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Industry survey indicates improvements in architecture revenue

Zweig Group’s 2017 “Financial Performance Survey of Architecture, Engineering, Planning, and Environmental Consulting Firms” reports increases in revenue and improved collection periods, but also indicates lengthier backlogs.
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This spring, consultant Zweig Group released its annual “Financial Performance Survey of Architecture, Engineering, Planning, and Environmental Consulting Firms,” which reports a general increase in revenue despite concerns in other sectors.

At a 10-year high, net service revenue per employee improved to $141,891 from last year’s rating of $137,113. Similarly, pre-tax, pre-bonus profit continued a four-year trend of growth, improving from 9.9 to 11.6 percent of gross revenue and from 12.7 to 14.6 percent of net service revenue.

Adding to this improvement, a decrease was observed in the average collection period for accounts receivable, going from nearly three months to an average of 75 days.

“This is still a bit high,” warns Will Swearingen, Zweig Group’s director of research. “Extended collection periods can have a great impact on cash flows and bad debt write-offs, and eventually impact a firm’s liquidity position.”

Profit also had a role to play in another score: the break-even multiplier (which reflects, in dollars, how much a firm must earn through direct labor to cover labor and overhead costs). Although the overall average was 2.54 (i.e. most firms must generate $2.54 for each dollar spent on direct labor), high-profit firms averaged out at 2.45, and low-profit scored 2.91. Improvements in debt to equity values—which increased from 0.80 last year to 1.04—were also noted.

One area of negativity was backlogs, which continued a trend of increase, reaching an average of 7.2 months. Public-sector firms made up for a higher average here (8.2 months compared to the private sector’s 6.1) with a similarly higher staff growth rate, seeing an average 11 percent increase compared to the private sector’s 7 percent.

“2016 was a great growth year for firms and provides ample opportunity for leaders to invest in their firms,” says Swearingen.

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