The worst of the Great Recession is behind us and markets are up for architects. The Architecture Billings Index, the main gauge of the health of the industry, has been going strong since 2012. Still, downturns can strike at any time. Firms that want to endure should start planning now. Strategic investments are one way to leverage the current economic climate—but where to start? A panel of business advisers and experts in the architecture profession offer tips on how to spend while times are good.
Think Sustainability, Not Growth
With replete coffers and abundant work, it can be tempting to use extra resources to grow staff or even to acquire another firm. But Ray Kogan, AIA, of the Arlington, Va.–based strategic planning consultancy Kogan & Co., suggests that firms shouldn’t pull out their wallets yet. Instead of focusing on short-term gains, they should be looking further ahead to stay afloat in case of future downtimes. “You want to invest in sustainability more than growth right now,” he says. “And that really means investing in things like marketing and positioning yourself in a strategic way.”
Nurture Client Relationships
Part of positioning one’s firm for the long-term requires establishing a strong foothold in its primary markets—which takes cultivating relationships with individual clients through business development. “Investing and firming those up are important while things are good because those relationships will sustain themselves when times aren’t so good,” says Kogan, who recommends spending the time—and money—to engage with clients often. That can mean anything like taking clients to lunch, maintaining regular contact through marketing materials, or simply picking up the phone and checking in. “When those clients have a little bit of work instead of a lot of work, they’re likely to work with firms that have strong relationships with them.”
Train Your Staff
The future of a firm depends largely on its workforce, so consider using healthy economic times to invest in training and mentoring personnel. That can take the form of workshops, formal classes, or just tapping firm leaders to impart their expertise. “One of the best ways for staff to learn is from people who have done it,” says Stephen Epstein, a management consultant at Strogoff Consulting in Mill Valley, Calif. “You have to find a way to take the leaders of the firm and provide them with the opportunity and the tools to share what they know.”
Unfortunately, Kogan notes, many firms are reluctant to prioritize training. “It costs money to do training and it affects firms’ utilization and financial performance,” he says. “But it pays off when things go south because you have the very best staff.”
Upgrade Your Technology
It’s becoming increasingly important for firms to keep their technology and software up-to-date, and prosperous times enable investments in office resources and equipment. But Kogan argues that keeping a firm’s tools up-to-date should be an imperative no matter how the economy is doing. “Firms shut off the tap to spend money on technology, but technology continues to advance even during a downturn,” he says. “So if you’re falling behind before a downturn, you’ll fall way behind when you’re out of a downturn.”
Invest in Saving
The best place to invest money during good economic times is in a firm’s own capital base, says Colvin Matheson of Matheson Financial Advisors, in McLean, Va. Too many firms don’t save enough of their profits to prevent shortfalls when a downturn hits, opting instead to distribute profits at the end of the year to avoid corporate taxes. “They’re basically emptying the cupboards before each tax year, which weakens the entity,” he says. “And in a downturn that may force partners to have to recapitalize and infuse capital because they stripped it out.”
Matheson recommends that firms maintain enough funds to cover payroll and keep the lights on for at least a few months. “As you start to get closer to a downturn,” he says, “you need to start shoring up your capital base, decreasing the amount of debt and [lenders’] financial leverage, and making sure you’ve got a strong balance sheet that will withstand a prolonged downturn.”
