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2017 Mid-Year Executive Outlook

Summer is finally here and that means it’s once again time to reflect how industry conditions and firm prospects are unfolding with our Mid-Year Outlook. For this year’s piece we have focused our attention on niche and specialized firms run by first generation founders. Given that 95% of the A/E industry is comprised of firms with less than 50 employees, these owners offer unique insights for their success as well as challenges. They shared with us how their firm’s size is a competitive advantage, advice for those thinking of starting their own firm, and what their summer plans are to unwind.

Jeff Cowan, Principal, Cowan Group Engineering, LLC, Oklahoma City, OK

Tell me about Cowan Group Engineering’s capabilities and markets. How many staff members do you currently have?

Cowan Group Engineering (CGE) is a general civil engineering firm providing professional services for water resources, transportation, contract city engineering services, drainage, land planning/development and land surveying. Our market is located across Oklahoma and our client base includes local and state governments, along with private organizations. Currently, we have 22 staff members and looking to add more in the next two quarters.

How has your performance fared so far in 2017?

We’ve been on track this year, meeting our 2017 revenue goals along with net income results for the first two quarters.

What are the biggest concerns your clients face today?

Our biggest concern is the Oklahoma economy (balanced budget negotiations) which affects all businesses and citizens in Oklahoma. The state government needs to improve the revenue side of the equation while maintaining a favorable business climate for entrepreneurs and attracting new companies here.

How has your firm’s size been a competitive strength?

We are very competitive due to our firm’s size. We are able to serve the smallest to the largest cities throughout the state.

What inspired you to start Cowan Group Engineering? What advice would you offer engineering entrepreneurs today?

The desire to start a company has always been a part of my vision and recently we celebrated our 5 year anniversary. Recently, our firm was notified that we made the 2017 Inc. 5000 list for our 1000% growth over the last five years! My advice to engineers starting a company is to develop a written “business plan” and then work the plan. Next, find a local banker to partner with for the growth.

What are your plans this summer for rest and relaxation?

My wife and I just celebrated our 25th wedding anniversary and enjoyed that time in Cancun!

Michael Kukuk, P.G., President, Blackstone Environmental, Inc., Overland Park, KS

Tell me about Blackstone Environmental’s capabilities and markets. How many staff members do you currently have?

Blackstone employs engineers, geologists and scientists to serve our clients. Our staff size at the current time is 15 and we are very diverse in our capabilities to deliver. Our main market areas are: solid waste engineering and consulting; water resource engineering; general environmental consulting; construction management and oversight; groundwater monitoring and reporting; and air permitting services. We mainly operate in the Central United States.

How has your performance fared so far in 2017?

2017 is turning out to be a very good year for Blackstone. The 1st quarter was fairly flat, which is not atypical for us and we are now into our busy season from an engineering design and construction oversight standpoint. Our utilization remains high and our profits are at or above plan. After a disappointing 2015 due to client budgetary restrictions and market forces, we had an outstanding 2016, and 2017 has followed suit. In 2016 we added 3 engineers, significantly increasing our capabilities. One of these strategic hires was an air permitting and compliance engineer, which added a new service line for our clients. We have added 2 geologists so far in 2017 with more growth planned. All of our growth has been organic.

What are the biggest concerns your clients face today?

Our client’s biggest concerns are associated with the continued uncertainty with the economy, political direction/leadership, and environmental regulations. All of these factors add uncertainty which affects the budgeting process as well as the ability to confidently plan growth for the future. Budgetary demands on our clients tend to dictate the overall feasibility of a project even if the solution will be long term improvement. Some needed projects or improvements don’t get completed due to short term budget restrictions, even if it costs the client more money in the long run. Our clients want to know that our approaches to their issues are sustainable now and into the future, and won’t be significantly altered by political or regulatory forces.

How has your firm’s size been a competitive strength?

