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FROM THE FOUNDER
Making real money in AEC
There are a number of strategies one can employ to make lots of money in this business.
A nyone who says you can’t make serious money in the architecture and engineering business is just plain wrong. It may not come easily, and it may not come overnight, but there are a number of strategies one can employ to make lots of money in this business.
Here are some different approaches I have seen used over my 40-plus years in this business: ■ Growing through acquisitions. This is probably the most common method employed today to make lots of money in this business. Here’s why – if you can borrow money at 15 percent or lower interest to buy companies that generate anywhere from 30-50 percent on invested capital, it just makes sense to do it. On top of it, the higher the growth rate, the greater the multiple of revenue (not EBIT!) a firm is worth at exit. Increase growth rate and increase value. Then there are always overhead consolidation savings in the form of cheaper insurance, top management consolidation-based staff reductions, office space savings, outside legal and accounting fee reductions, and more. So buy, buy, and buy. And if you can keep it all going the right direction, you will have a very valuable company in the end.
■ Growing through mergers. I have seen this approach used several times over the years. Company A and Company B merge. Each one represents a percentage of the combined firm value, typically based on what portion of the revenue each brings to the new company created in the merger. Then they do this again and again and again. Every time it happens the owners have a smaller piece of a bigger pie. But along the path of this journey, there are (of course) overhead consolidation opportunities. And once again, you end up with a firm that has a history of a significantly higher-than-normal growth rate and resulting in a higher than normal valuation as a result. It takes someone at the top with a real growth vision who can sell that to other business owners to make it happen. And don’t forget, the bigger the firm, the higher the average salaries and bonuses are for most of top
Mark Zweig
See MARK ZWEIG, page 6
THE ZWEIG LETTER DECEMBER 4, 2023, ISSUE 1515
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