Zweig Group reports strong financial outlook for the AEC industry
Recent data indicates strong financial performance industry-wide
Zweig Group’s annual Financial Performance Survey of AEC Firms, released on April 4, 2019, identified a strong positive trend in multiple key financial indicators, including profit, revenue, staff growth, and backlog.
The survey gathered data on financial metrics and methodologies from AEC industry firms of varying sizes, types, and markets across the United States.
With many leaders in the industry reporting difficulties in recruiting, average staff growth was 2.5% industry wide. Firms on the West Coast and in the Mountain region reported averages of more than 5.5% and fast growth firms reported an average of 10.3%.
Staff turnover (voluntary and involuntary) was an average of 13.6% industry wide, with higher numbers reported in architecture firms, firms of all types in the Mountain and South Central regions, firms with stable or declining growth, and no surprise, firms experiencing low profit or losses.
Median pre-tax, pre-bonus profit on net service revenue was almost 14% this year, well above pre-recession levels, and an increase from 12.7% last year. The profit metrics have remained on a generally overall upward trajectory since 2013.
Net service revenue per full-time employee also continues to rally. AEC industry firms are now generating a median of almost $150,000 per full-time employee – an all-time high. Profit generated per employee was just over $19,000, a staggering increase from 2015’s $7,146.
The contribution rate is the percentage of net service revenue remaining after all project costs (direct labor and other direct costs) have been covered. This number also hit a record high of 67.7%, indicating that industry firms are able to charge appropriately for their projects.
One of the strongest indicators of financial performance is revenue factor, which uses a combination of two financial statistics — chargeability and multiplier — to measure a firms’ ability to generate revenue. It takes into account not only how much time the firm bills to jobs (chargeability), but also what it realizes in revenue compared to what it costs in terms of direct raw labor (net multiplier). This hit a three year high of 1.86.
AEC industry firms are collecting money fairly quickly –a median of 70 days (the second lowest number in the past decade) speaking to the overall quality of accounts receivable. Work backlog also hit a high of almost eight months, indicating another strong year ahead.
Click for more information on Zweig Group’s Financial Performance Survey of AEC Firms or the Financial Performance Survey Benchmarking Package – with Excel working file.