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FROM THE FOUNDER
2 025 is already underway, and as a grizzled old veteran of the AEC business, I have a few thoughts that I wanted to share with our readers: 2025 offers opportunities for AEC firms to thrive through responsiveness, strategic metrics, strong banking ties, and workplace honesty. Some good things to think about in 2025
1. There are many reasons to be optimistic. There is a tremendous pent-up demand for everything AEC firms do. The facts are that demand exceeds supply, and the skilled labor shortage isn’t going to change. That bodes well for our ability to have profitable businesses. 2. As terrible as these events are in terms of life and economic losses, natural disasters like the California fires, floods, hurricanes, earthquakes, and more increase the demand for what AEC firms do. High demand means higher prices and more consistent backlogs. 3. Interest rates probably won’t change much. I would expect another 0.5 percent to 0.75 percent drop in 2025, but that’s it. I don’t think we will ever see 3 percent rates again, either. But if you look at the last 50 years – 6 percent mortgages are pretty good and probably should be the norm. 4. Companies have got to stop pushing utilization
as their primary goal. Every one of your managers and employees instead needs to understand revenue factor as the primary performance metric. “Revenue factor” is net service revenue divided by total raw labor. It is also utilization times effective labor multiplier. Same number. And it’s the most important number to track. Pushing utilization by itself will result in budget overruns so people look like they are productive. More firm owners have got to understand that you could have a 50 percent utilization with a 4.0 labor multiplier and be more profitable than a firm with 65 percent utilization and a 3.0 multiplier. 5. Accounting needs to speed up. There just isn’t any good reason for it to take weeks and weeks or sometimes even longer to close out a month and know whether or not you made money. The books need to be closed and the P&L distributed within days of month closed. Why lose time that
Mark Zweig
See MARK ZWEIG , page 6
THE ZWEIG LETTER JANUARY 20, 2025, ISSUE 1569
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