Stimulus delay leaves A/E firms in limbo

A/E firm leaders eager for a quick boost from an economic stimulus plan received some troubling news recently when it was suggested that spending on infrastructure projects may be slow to materialize. A report by the Congressional Budget Office estimated that, while two thirds of infrastructure and other discretionary spending included in President Obama’s American Recovery and Reinvestment Plan would take place by 2010, only a small percentage is likely to be spent in 2009.

Consequently, A/E firm leaders hoping for quick returns from the economic stimulus package may need to rethink their plans for the year. "A/E firm leaders cannot simply sit back and wait for the stimulus package to come into effect," says John Doehring, managing director of ZweigWhite’s Strategic and Financial Advisory Services consulting group. "For firms to be successful in this challenging economic environment, they are going to need to tighten up firm management while positioning themselves to take advantage of opportunities like the Obama stimulus plan if and when they hit."

Doehring—a principal strategy consultant with ZweigWhite who advises architecture, engineering, planning, and environmental consulting firm clients on strategic and growth oriented initiatives—suggests the following strategies to ensure that firms are prepared for what is likely to be a tough business environment in 2009.

Shore up early warning systems—"In times of economic uncertainty, managers need to be able to accurately project workload-related peaks and valleys," says Doehring. At a minimum, Doehring suggests that A/E firm leaders and managers track sales, revenue, backlog, and capacity at least three months out. "This way, managers can shift work around and make the most of the firm’s resources," he says.

Continue to invest in sales and marketing—While it may be tempting to cut back, reducing expenditures on sales and marketing can do more harm than good. "In this environment, firms need to be positioned to take advantage of each and every opportunity," says Doehring. According to ZweigWhite’s 2008 Marketing Survey of Architecture, Engineering, Planning & Environmental Consulting Firms, the median marketing budget at industry firms is 4.9 percent of net service revenue.

Expand your reach—With projects becoming scarcer, firms may need to broaden their audience in order to meet their goals. Doehring suggests that diversifying in terms of geography, client type, project type, or service offerings may be necessary to offset slowdowns in local and individual markets.

Monitor and trim unnecessary expenses—"When business conditions get tough, a number of firms will have to make difficult decisions and reduce costs," says Doehring. "Bonuses, fringe benefits, and perks are often the first to go." According to ZweigWhite’s 2008 Financial Performance Survey of Architecture, Engineering, Planning & Environmental Consulting Firms, more than three quarters (79 percent) of firm leaders said they would consider reducing bonus payouts should the United States enter into a recession. Nearly half (42 percent) say they would cut back on perks and benefits.

With many economists predicting that an economic recovery may not begin until 2010, this year is shaping up to be a difficult one for A/E firms. However, by focusing on managerial and operational discipline, A/E firms can help ensure their continued success no matter what news comes out of Washington.