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FROM THE FOUNDER
These misleading statements often stem from naivety and perpetuate harmful conventional wisdom. Some things we need to get straight on
I ’m sure I spend too much time on LinkedIn and reading AEC business-related stuff. I can’t help it. It’s the industry I have spent my last 45 years working in. Let’s just say I have a lot invested in it!
That said, I sometimes see things written that I think mislead people and perpetuate “bad” conventional wisdom. Many of these are just borne out of naivety. Here are a few examples of that: ■ You should always have X percent utilization rate or higher. Wrong. It completely depends on the services you are providing and the market sector you are serving. The single most profitable company I ever worked with in this business did $60 million in revenue and made a 40 percent profit three years running. Their company-wide utilization rate was 50 percent. But their effective labor multiplier was 4.6, with some people working at a 6.0 or higher. They also had highly billable principals including a CEO who was about 75 percent billable. ■ You should always have an X or higher effective multiplier. Not true. Once again, it depends on the services provided and markets served. If you
are providing construction administration services to a state DOT you might be doing it at a 2.3 multiple and it’s still a good project because your people are 90 percent billable. CRS corporation – they used to be one of the big firms in our business years ago until they were broken up and sold in pieces – had a Spanish-style inquisition committee that line managers had to appear in front of if their units fell below that number. It didn’t work. They would work on jobs and not charge time to them so they looked profitable. Then the utilization rate declined. ■ You can’t make money on hourly work. I love it when I hear this. It’s just not true at all. You have to be naive to think all work can be done on a fixed fee. There is absolutely no way to tell how long some things will take, and hourly is fine if your billing rates are high enough. If my billing
Mark Zweig
See MARK ZWEIG, page 6
THE ZWEIG LETTER FEBRUARY 3, 2025, ISSUE 1571
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