Understanding High Performing A&E Firms

Posted by Jon Bornstein on September 16, 2014

Mike Webber owns A/E finance, a consulting firm focused on the business-side of architecture and engineering firms. A key collaborator on the Deltek Clarity A&E Industry Study, Mike has taken a deep look at the High Performing Firms. He welcomes feedback at mawebber@aefinance.net.

Yes, architecture & engineering firms can make very good profits (over 20% Operating Profit Rates) and provide stockholders very good returns on their investments (over 30% Pre-tax Returns on Equity).

Financial analysis is an exercise all A&E CEOs & Principals must obviously conduct for Strategic Planning, not just for of monitoring operations. Basic analysis includes ‘benchmarking’ against other firms.  Why not benchmark against “High Performing Firms” instead of just the A/E industry’s averages?

Using criteria of a minimum 20% Operating Profit Rate and minimum 3.00 Net Revenue Multiplier, an A/E financial study for 2013 showed that a full 25% of the firms were categorized as “High Performing Firms”:

  • 28% of the Small (1-50 employees) firms,
  • 23% of the Medium (51-250 employees) size firms, and
  • 20% of the Large (251+ employees) firms

Further, there is credible evidence to indicate that many of these firms repeat as High Performers year-after-year.

As a CFO and study collaborator, I was particularly interested to see what other KPIs could point to specific success factors – and which may not. Click here to read the full detailed analysis of primary KPIs for “High Performing Firms” vs. “All Other Firms." Before your annual Strategic Planning activity starts, you need to know how your firm is doing, and how well it could be doing.

An article on an even more detailed Strategic Planning precursor is available by clicking here. And of course, you can download the full Clarity A&E Industry Study here.

Have your finance & accounting manager benchmark your firm before you start you planning activities for next year. Why not plan to be among the best?