Evidence of Recovery
The EC&M survey posed several questions regarding the business climate and revenue expectations in 2011 and 2012. Just under two-thirds of the Top 30 firms described the 2011 business climate as “fair,” while the remaining companies were split between “strong” and “weak” (Fig. 1). Almost half the firms on the list reported meeting their revenue expectations for 2011 (Fig. 2). Still, 30% disclosed they did not meet revenue expectations last year. Only 23.3% exceeded revenue expectations in 2011.
Pressure to provide more services for smaller fees contributed to the perception of a weak business climate. “In the past year, we have seen clients asking for more services but not willing to pay additional money due to their budgetary issues,” says Shreedhar Shah, president, Gaithersburg, Md.-based Shah & Associates, Inc. (No. 30), which specializes in custom-designed traditional and alternative energy solutions. “While we sympathize, we can’t simply do work and not be compensated for it. We sit down with clients and ask them to reduce scope or alter the design criteria, among other things, so that both the client and engineer develop a solution that’s win-win.”
Despite these attempts by owners to diminish margins, the Top 30 firms revealed optimism in their answers to questions regarding 2012. Almost half the companies on the Top 30 list are expecting an increase in revenue of 6% or more this year (click here to see Fig. 3). Only one company is expecting a decrease in revenue this year, albeit more than a 10% increase. Perhaps based on the increase in backlog two-thirds of the companies experienced in 2011 (Fig. 4), the majority of companies — 76.6% — on this year’s Top 30 Electrical Design Firms list predict a further increase in backlog in 2012 (Fig. 5).
Yet, there remains caution in these predictions. Madison, Wis.-based Affiliated Engineers, Inc. (No. 7) experienced a slight uptick in its backlog in the second half of 2011. Based on this, it expects its backlog to remain at this level, but only in the short term — up to three months. “We are not seeing nor do we expect to see the ‘up to 12 months’ of solid workload seen a few years ago,” says Julie Bauer, director of marketing, Affiliated Engineers, Inc.