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FROM THE FOUNDER
I t is hard to believe that after almost 45 years of working with architecture and engineering firms, firm owners and managers are STILL arguing about and debating what kinds of chargeability or utilization targets make sense for people or units in the firm. Stop measuring success by utilization – revenue factor reveals what really drives profit in architecture and engineering firms. The one number to track in your AEC firm
It’s dumb, and who cares? I’m sure this sounds like heresy to some of you. “How can Zweig say that? After all, we know if our people would be just 3 percent more chargeable we would make an additional $2 million in profit,” you may say. Not necessarily. In truth, all that REALLY matters is how much net service revenue (or labor revenue, if you prefer) you bring in versus how much you spend on labor, billable or not. If all you do is measure, report, and push utilization, what happens? You get higher utilization. “Yay,” you may say. “That’s the point!” But is it? What if all that happens is your people charge more time to jobs but don’t get anything more done on them? What if they
just charge time to jobs and run them over budget? Their utilization looks great. But the labor multiplier on the project erodes. The net result is the same. Same revenue and same labor cost. No change in the bottom line. So should “Sue” in her job as a PM be 70 percent chargeable? I don’t know. How about “Randy”? He’s a licensed architect. Is 90 percent the right utilization target for him? Again, I don’t know. I certainly don’t know unless I know what kind of labor multipliers each is achieving in their units. Because if Sue is in a unit that gets a 4.2 multiplier and Randy is in one with a 3.0, all other factors being equal and each earning the same pay, we are making far more money on Sue than we are with Randy, even though Randy has much higher utilization. Sue’s revenue factor (utilization
Mark Zweig
See MARK ZWEIG , page 6
THE ZWEIG LETTER JULY 7, 2025, ISSUE 1592
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