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O P I N I O N
T he real test of an organization never comes when the wind is at its back and revenues are strong. However, these are the times when firms within the A/E industry should take a moment to assess their vulnerabilities. The winds of change Is your firm vulnerable, or are its revenue streams diversified enough to endure the ups and downs of politics and the economy?
Most A/E firms that I know of are doing well, and yours is probably no exception. Revenues are strong and the biggest challenge seems to be finding and retaining key staff. The wind is strong and steady. But, what if something changed and there was a sudden shift in the economy that alters spending in one of your key client sectors? Will the diversity of your firm’s revenue streams enable it to easily tack and quickly alter course, or will over-weighting in a single market sector leave you drifting amid the doldrums? Knowing exactly where your vulnerabilities exist and mitigating the risk of overdependence on a key market sector is a responsibility of senior leadership in every A/E organization. All too often, however, leadership is lulled into believing the sky will never fall, and there will always be time to plan – tomorrow. Besides, milking the cash cow client or market sector is a lot easier than building new sources of revenue. (Recall, that’s how the leadership of many small environmental firms viewed the state-funded underground storage tank programs of the early 1990s, and we all know what happened to most of them.) It’s hard to ever take money off the table when you’re on a winning streak! While most of you intuitively know just how vulnerable your firms are to changing markets,
sometimes visualizing your sources of revenue on a sector-by-sector basis brings the matter to a heightened sense of awareness. Take for example the two organizations above. Both are of comparable size, but one derives nearly 75 percent of its labor revenue from a single client sector. Trust me, seeing something like this in a pie-chart underscores the issue of vulnerability, and will send shivers down the spine of any self-respecting CFO! “Sometimes visualizing your sources of revenue on a sector-by- sector basis brings the matter to a heightened sense of awareness.” The same exercise can be used to easily visualize the vulnerabilities of individual business units or service lines within an organization. In this instance, the more work types or pieces making up the pie, the less vulnerable the unit is to sudden market fluctuation, and the more sustainable the service line is in the face of changing economies.
Marc Florian
The point to be made here is that senior
See MARC FLORIAN, page 12
THE ZWEIG LETTER August 8, 2016, ISSUE 1163
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