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F R OM T H E F O U N D E R
Profitability tune-up
There is always something you can do to improve your bottom line, and now is the time to do it.
A ttention all of you who are AEC firm owners and managers! With the widespread inflation we are experiencing in this country, if you aren’t worried about declining profitability, you probably should be.
Everything is going up. And it’s not going up by 6 percent to 7 percent like it’s being reported. Some things are going up by 300 percent or more. So if it hasn’t hit you already, all of us are eventually going to face rising costs for labor, office space, software, insurance, and everything else. And these cost increases will unquestionably affect your profitability. If declining profits are one of your concerns, you might want to consider doing some of these things: 1. Raise prices. I could keep saying this until I am blue in the face. Those of you on percentage of construction cost contracts will get paid more just because everything is going up. But projects on a fixed fee or hourly billing rate should also go up in price. Now is the time if there ever was one to raise your rates by 10 percent or more. 2. Buy a building or buildings. It’s one way to control
your space costs and get some tax advantages. And while there is no doubt commercial real estate has gone up in value thanks to market acceptance of lower cap rates, it has not gone up as fast as rent. Could this be the time to go for it? Perhaps it is. 3. Shop your insurance. I’m no expert in insurance, but I do know this: When you have worked with the same brokers and insurance companies for a long time they tend to push their rates up. Sometimes new companies will buy your business for a year or two and give you a better deal than you are currently getting. Brokers can get lazy or may be tied to one company. Check out your options.
Mark Zweig
See MARK ZWEIG, page 12
THE ZWEIG LETTER APRIL 4, 2022, ISSUE 1435
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