Cart 0

Designing your business to scale

1332 A/E advertising advice AEC Benefits bonus program Budget business management Business Planning Category_Articles client database database financial performance grow Growth healthcare information sharing Mark Zweig marketing Meetings open book management Ownership Recruiting rewards scale stock success successor Training working capital ZG Team

“If you have lofty ambitions for the growth of your firm, but aren’t exactly sure of what you need to do to accomplish it, here is my best advice.”

Entrepreneurial A/E firm owners will tell you that they want their businesses to “scale” – i.e., continue to grow – but they don’t always do what they should to make that a reality. Wishful thinking and fantasizing about having a company that grows successfully won’t make it happen.

If you have lofty ambitions for the growth of your firm but aren’t exactly sure of what you need to do to accomplish it, here is my best advice:

  1. Implement a single client and potential client database that is available to every single employee and used. This is job No. 1 and you have to do it. It’s going to be necessary to implement my second suggestion. Implementation of these systems has a high failure rate. You will need lots of planning, lots of training, and lots of talk about the importance of it to do it successfully.
  2. Commit to a high marketing and advertising budget and spend that every year, regardless of short-term results. “High” is perhaps as much as twice whatever your competitors spend. You can’t lump all A/E firms into one pot when it comes to marketing budgets. High design firms often spend 10-12 percent or more on marketing. Single discipline subconsultants could have 3 percent budgets. Everyone else is in between. But the point is, if you want to beat the industry standard growth rate you will have to do more than they do over the long-term. Accept this as the truth!
  3. Develop and implement an aggressive recruiting program. Growth requires lots of good employees. You won’t get them in this very tight end competitive labor market unless you work very hard and spend the money necessary. Appoint one person in charge of recruiting and get out and SELL your company to them.
  4. Become an open-book management company. Come up with a monthly report that shows your financial performance compared to goals and/or industry benchmarks and charts it all and give it to every single employee in your firm. Get it done quickly and explain what the numbers mean. Everyone needs to know how the business is doing and what is working and what isn’t so they understand how the business makes money and can help make the company more successful.
  5. Use your stock or ownership interest as a way to generate the working capital you need and tie down key people. Consider this – an ownership program that sells small amounts of ownership to your best people every year and requires everyone who buys in to sign a non-competition agreement that at a minimum keeps them from stealing your current clients when they leave. You can finance it through payroll deduction and sell it at a price that approaches its real value, not one based on book value or a strictly profit-driven formula. You will have an army of people with a vested interest in the long-term success of your firm PLUS minimize your need to take on debt to finance your growth.
  6. Institute an ongoing business management training program. Architects and engineers don’t all know a lot about business. They aren’t all great project managers and don’t know how to sell. They don’t necessarily understand finance and accounting and business valuation. They need to know all of these things to help you build your business properly.
  7. Institute and ongoing business planning process. Require each business unit leader to come up with three new services to sell and three new ways to sell their services every year. You need engaged employees to foster growth. Getting their involvement in the plan is critical. And planning for growth and marking out the steps required to achieve it is, too. Keep everyone focused through your planning process.
  8. Require every manager to identify their successor or, if they don’t have one, begin recruiting to find that person. Scalability means you have to have a succession plan for everyone. Instead of just talking about it, make it real by taking this step.
  9. Implement a formula-driven, shared bonus program that rewards every single person. Tie everyone into the short-term cash basis profitability of the firm. Have three groups of bonus pools. All employees, management/key people, and owners. Pay the money out frequently so they see the link between what they do and what they get.
  10. Minimize meetings, bureaucratic decision-making processes, and all other demotivators that turn people off. What more can I say? I read an article this morning in Harvard Business Review that said people in businesses spend 80 percent of their time in meetings and responding to requests for information. That leaves 20 percent of their time to do their jobs. And it is ridiculous. Don’t let this happen.
  11. Have the best healthcare benefits of any firm in the business. It will help tie people to your firm and keep them there. Yes it is expensive but it will differentiate you and it’s worth it.
  12. Cut the bottom-ranked 5 percent of the staff every year. This may seem harsh but every firm tends to accumulate dead wood if it lasts long enough to do so. You have to acknowledge the fact that other employees not carrying their weight is a huge demotivator to your best people. Have high standards to stay on the team but big rewards for those who can and do.

So there you have it – a 12 step formula for scalability. How do you stack up? If not so good, maybe you should consider taking my advice.

Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.



Older Post Newer Post