Optimism at small firms

December 2013 » Features » SURVEY
Many have weathered the recession as well or better than some of their larger counterparts.
Christina M. Zweig

Small firms are holding their own out there. A recent ZweigWhite survey found that a firm's size plays an important role in many of the challenges they face – and though small firms may have bigger hurdles in some areas of their operations, they also offer a number of competitive advantages.

According to the U.S. Small Business Administration, the small business sector is growing rapidly. Small businesses have generated more than 65 percent of the net new jobs since 1995. The number of small businesses in the United States has increased 49 percent since 1982, and many of these businesses are in the architecture, engineering, construction, and other related industries. While corporate America has been downsizing, the formation rate for small business start-ups has risen, and the rate for small business failures has declined.

ZweigWhite's 2013-2014 Small Firm Survey of Architecture, Engineering, Planning & Environmental Consulting Firms, which returns to publication after a hiatus, defines "small" as any firm with one to 50 employees. In the survey, most principals in small firms said the business environment will be somewhat better or much better in the upcoming year. When asked if their investment in the firm was worth more than, less than, or the same as they paid for it, small firm owners overwhelmingly (83 and 84 percent) responded "more."

By the numbers, small firms don't look too shabby.
The survey reports that gross revenue has increased by a median of 14.8 percent during the last three years for firms with 26 to 49 employees, and 6.5 percent for firms with 25 and fewer employees. The three-year projected revenue growth for small firms was a median of near 20 percent, with five-year growth predicted to be a median of 45 percent for firms with one to 25 people, and 40.8 percent for firms with 26-49 people (see Figure 1).

Figure 1: Gross revenue growth

Larger firms traditionally have bigger budgets and more opportunities to develop training programs, participate and hold events, and work on large-scale projects. While many small firms can't offer the more attractive salaries and other perks that bigger firms can, many people are attracted to the atmosphere, opportunity, experience, and flexibility often available at a small firm. While they may have a more diverse workload or have to wear multiple hats, the survey found that most project managers at small firms say they are comfortable with their workload and rarely report turning down work due to lack of manpower.

Christine Brack, principal, ZweigWhite, says in her introduction to the survey, "Small firms, in fact, are wonderful to work with. They have a remarkable entrepreneurial spirit that is often lost at larger organizations. They have fewer layers to move through when making decisions and they literally have all hands on deck to make things happen and get things done."

Not all operating costs are higher at small firms, either. Interestingly, ZweigWhite's 2013-2014 Operating Expenses Survey found that the vacation, holiday, and sick leave costs as a percentage of total labor were lowest at small firms with one to 24 people – only 9.7 percent. For larger firms (250-499 people) this figure reached almost 11 percent.

For small firms, small jobs can add up in a big way, and small firms may be better suited to take on certain types of projects that large firms are not. "Clients like small firms too. They like working directly with the owners and knowing their project will not be delegated to a newbie once a 'bigger' client comes along," Brack said.

The "2013-2014 Small Firm Survey" is available for $395 at www.zweigwhite.com/p-2185-small-firm-survey-2013-2014

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