A/E/P principals spending 40% of day on management; many firms feeling squeeze

Zweig Group just released the 2017 Principals, Partners and Owners of Architecture, Engineering, Planning and Environmental Consulting Firms Survey.

For nearly 30 years, Zweig Group has surveyed the industry’s top talent to glean insights on how principals, partners, and owners run their businesses, and their outlook on their profession and industry. The 2017 edition was derived from the responses of 150 individuals, 93 percent of which were owners in their firm, with over half owning at least 25 percent. The average net service revenue (NSR) of these firms was just over $9 million.

In the 2014 Principals, Partners and Owners Survey, only four percent of respondents thought there was any possibility that they could be laid off in the coming year.  This year, that number was up to ten percent. Though this election year has caused some uncertainty in the market, most respondents still feel that the next few years should continue to provide ample opportunities for growth. Eight percent of principals took a pay cut last year, with a median pay cut of 25 percent of their total compensation. Even in a strong market, some A/E firms are underperforming and feeling the squeeze.

We found that most principals (72 percent) were generally pleased with their careers and had met or exceeded their career goals. In fact, even more (81 percent) would recommend the career path to a friend or family member. The survey also revealed some significant challenges in achieving the objective of ownership. Most owners must have ten years of industry experience, be with their firm for five years and have both a bachelor’s degree and professional licensure. Nineteen percent of respondents said they had to purchase a minimum amount of shares to become a principal. The median ‘minimum amount’ of shares to be purchased was two percent. Seventy-seven percent said they actually purchased the maximum amount of stock available when they became a principal, with an average initial purchase of 35 percent of the firm’s outstanding stock.

The typical day of an owner is dominated (almost 40 percent of the day) by firm management activities. Most owners would like to pare that back to about 30 percent and use the remaining time mentoring staff and conducting business development. An interesting discrepancy we found was that principals in firms with a declining growth rate over three-years were only spending four percent of their days on marketing and business development. These same owners felt like they should be spending closer to fifteen percent of their days on marketing and business development. This is a large gap and represents the importance of proper marketing and business development initiatives at the ownership level. In comparison, owners in fast growth firms are spending over twenty percent of their day on marketing and business development.

The stress and long hours taken on by firm owners does not go unrewarded.  The average base salary of a firm owner was $150,000, which represents around 75 percent of their total compensation. The other 25 percent comes in some form of bonus or shareholder distribution, forming an average total compensation of $265,000.

Click for more information on the 2017 Principals, Partners & Owners Survey of Architecture, Engineering, Planning & Environmental Consulting Firms.