer speakers, each from a different industry, who were talking to student representatives from all 50 states. Represented on the panel were speakers from academia, government, industry, and consulting.

When the consulting guy got up there – I remember he was a high-level guy from one of the larger national firms at the time – he started out his by saying: “If you ever want to drive a Cadillac, don’t go into the A/E business.” I thought: “What a terrible thing to say to these young people!” And, when I had my opportunity to address the audience, I made sure to let them know that I worked for an A/E firm and had, in fact, driven there that night in my then-new Porsche. That got a few laughs, but I was serious. The opportunities for financial success in this business are fantastic.

When you examine the psyches of the big money-makers versus all the rest, there are some major differences. First and foremost, they think they deserve it. They know if they can run a business that is so profitable that it can afford to pay them that well, then they must be doing something pretty fantastic.

Those who are paid the “industry average” for someone in their position are, by and large, not unhappy with it. And the longer it goes on, the more likely it is that they will just give up on the idea that making serious money in this business is even possible. That, in turn, affects every decision they make and lowers their overall expectations, which reduces the company’s performance. Their firm may become one that actually demands less from everyone working there as a result, and the low performance expectation becomes the reality of the situation.

I’m not advocating that you turn into a greedy person who loots the company and squanders the money on personal luxuries. But I am saying that your success – as measured by how much your business pays you over the course of the year – is actually important for creating a culture of success in your company. And that culture will help you and everyone else working there be more successful over the long haul.

Think about it!

Mark Zweig is president and CEO of Zweig Group. Contact him at mzweig@zweiggroup.com.

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A leading strategy

Tony Mirchandani_resizedRTM’s CEO Tony Mirchandani has built his career pragmatically and encourages sustainable growth within his firm.

By Liisa Andreassen
Correspondent

Tony Mirchandani, CEO, RTM (South Barrington, IL), a 100-person engineering
consulting firm, has expertise in business development, financial management, and engineering. Upon joining RTM in 2001, his vision and leadership resulted in a three-fold growth in revenue.

Before joining RTM, he was involved in corporate venturing with HON Industries and two start-ups in the technology and consulting fields. He received a B.S. in electrical engineering and a technological entrepreneurship certificate from the University of Iowa in 1998. In 2006, he received an M.B.A. from the Kellogg School of Business at Northwestern University.

Mirchandani has been included in Lexington’s Who’s Who of Executives and Professionals for his successful service business and an e-commerce business start-ups. He was also featured on the cover of Inc. magazine in March 1998 as one of the future “HOT” entrepreneurs in the Midwest. Additionally, Mirchandani sat on the board for the Governor’s 2010 Strategic Planning Council of Iowa.

In his role as RTM’s CEO, he consistently seeks out opportunities for the company to grow its market share, while enhancing the services it offers to clients.

“To achieve a balance between our external and internal goals, I am continually striving to construct internal systems that support pragmatic sustainable growth,” he says. “Some of the ways I support this growth is by developing a strong leadership team and a company culture that makes RTM one of the best places to work.”


A conversation with Mirchandani

The Zweig Letter: What are your key strengths? What do you feel the key strengths are for an effective leader?

Tony Mirchandani: As a leader, I constantly demand more of myself and seek ways to improve. I know that I don’t have all the answers, so I make a point to consult with my industry-savvy colleagues for guidance. I strive to create a work environment that encourages knowledge sharing, and RTM has achieved this by hiring and empowering great team members.

A fundamental requirement for a great leader is to provide a common vision and a strategy to achieve it. A key strength of my leadership style consists of challenging the traditional approach to doing things, taking responsibility for failures, and being able to commend a job well done. As the firm grows larger, I believe it is important to keep a humble, yet strong, company culture where everyone, from intern to principal, succeeds and fails together.

TZL: How would you describe your work style?

TM: My work style is continuously shifting; I enjoy juggling many different topics or subjects at any given time. I always think 10 steps ahead, strategizing for one, three, and five years down the road. I believe it is important to continually improve my knowledge in leadership, as well as in the A/E industry.

TZL: What has been your greatest challenge to date, and how did you deal with it?

TM: The Great Recession was simultaneously one of the most challenging and rewarding periods in RTM’s history. It forced us to think long and hard about what we needed to do to be better tomorrow than we did yesterday. When someone has a heart attack, it serves as a reality check: Change your habits, or you won’t be around for long. During the recession, it became apparent that the only way to survive was to grow the firm with a purpose, rather than for the sake of growth alone. We approached the challenge by re-vamping our organizational structure and focusing on our marketing and business development efforts. We built a base of clients whose design philosophy aligned with ours and left the rest behind.

