SME Engineering & Consulting Challenges

Financial

This is part five of a series of six articles focused on organic growth challenges for SME (small-medium enterprise) engineering, consulting and construction firms. Each article will focus on one challenge area and provides some high level approaches to overcome these challenges.

SME firms can have several challenges in the financial area including but not limited to cash flow, access to financing, bonding capacity, lack of robust financial systems/tools and lack of employee financial knowledge. The issues are compounded when revenues are shrinking and pricing is eroding. These challenges limit growth options including geographical expansion, attracting key hires, ability to replace aging infrastructure/systems and ability to pursue projects requiring bonding. The owners of a firm under financial stress will find it more difficult to find M&A opportunities that reach their expectations due to a low valuation.

Three common areas where SME’s can improve their financials include Client Mix; Better Operational Controls & Tools and Better Financial Acumen.

First, if an SME firm is heavily weighted in a client segment that traditionally competes everything, chooses the low bid and is a slow payer it may be time to make some tough choices.If you cannot make money on a client then perhaps it is time to “fire” them by either phasing them out over time or just quit bidding. The decision will depend on how fast you can replace the revenue. One suggestion before “firing” them is to have an actual conversation with them about the situation to see if they have any suggestions.

Second, smaller firms are more likely to have financial and project management accounting systems that lack the tools needed to help project managers understand their financial position. At a minimum, there should be a standard spreadsheet tool used by all departments that provides them with key financial performance metrics. Check your financial software to see if it has existing functionality or low cost add-ons that help automate some of the reporting tools needed. You might also check to see if there are any free or low-cost pay per user applications available. It is hard to improve something you can’t see.

Lastly, make sure your department managers, project managers and even mid-level engineers and scientists receive some financial training including key indicators, how they are calculated, how they can impact them and where to get additional help. Financial awareness can provide incremental improvements which add up fast.

Jerry Strub is the CEO and founder of Strategic Growth Consulting, Inc. Jerry has led global and domestic growth strategies for over 30+ years in the engineering, environmental consulting, environmental services and construction industries. He has over 25 years of training, coaching and mentoring engineers and scientists on improving their business development skills and improving organizational business development practices. He is an advisory board member of two Chinese environmental firms and serves as an advisor and connector of CleanTech and engineering services between North America and China.