The size of our firm, which is relatively small at this time, has generally been an advantage for us. We work for many large corporations. We have had long relationships with many of our clients, even though Blackstone has been in business less than seven years. Many clients transferred their work over to Blackstone when we incorporated in 2010. Our smaller size is not a negative factor with our clients. They hire us because we are very nimble and they know our people and the quality of the product and customer service that we will deliver. Our size also gives us a competitive advantage with our lower overhead multiplier (fees). Being a low-cost provider is not our goal but it does give us the ability to be very competitive when we need to be.

What inspired you to start Blackstone? What advice would you offer environmental and engineering entrepreneurs today?

In 2002 I was one of three co-founders of another environmental, engineering and hydrogeological firm in Kansas City which was very successful at the time. I left that firm in 2010 and founded Blackstone with the desire to surround myself with like-minded people and to create a company where professionals can practice their craft in a collaborative environment. I enjoyed starting and growing (with others) an employee-owned firm the first time and desired to do it again as opposed to taking a leadership position in a larger firm.

My advice to others would be if you fear failure, uncertainty, or a non-guaranteed paycheck, starting a company may not be for you. If you have the confidence (and clients!) that it will work and it can be very rewarding. There will be significant bumps in the road that you did not anticipate and you need to have the personality and fortitude to persevere through the tough times.

What are your plans this summer for rest and relaxation?

For the first time in many years, I don’t have a summer vacation planned with my kids. We did go to Phoenix over spring break to visit Grandpa. I also took a week and vacationed in the Cayman Islands for the first time this May. It was quiet and wonderful!

Karen Jehanian, P.E., President, KMJ Consulting, Inc., Ardmore, PA

Tell me about KMJ Consulting’s capabilities and markets. How many staff members do you currently have?

KMJ Consulting is a 100% Woman-owned business. We are a niche firm whose market is public sector traffic engineering design, planning, and stakeholder involvement. We have clients at the federal, state and local level and are known in the market sector to provide strategic, creative and responsive service for nearly 20 years. KMJ’s team is comprised of 15 members with a variety of skill sets, including traffic engineering, IT, stakeholder involvement and social media.

How has your performance fared so far in 2017?

So far, we have had a very productive year. I project our gross revenue at about $1.5M, an increase of about 10% over 2016. Our comparative utilization is also higher and our backlog is running at about 12-18 months. Managing the backlog, more specifically the peaks and valleys can be challenging. We project workload at the macro and micro level. At the macro level to 12-18 months and at the micro level based upon actual project work anticipated for eight to ten weeks.

What are the biggest concerns your clients face today?

One of our major clients has expressed a series of human resource concerns ranging from their staff able to communicate and run meetings effectively to having enough experienced project managers to handle the volume of capital projects they have funded. As consulting engineers, we need to remember that the public economy affects our business in these ways. From our experience, we have found the most successful projects have had active project management teams on both the consultant and owner sides. In this case, as public-sector folks retire there are two ways that consultants can be effective: 1) by having excellent project managers who work proactively to anticipate and solve problems or 2) hire the public-sector retirees.

How has your firm’s size been a competitive strength?

KMJ currently has about 15 people on staff. This works for us. More important than our size, is the attitude and character of our people. They are great! And, our size offers us the opportunity to interact at a deeper level. We believe in training our staff to understand how to engage the client in a personal way allowing for a more targeted, focused and streamlined approach to their needs. Everything we do is customized. We are not a one-size-fits-all group behind a big company name. I know that our clients (both the owners and the consultants) value the quality of service they receive from KMJ. We communicate clearly, anticipate their needs and act appropriately.

From the position of our staff there are three opportunities: 1) they have direct access to the owner of the firm and share in an active and open dialogue throughout the course of a project and their tenure with KMJ; 2) they have direct access and receive feedback from our clients, and; 3) there is a synergy among our staff and we have the ability to learn from each other. This is something I really appreciate and that I think is very special about KMJ. We have a group of really smart, down to earth people who come to work each day excited to meet the day’s challenges.

What does being a civil engineer mean to you?