TZL: What is your leadership style?

TM: I approach leadership by empowering my team to the fullest extent possible. In doing so, the company has successfully avoided the sporadic and political conditions that naturally develop in any growing organization. A key requirement of a leader is to not only share the vision of the organization, but to also have the ability to roll up your sleeves and help accomplish it.

TZL: What is your vision for the future of RTM?

TM: To become one of the top three engineering firms in any market in which we operate.

TZL: What do you enjoy in your spare time?

TM: If you read any of the first seven answers, you’d see that I really have no spare time. All joking aside, I do enjoy spending time skiing, sailing, and traveling with my family.

TZL: What is something that no one knows about you at the firm? 

TM: I spent 10 days in Israel, 10 days in China, climbed Mt. Fuji, and backpacked through Alaska for five days. Another interesting fact is that I started my career at a furniture manufacturing company in Iowa.

© Copyright 2015. Zweig Group. All rights reserved.

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Scoping out the competition

PPO_graphIt is a good to be to be a principal, partner, or owner in the architectural, engineering, planning, and environmental consulting industry!

In its 2015 Best Jobs rankings, U.S. News & World Report lists Architect as its No. 2 Best Creative Job, No. 19 Best STEM Job, and No. 81 Top 100 Job.

Engineering also makes the list: Civil Engineer is the No. 7 Best Technology Job, No. 10 Best STEM Job, No. 17 Best Paying Job, and No. 22 Top 100 Job; and Mechanical Engineer is the No. 5 Best Technology Job, No. 7 Best STEM Job, No. 16 Best Paying Job, and No. 18 Top 100 Job.

Additionally, in its most recent Compensation Report, the American Institute of Architects shows average principal, partner, and owner compensation between $100,000 and $150,000, regardless of geographic region and firm size.

It has been nearly 25 years since Zweig Group’s Principals, Partners & Owners Survey was developed to assess A/E/P and environmental consulting leaders. Though the basic compensation package components remain the same – base salary, bonuses, and overtime; stock options; retirement plans; and health, life, and disability insurance – a lot has changed. It is not unusual for today’s organizations to offer perks such as company cars and cell phones, telecommuting or flex-time options, and reimbursement for educational programs or health club memberships.

This year’s Principals, Partners & Owners Survey, which was released May 4, allows readers a glimpse into other companies to assess how they recruit and maintain talented principals. It offers points of comparison: How does your firm stack up to its peers? What are the companies that you aspire to imitate doing? Are there things you can do to level the field or make strides toward your goals? Along with an executive summary, the publication includes a workbook for readers to track where their firm is and where they would like for it to be.

The Survey provides comprehensive data on A/E/P and environmental consulting ownership, management, and leadership broken down by firm type, size, and headquarter region. The pages lay out all you could need to know about the types of compensation, work, and perks that principals, partners, and owners can expect, and it goes even further, outlining the backgrounds and attitudes that principals express and the conflicts and challenges that they typically face.

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Measuring performance measures

Though harder to apply and evaluate, assessments of interpersonal skills can promote team performance and increase morale.

I have had a number of discussions lately about how to measure performance. The people I’ve spoken with, both employers and employees, all gravitate toward what I term “hard metrics,” such as billable hours.

For project managers, it’s all about meeting the fee budget and schedule, profitability, number of change orders, and the like. For principals, it may be work brought in or deals closed. All of these things are important and, in most cases, fairly easy to measure. But they can also be “gamed,” for example by blaming deviation from targets on someone else or hiding time (i.e., principals or project managers asking team members to put in extraordinary hours without logging time on their timesheets in order to meet the fee available).

This most often leads to finger pointing, blame, and resentment. The result is, invariably, bad morale (which I spoke about last month). Various circumstances can lead to poor hard metrics performance.

“We just had to have that project, so we went after it with a fee that was too low,” the person who negotiated the deal says. “We knew going in that this was going to be a challenge; you all said you would work hard to tailor the services to meet the fee available, and now you’ve blown through it.”

Or the building department goes off on a tangent about a conflict in the code, delaying the project and causing extensive modifications to the drawings to gain approval. The client says, “Your contract calls for a code compliant design. Why should I pay extra?”

