Here are three resolutions for top management and professional staff at AEC Building Teams to consider for the coming year. Like all New Year’s resolutions—from losing weight to breaking five hours in the marathon—it’s all in the implementation.
Resolved: I will not be foolishly optimistic about business prospects.
Most AEC firms should have experienced a terrific year financially in 2006. You may even have had a good run for a few years in a row. There hasn’t been sustained growth in commercial, governmental, and industrial construction like this in a long time.
According to our economic analyst, Dr. Jim Haughey, the commercial, industrial, institutional, and multifamily sectors should be good to solid at least through 2007, and probably well into 2008.
But if you survived the recession of the early 1990s, just remember what it was like to have everything dry up all too quickly. If you’re too young to have worked (or to have been laid off) in the ’90s, you don’t want to know what it was like. So don’t assume this economic gusher is going to last forever.
Resolved: I will be cautious about biting off too much.
An obvious corollary to the first resolution. When things are going well, there’s that gnawing temptation to expand geographically (“Hey, let’s get into that India thing!”), or to dip into new markets where your firm has no real expertise (“Healthcare? Sure, we can do that”). Or you start adding people—if you can find them in today’s tight professional labor market—without considering what will happen if the work suddenly stops coming.
Resolved:I will focus on financial metrics that have real validity for my firm’s business.
Keep your eye fixed on the bottom line. Profit, not gross revenue, should be your key metric. It’s not how much you make, it’s how much you keep at the end of the year that counts.
How to achieve this? Some suggestions:
• Reduce your collection time. If you’re not getting paid for services rendered, you’re giving your customers an interest-free loan. If necessary, hire or assign someone to collect past-due fees. It will pay off.
• Get rid of deadbeats and unprofitable clients. Do you really know if you’re making money on every job? It’s amazing how many firms are working for nothing for so-called loyal clients.
• Get more business from current clients. This assumes a) that they pay their bills on time, and b) that the jobs are profitable. It is almost always easier and more profitable to expand your business with existing clients than to seek out new ones.
• Get out of markets where you’re losing your shirt. Just because your firm did schools since its founding doesn’t mean that you should still be doing them, if the payoff’s not there.
• Track revenue or profit per professional staff member. This is a good way to measure staff productivity.
Now, it’s off to the Y to burn off some of those pounds and get ready for the Chicago marathon. May you have better luck than I do keeping your resolutions.