In our field, we are given the choice to perform our civic and civil duty. Associating our work to real-life situations makes for a meaningful and fulfilling life. For instance, designing ADA curb ramps – you may not think much of it when you are talking a walk around town, but for those in a wheelchair, this is a vital resource. When you get to the heart of it and understand the ‘Why’ behind these plans and studies, we understand the real benefit to our society. This is very powerful and I keep it at the forefront of our work. It is not just the plans and studies, it is about the impact on humanity and civil society.

What inspired you to start KMJ? What advice would you offer engineering entrepreneurs today?

I truly believe that entrepreneurship is in my DNA! I come from a family that had both engineers and entrepreneurs and I had the spirit from a young age. I started out selling apples before I was allowed to turn the street corner alone (so, I found an older friend to escort me). As a teenager, I joined Junior Achievement and learned how to read financial statements and run a business. When I graduated from Drexel University with my BSCE, I was very intentional about learning how to run an A/E firm and when the opportunity arose to start my firm I seized it. As with most start-ups, it was not easy, but it was exhilarating to start from scratch and nearly 20 years later we are an ever-evolving, but always going concern. I started the firm to offer a unique work and cultural experience for our staff, and specifically to create a friendly and creative environment. By all accounts, this has been accomplished.

My advice to anyone interested in starting a firm or any business is that you really have to want it! If you go it alone, you need to be able to wear three hats: technical, marketing and accounting. Of course, once you get going you can hire these folks, but as a small business, it is always beneficial and useful to have this background.

What’s on your summer reading list?

My summer reading list is either aggressive or aspirational depending upon how you look at it. I always have two or three books that I am reading. This summer’s list includes both fiction and non-fiction, including: A Dog’s Journey by W. Bruce Cameron, Stories of Your Life by Ted Chiang and The Law of Attraction: The Basics of the Teachings of Abraham by Esther and Jerry Hicks. So, my list is eclectic and varied. No engineering or business books per se, but I’m always reading and learning.

Vincent Pedraza, Principal and Executive Vice President, JVP Engineers, P.C., Washington, D.C.

pedrazaTell me about JVP’s capabilities and markets. How many staff members do you currently have?

Established in 1992, JVP Engineers is an award-winning, nationally recognized mechanical, electrical, and plumbing engineering design firm. The firm began as an independent, small, professional corporation located in Washington, D.C., and has grown into a competitive enterprise with a reputation within the engineering community for engineering professionalism.

We specialize in engineering designs ranging from office buildings, airports, embassies, chanceries, and computer facilities to hotels, hospitals, laboratory and research facilities, museums, educational facilities, and military command centers. The firm has designed systems for buildings within the Washington Metropolitan area, across the United States, and internationally, including some of the country’s most beloved historical structures.

How has your performance fared so far in 2017?

Over the years, we have predominantly done a lot of federal work. Given the condition of our federal government and the lack of an approved federal budget, we are seeing a reduction in workload. In contract, we are seeing more higher education and elementary school solicitations coming out. Notwithstanding the above, we have fared well in the performance of our current projects and are optimistic about the future work that will be coming out of the various federal agencies.

What are the biggest concerns your clients face today?

Although each client seems to be facing different issues, the more common ones appear to be: the collection of fees, managing the BIM process with multiple consultants, and the urgency of project schedules which do not appear to be afforded enough time to perform the required coordination and quality control.

How has your firm’s size been a competitive strength?

As a small firm (25-50 people), we feel the competitive advantage we have is providing personalized service by high-level principals and senior engineers. The principals of larger firms tend not to be involved in the day-to-day design activities and we have learned that this is often what our clients are seeking. By offering the involvement of our senior personnel and owners, our clients have a strong sense of trust with respect to the designs we are proposing. Similarly, we are able to offer new interns and younger engineers an in-depth and hands-on experience working alongside veteran senior staff and principals.

You and your father established JVP and have worked together successfully for 25 years. How has that special relationship worked for you and the firm?

My father has been a mentor, business partner, friend, colleague, and confidant throughout these past 25 years. I could not have asked for a better scenario to start a business when I came out of college. The experience has been extremely positive, and we have enjoyed a great deal of success as result of our ability to complement each other’s strengths and weaknesses. I could not have asked for a better partner type relationship. I have benefitted tremendously from his wisdom and guidance and I am thankful to have had the opportunity to work alongside him. His mentorship and tutelage have prepared me for the next 25 years and the future successes that JVP will achieve.