Somehow these things never quite seem to be appropriately accounted for at bonus and raise time, leading to more finger pointing and blame as to whose fault it was that we didn’t make the profit we’d hoped for. In other words, my poor performance is always someone else’s fault. It’s usually impossible to lay an economic performance failure at a single individual’s doorstep. Besides, our objective should be to recognize that success in our profession is a team effort where, together, we’re all looking at the issues that arise and working to address them. Hard metrics often seem to result in each person trying to move the blame onto someone else’s plate.

So, what should we do? While I’m certainly a proponent of keeping hard metrics, I like to use them as a learning tool. What have we done right? What can we learn from our experience to improve our performance in the future?

But, when it comes to evaluations that lead to bonuses or raises, I favor a series of soft metrics:

  • Has the person worked collaboratively, taking personal responsibility for helping the team to perform at its highest level?
  • Has an individual reached out to help another team by sharing an area of expertise that the team needed?
  • Has the person acted in such a way as to shine a positive light on the firm with the client, consultants, building officials, contractors, sub-contractors and suppliers? After all, that’s where future repeat and referral work comes from. We can’t just say: “That’s marketing’s responsibility.”

These are much harder characteristics to evaluate. They require that the evaluator has a close working relationship with the person being evaluated. He or she has to care about the individual’s success. That involves being a good coach and counselor along the way, offering advice on how to do the things that will help the person grow as a professional, making the firm stronger and better respected, and our teams more successful.

In the end, hard metrics, while required, have the potential to bring about dysfunction, resentment, and blame if used as the only measure of success. They can be antithetical to strong team performance if used in isolation.

Soft metrics, while harder to apply and always subject to judgment, are equally, if not more, important in promoting stronger team performance, better utilization of each person’s unique talents, and higher morale.

Let me know what other soft metrics you think are important, contribute to the success of your organization, and should be used to evaluate performance.

Edward Friedrichs, FAIA, FIIDA, is a Zweig Group consultant and former CEO and president of Gensler. Contact him at efriedrichs@zwieggroup.com.

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Being strategic about marketing

Diverse firms can implement rules-of-thumb to establish priorities and see results for years to come.

140By Andrea Bennett
Managing Editor

A/E/P and environmental firms have several items on their to-do lists at any given time: RFPs to consider; go/no-go evaluations to make; constant communications with past, current, and potential clients; not to mention HR and other internal priorities. On top of all of that, savvy firms know that in order to keep business coming in, they must continue putting their message out through continuous marketing of their services and successes. Though the actual means and message will vary by firm and industry, Zweig Group’s Executive Vice President Chad Clinehens says that most A/E/P and environmental organizations can utilize some basic principles and strategies to ensure that they stay at the top of their marketing games – and ahead of their competitors.

For starters, Clinehens says, it is essential that firms stop thinking of marketing as another overhead expense.

“Marketing is an essential business-building function,” he says. “It should always be viewed separately from support services like payroll and other general overhead functions. The healthy perspective is: ‘With every dollar I spend on marketing, I should expect to get some return in the future.’ Growth starts with marketing.”

Though there is no specific formula or ideal media mix that can be implemented across-the-board, Clinehens says that firms can use some rules of thumb to determine their ideal budgets and channels.

“In general, firms spend an average of 3.8 percent of their net service revenue on marketing, and we suggest that firms outspend their peers by at least 30 percent to gain a measurable competitive advantage,” he says. “There is not a generally accepted ranking of activities that all firms should use to prioritize their investment. Rather, the priorities should be defined by that firm’s unique position in the market and its strategic plan for modifying or expanding that position. Firms, in general, however, need to make sure that they distinguish what is true marketing, versus what is business-development.

“Regardless of size, firms need one person that is solely accountable for driving return on marketing investment. In smaller firms, that could be the CEO, but, as firms grow, having someone specifically tasked with marketing is crucial. We normally recommend this for firms with 50 or more people. Firms should also carefully consider who has this role: Understanding the unique spects of this industry, combined with creativity, is a must.”

As far as where to look to begin making these decisions and distinctions: Clinehens says that it all goes back to the strategic plan.

“Firms must have a clear and concise strategic plan that is updated yearly,” he says. “Have goals and activities in that plan that are designed to advance the firm and its vision. Then provide adequate resources to accomplish the short- and long-term goals in that plan. The marketing priorities included in the plan should be set by a clear vision and mission for the firm.

“At the end of the day, everyone is looking for measurable results. Measurable results, however, are particularly difficult to define in our industries, because we do not sell products in the retail sense, where a sale can be tracked to a specific activity. Rather, marketing activities in firms aim to build a brand, which results in purchases for possibly years out. This is why marketing is an essential business function, not an overhead expense.&rdquo

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