Thursday, September 29, 2011

Preparing for Another Possible Downturn

While the news outlets were abuzz last week about renewed concerns of another recession, many questioned whether the last one had really ever ended. But among engineering, architectural, and environmental firms, many have seen business improve significantly since the financial crisis in 2009. Will the improvement continue?

There are some disconcerting signs for 2012. Sixty percent of American cities are delaying infrastructure projects due to declining revenues. Nearly half of states are projecting budget shortfalls of over $1 billion next year. About 85% of the Recovery Act funds have been spent. And now I'm hearing of delays and cutbacks on federal projects and contracts, and clearly there are more reductions coming.

AIA's Consensus Construction Forecast in July projected a 6.4% growth in nonresidential construction in 2012. But given the recent economic news, that forecast is likely subject to downward revision. Reed Construction Data, for example, in August modified its forecasted growth in 2012 to 4.8%, down from 10.5% (admittedly one of the rosier projections). Last week, McGraw Hill dialed its projection down from a 1% gain next year to a 3% drop, with a 7% decline in non-building construction predicted.

How all this impacts your firm, you'll have to determine. I suspect the outlook will be mixed across our industry, just as it has been recently. But there's little doubt that the worst is still ahead for many A/E and environmental firms. If you're among them, what can you do? Here are a few suggestions, with emphasis on developing new business in a tough economy:

Don't discard discipline in your sales pursuits. It's easy to succumb to a volume strategy when the volume of sales and proposal opportunities decreases. But simply chasing more is unlikely to translate into winning more. On the contrary, spreading your collective business development time across more pursuits usually means spending less time on your best opportunities--and losing some you can't afford to let slip away. Every hour spent on a proposal you have little chance to win, for example, is one less hour available to do a better job on a proposal where you're better positioned.

Specifically budget BD time for seller-doers. Even in a down economy I still hear utilization goals used as an excuse for not making more sales calls or getting a head start on key proposals. Don't try to tackle these crucial tasks with leftover time! Instead, manage BD activities like project work. Define tasks, assign individuals, budget their time, and track their follow-through. Give BD the same importance as any other project. Of course, deadlines and detours will arise, but you don't ignore other client projects just because you're busy. Yet that happens with BD all the time.

Transform lower utilization into higher BD activity. Every person in your firm can contribute in some fashion to your marketing and sales efforts (for a list of possible BD tasks to be divvied up among staff members, check out this previous post). So redirect every available nonbillable hour to supporting the firm's business development activities. This is not only wise use of your resources, but helps raise employee morale and productivity because they become part of the solution.

Be diligent in following up leads. Most legitimate sales leads are neglected or mishandled resulting in lost sales, according to research. Part of this is due, no doubt, to chasing too many leads at one time. It's important to evaluate your sales prospects, just as you do (hopefully) RFPs, determining which ones to go after and which to pass on. But once you've made the "go decision," you need to give every lead the appropriate focus and effort. Again, define specific action items and carefully track follow-through.

Keep talking to your clients even if they don't have work. Client relationships are a long-term investment that you dare not neglect when there's a budget crunch. Someone else may well have nudged your firm out when the funding returns. Don't forget that clients' needs didn't go away when their budgets did. They still need help, perhaps more than ever, and you might find ways to make a big difference that will pay off later if not now. In staying engaged with your clients, don't neglect asking them for leads or referrals with other clients.

Don't cut marketing costs; redirect them.
Marketing has traditionally been one of the first targets for budget cuts when business declines. And I understand why. For most firms, marketing is nice to have when times are good, but is not seen as essential when the economy tanks. The problem is that the tangible benefits of it are usually neither demonstrated nor measured. But rather than cutting back, consider redirecting your efforts from the usual ineffectual self-promotion to generating content and resources that clients find useful. Check out this previous post for insights on what works best in professional service marketing.

Commit to growing market share. Your firm's growth for years to come may depend on your ability to take more work from your competitors. Sure, you've had success beating the competition on a situational basis, but the challenge of actually increasing market share is one that few A/E firms are prepared to handle. You won't get there doing business as usual. You're going to have to out-sell, out-serve, and out-work your competitors. Get your management team together and outline the particulars of how you're going to do this.

Do things differently if you want different results.
I'll not repeat the old line about insanity, but doesn't it seem crazy to keep trying the same tired approaches to BD when it's clear they're not working very well? The temptation is to blame this all on the economy, but the reality is that most A/E firms were mediocre at BD before the recession and now they've been exposed. More of the same won't cut it. I've written extensively about distinct approaches to BD in this blog, so I'll encourage you to use the search bar or browse under the BD heading for ideas. If you need more advice, don't hesitate to call or email me.

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