What are your plans this summer for rest and relaxation?

My family enjoys the water so I envision multiple trips to our house in Ocean City, Maryland.

Brandon G. Sprague, Principal, Brightworks Sustainability, San Jose, CA

spragueTell me about Brightworks Sustainability’s capabilities and markets. How many staff members do you currently have?

We are a multi-disciplinary team of 22 consultants serving clients in over 25 industries from offices in Los Angeles, New York, Oakland, and Portland. Founded in 2001, Brightworks’ early consulting practice in corporate sustainability helped organizations audit, assess, and quantify the environmental footprints of their operations and then establish systematic programs for managing, mitigating, and reversing those impacts. During this period, Brightworks facilitated UC Santa Barbara’s first-ever campus sustainability plan, for example.

We are still active in developing and implementing corporate sustainability programs. But the same year that Brightworks was founded, the USGBC launched the LEED program. To meet the resulting interest in green buildings, Brightworks added engineers, architects, and energy experts to its initial team of consultants focused on business operations.

Today, we are active in the following practice areas: Energy, Carbon, Waste, & Water Consulting; Green Building Certification & Consulting; Design Simulation & Modeling; Healthy & Sustainable Materials; Planning & Infrastructure; Corporate Sustainability Programs; and Reporting & Regulatory Compliance.

How has your performance fared so far this year?

We have experienced very strong growth for at least two years. Most interesting to us are the reasons we see for this.

Our clients tend to be in growth industries and have resources to invest. Not only do the jurisdictions where they are based have impressive sustainability regulations; our clients’ appetite to take on voluntary sustainability measures has also increased. The baseline for sustainability performance among these clients has rapidly shifted upward. At the same time, the sustainability laggards have increased their commitments. So we are seeing clients increase their efforts in multiple dimensions – more clients are taking action, and those who have already begun are taking more action.

What are the biggest concerns your clients face today?

Half of our clients are owners, and half are prime contractors, to whom we are sub-contractors (these include program managers, architects, engineers, construction managers, or general contractors). Among the owners, the leaders in sustainability are moving full-steam-ahead and setting ever-more ambitious environmental stewardship targets, especially clients in tech, financial services, and higher education. The sustainability teams within these organizations are managing far more complex sustainability programs, with far greater scrutiny from a wider range of stakeholders than ever before, and value our help. This creates the desire for seamless communication between client and consultant since we are ultimately one team.

By contrast, the prime contractors we work with are primarily concerned with the immediate need to win new business. Directly related to this, they seem most concerned with establishing, defending, and presenting the right mix of differentiating factors for each specific opportunity. This is very hard to do when practice is largely standardized between firms, as it is in architecture and engineering. Points of differentiation become points of parity when competitors generally meet the same standards of practice.

Our A/E clients are increasingly asking us – and presumably other specialty consultants – to help them win new business by involving us heavily in new business pursuits. We recently wrote the sustainability approach for an architect client’s proposal for an LBC project. We learned that the owner selected their team because they were, in their words, “overwhelmed by the thoughtfulness of the sustainable approach.” That’s a true win-win-win — we exceeded the owner’s expectations, we helped a long-time A/E client win an extremely competitive pursuit, and we get to work with an enlightened owner and great design firm on an inspiring project!

How has your firm’s size been a competitive strength?

Brightworks Sustainability can be considered a small firm and a large firm. We are a fairly large firm among sustainability-focused consulting firms. This is a function of our age (over 15 years of business), stage of maturity, client base, and business strategy. Our scale lets us serve large clients with complex needs. It also lets us develop areas of focused expertise in specialty areas of sustainability practice that make us useful resources to both large and small clients.

