Note: this document has been amended to protect the identity of the client. Substitutions (highlighted) have been made to retain readability and context.
Overview:
The situation can be summarised with three key statements:
- Culture problem
- Tightening market
- Business development hole
Culture problem – it is clear even from a brief visit to the business that there is a critical lack of pride and accountability within the workplace. This is evidenced by symptoms such as: demo technology area inactive and being used as excess IT storage dump, conference room (which is presumably main client engagement area) full of mess and lacking in meaningful samples of work, main production workspace incredibly messy and disorganised, TV in conference room without remote control. I would surmise that this is indicative of a lack of individual accountability and, whether it is a cause or effect of this, a lack of passion and drive. The client perception on visiting this space would not be one of a high performing, professional, cutting-edge business. Note that this is in stark contrast to previous times I have visited the business, both at the current location and at the previous location.
Tightening market – it would be naïve to ignore macro factors here and the general trend within the AEC market has been of caution in recent years. Margins are wafer thin and many large players are either struggling or have gone bankrupt. Presumably the ones which remain are taking measures to cut costs radically. A few facts:
- up to June 2024, 4,303 construction firms in England and Wales became insolvent, accounting for 17% of all insolvencies—the highest proportion of any sector.
- Major collapses – Notably, ISG, went under in September 2024 with debts nearing £1 billion.
- Average industry margin of top 100 construction companies currently standing at 2.72%. This is an improvement over last year’s results which was 1.6% but clearly significantly far from healthy numbers.
At the same time the competitive landscape has become more crowded, there are much lower barriers to entry within this niche than there were previously, and the market is maturing rapidly so the client no longer enjoy the advantage of expertise that was previously relied upon to win business. These factors combined suggest that there will be a squeeze on revenues which will require strong strategy to counteract.
Business development hole – there appears to be little to no business development strategy currently in operation. There, on subjective examination, seems to be very little activity among the sales/account/project management staff and little sense of urgency. There was no obvious prospecting list or pipeline, and the figures paint a pretty damning picture in terms of existing client spend – many good spending clients have declined in revenue or disappeared entirely. In conjunction with this the revenue stream from group partner businesses seems to be in freefall.
Action plan
There are clearly a multitude of factors which need to be addressed, most of which are urgent. Clearly, they can’t all be fixed simultaneously so some care will need to be taken to create a priority list and I would recommend external help to be drafted in, either in the form of external consultant support or additional staff from within the business (should they have the requisite skills/experience).
In no particular order:
Reactivate existing client base – there is a significant portfolio of existing clients, given the macro factors previously discussed there may be reduced opportunity but the decline has been in excess of the shrinking market so there is certainly more business to be had here.
Get group partners back on board – revenues from other group business referred work are shockingly low compared to previous years and this is an easy force multiplier. This may be down to a lack of engagement with the business units, misaligned incentives, or something else entirely. I’d recommend some investigative work to determine exactly what has failed here.
Referrals – given that work is still progressing it would be worth attempting to capitalise on the existing relationships with a formalised referral system.
Reduce cost – this is imperative. There is astonishing waste, from large quantities of excess IT hardware to unnecessary software subscriptions. I’d recommend a line-by-line expense review. It’s worth highlighting here the automated quoting tool – was there any research/analysis run for this? The additional revenue required to be generated for a $4k/pa solution doesn’t seem to be present. I’d question whether this is even a significant source of friction in the sales process and was a minimum viable product developed and tested? Given the sophistication of AI currently the code could be developed for this in minutes and an offshore developer could be engaged to integrate it into the website.
Long term plan for facility – like the above, the monthly rent of the facility is cripplingly expensive, I understand subletting is being explored to mitigate some of this cost but long term I would question whether this kind of location is necessary. It is moderately difficult to get to so I doubt it could be argued that it’s needed from a client perspective. From a production standpoint, unless there was going to be a serious problem with recruitment, an outside London location could be used for the production hardware or possibly even transitioning to a consultancy basis and outsourcing manufacturing production and acting as a finishing house. Some detailed financial modelling would be beneficial in the decision-making process here.
Fix culture – this is of critical importance. Without this being addressed it is unlikely that any gains will be long lasting. Whilst this will not be a quick or an easy fix, there needs to be a huge increase in pride and drive within the business.
Marketing strategy for creative market – this has signs of being an area to drive growth, there needs to be a robust marketing strategy for this to drive incoming leads into the business and a defined sales process to action them.
Assessment of AEC as key market – is this still as core to the business as it once was? The messaging suggests that it is but if it is in decline then attention could be shifted elsewhere to greater effect.
Analysis – there’s a whole raft of exercises that should be performed but I’d advise starting by looking at the data and sales results to identify which areas of the business are the most profitable and defensible. Average order value (AOV), customer lifetime value (CLV), margin and segmentation analysis and capacity estimates for person/department would be a good place to start. Some of these are traditionally e-commerce metrics but I’ve found them to be useful outside e-commerce in drilling down to the reality of what is financially beneficial and what is noise.
Business development – an entire report could be written on this and you probably know how to build your plan, but I think having actual processes in place and a gameplan for each target market is something that would help in the short term. It was unclear how much CRM is being utilised from my visit, but I’d target this as a focus area as it is usually not being used effectively. You mentioned that you were thinking about getting a bit hands-on and doing some business development yourself, I think that this is a good thing in the short term, both in generating results and improving morale by leading from the front – but I’d caution against spending too much time on this. There are a lot of significant tasks that will require your attention and the danger with anything of a transactional basis (ie: anything client based) is that it will divert your attention and will slow your progress in other areas which are of critical importance.
NB Strategy 