TZL 1345

T R E N D L I N E S Value per net service revenue M a y 1 8 , 2 0 2 0 , I s s u e 1 3 4 5 W W W . T H E Z W E I G L E T T E R . C O M

Though the immediate impact of COVID-19 is bleak, there is reason to see the foundation forming for a different type of AEC firm. Opportunity in crisis

In Zweig Group’s 2020 Valuation Report of AEC Firms , valuation ratios were analyzed by firm staff size over the last three years. In relation to value per net service revenue, we see that firms see a general increase in value with growing staff size. The median value for firms with less than 25 employees was 0.54, meaning that they were valued at around 54 percent of their annual NSR.

T he true worth of any profession or business – including the AEC industry – is revealed in a crisis. We have seen the AEC industry make itself suddenly more relevant to societal and environmental issues, and there’s opportunity in this circumstance. For an industry that has acknowledged reluctance to change and suffered from analysis paralysis, I think it’s worth calling out as an advisor to this space that this is no longer consistent with my experience. Leaders in the AEC industry have responded brilliantly; it is incredible to see how the firms that we talk to are not just open to change but are functioning as strategic change agents and making decisions without the benefit of research and information to rely upon. Firm leaders have been thrown into turmoil and have resoundingly risen to the occasion. With this acknowledgment is coupled a plea to stop exhibiting the behaviors that have led to the stereotype of the AEC industry as one that is resolutely behind the times. The business case has been made that your employees are resilient, dynamic, and able to work differently than we believed they could. It will soon be time to make decisions about what this means for your organization, rather than a circumstance we have had to adapt to, and a chance to reassess our comfort level working on teams with asynchronous schedules and delivering projects in a flexible environment. Not only in terms of workplace practices, but also the role of A/E professionals is so very relevant at this very moment. The national spotlight is shining on thought leaders in architecture, urban planning, environmental consulting, and engineering. That “seat at the table” that we have sought out collectively is in front of us, in interviews from Forbes to talking heads in the news on subjects from public health to development to education. For many, it may feel like the first time the AEC industry has been considered “essential.” Though the immediate impact in many AEC firms is bleak in market sectors and geographies that have been hit the hardest by COVID-19, and the daily news of layoffs is not encouraging, there is reason to see the foundation forming for a different type of AEC firm. To follow the money: the massive spike in M&A interest in AEC from private equity recently is evidence that we have far too long undervalued our time, expertise, and services, and therefore our companies, too. This is the time to reframe the value proposition for the design industry. If we intend to bounce back and recover “stronger

Jamie Claire Kiser

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F I R M I N D E X Arup......................................................12

edg.........................................................6

FXCollaborative.....................................12

KS Associates, Inc..................................2

OZ Architecture.....................................10

Ware Malcomb........................................4

MO R E A R T I C L E S xz WILL SWEARINGEN: Kicking the can down the road Page 3 xz Investing in the future: John Meyer Page 6 xz MARK ZWEIG: What’s so great

about the A/E business? Page 9 xz DAN PISELLI: Architects as advocates Page 11

See JAMIE CLAIRE KISER, page 2

T H E V O I C E O F R E A S O N F O R T H E A E C I N D U S T R Y

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