In addition to size, I would add that independence has been a competitive strength for us. Our clients have told us that they view sustainability practitioners within larger enterprises with skepticism, fearing reduced transparency and accountability and a focus on selling over innovation and project delivery. Being independent, fairly large among sustainability-focused consulting firms, small enough to be nimble, and expert in multiple complementary areas of expertise have helped our competitiveness.

What have been the drivers in your sales and business development philosophy? Is one marketing method more effective than others?

Related to the need for seamless communication with clients described above, we are very focused on maintaining close relationships with our owner clients and keeping them up to date on the many changes that are regularly occurring in sustainability practice. The high level of ferment recently in sustainability has made them eager to learn about new offerings and lessons learned from other projects we are working on. So we schedule regular calls, lunches, presentations, coffees, and happy hours to stay in communication with them. For our A/E and prime contractor clients, we are focused on showing them with our actions that we are doing all we can to help them win new business.

What are your plans this summer for rest and relaxation?

In early August, I will spend a week-and-a-half working out of our New York office before my partner and I fly to Paris for a baptism. We will stay in France for a week and a half, then stop in Amsterdam for four days on our way back to the U.S. West Coast.

Scott Thomas, P.E., PTOE, Principal, Apex Design, PC, Denver, CO

thomasTell me about Apex Design’s capabilities and markets. How many staff members do you currently have?

Apex Design is based in Denver with a staff of 32 really great people. We were founded in 2006 as an Intelligent Transportation Systems consulting firm and expanded into the traditional traffic engineering and transportation planning services. The majority of our work is in Colorado, with some clients in neighboring states. The clients we serve are typically public agencies.

How has your performance fared so far in 2017?

Things are going well. Backlog is healthy and we have some larger “anchor” projects that provide base revenue and allow us to pursue other contracts with more freedom. We are on pace to grow revenue by 15% this year. Like others we’ve talked with, we are seeing a shortage of talented engineers. Luckily, Colorado is a desirable place to live and that helps with recruiting.

What are the biggest concerns your clients face today?

Our clients are inundated with their day-to-day responsibilities and aren’t able to get everything done they wish to achieve. We are seeing more on-call contracts and outsourcing of both technical and management roles.

There are some local infrastructure bond initiatives going to vote this November in Colorado and the State legislature passed a toned down version of the proposed transportation budget last session. Everyone would like to see infrastructure funding increased, and more sustainable.

How has your firm’s size been a competitive strength?

We are a small firm and that allows us to be nimble. This provides us the flexibility to adapt to changing markets and pursue projects of all shapes and sizes; our staff appreciates this. We also focus on our niche and are able to remain specialized and do what we do well.

What inspired you to start Apex Design? What advice would you offer engineering entrepreneurs today?

At the time we founded Apex Design, we were some of the only folks doing Intelligent Transportation Systems consulting work in Colorado and didn’t really see a “home” for us at other firms. First and foremost we were engineers. Being ignorant about running a business really helped us! Had we known what we know now, we may have thought twice about launching. We purchased used computers and furniture, subleased modest office space, and incorporated and insured ourselves. Then we kindly asked clients to give us a try and figured out the rest as we went along. I’ve been constantly amazed by how helpful and eager most people are in our industry to share knowledge and provide advice and mentorship.

The advice I’d offer entrepreneurs extends to everyone: treat people well, do good work, and follow through on your commitments. Your personal reputation is what is important, and that follows you throughout your business endeavors. It really is hard to give advice on starting an engineering business because personal and professional goals vary so much.

What’s on your summer reading list?

I am a voracious reader and always reading something. I am currently reading Memoirs of a Geisha by Arthur Golden. The next three books I have are The Mothers by Brit Bennett, Today Will be Different by Maria Semple and The Underground Railroad by Colson Whitehead.


Coming!
Ownership Transition Strategies for A/E Firm Leaders: A One-Day Seminar
Tuesday, September 19, 2017
Newport Beach Marriott Hotel & Spa
Newport Beach, California
Click here for more details and to register.

Growth & Ownership Strategies Conference
November 8 – 10, 2017
Ritz-Carlton Golf Resort
Naples, Florida
Click here for more details and to register.