Well, here we are. After a decade of smooth sailing across deep blue seas, the robust business environment enjoyed by many engineering firms may finally and inevitably be headed toward shoaling waters. The key questions become for many firms how long will the slowdown persist, and how best to navigate the firm intact to deeper water on the other side?

My crystal ball is no better than yours. I don’t know how long or how deep the recession may be and neither does anyone else. If someone attempts to tell you otherwise, don’t believe them. Economic downturns are a basic fact of business life. We’ve had them before and we’ll have them again. In the natural world, events such as these are considered a purely objective, Darwinian-like process aimed at culling out the weakest and the excess from the herd. Business is not immune from its own version of survival of the fittest.

Here are a few suggestions:
Monitor Your Situation Closely—keep a constant eye on key indicators such as direct labor rates, backlog, cash balances and any and all other information you may customarily rely upon to manage your firm. If it was your practice to monitor your firm’s performance from month-to-month or quarter-to-quarter, shift your time horizon to day-to-day and week-to-week. When things do begin to head down, they are more likely to crash down than to float down. You’ll want to catch problems early and react quickly when they do.

Hoard Precious Cash—your firm will only stay afloat as long as cash coming in (along with cash already in hand) is greater than cash going out. Get to work now to squeeze your accounts receivables and work-in-progress to invoice and collect as much cash as you can. If you don’t have a backup line of credit established with your bank, do it now. The best time to arrange standby financing is before you need it. Delay expenditures as long as you can, but not so long that you do damage to your credit rating in the process, you’ll need to keep that intact for the future.

Cut Expenses—even if you are still doing OK at the moment, reduce your expenses as much as you feel you possibly can—and THEN cut an additional 10–15% on top of that. You must remain profitable, or at worst, breakeven—don’t rack up losses and debts. Since 65% of your cost to operate is payroll and payroll related, unfortunately, you’ll need to start there. Step 1) Identify your core staff and attempt to protect them as long as possible. Step 2) Cut proportionately from the top down to the bottom even if this means you cannot keep the entire core staff determined in Step 1. Remember this, if you’re going to cut, it is generally far better business-wise, and psychologically, to cut hard and deep all at once than it is to nibble away with a series of smaller cuts painfully drawn-out over time.

Visit Past and Present Clients—the best source for work is from clients who already know you. Rekindle any cold relationships and keep in close contact with current clients. If they themselves don’t have the potential for generating new work, seek their help to introduce you to others who may. In slowing markets, referrals and introductions as a means to new work become even more important than they normally are.

Hone Your Services—only do work you absolutely excel in. Don’t flail and attempt to do any and all things that come along. Cut back instead. It only hurts you in the long-run. Here’s the gold standard to shoot for—only work in arenas in which you can offer "impeccable services—flawlessly delivered". Can’t do this? Work hard to fix it so you eventually can.

Think Strategically—in addition to short-term operating issues that need your constant attention, take a deep breath, step back and consider where you are and your long-term prospects going forward. Based on your assessment, is now the time where it might make sense for your firm to pursue a merger, sale or acquisition where one plus one equals three as an alternative to business as usual?

There is an old adage that a rising tide lifts all ships. Hopefully, your firm has used the deep water of the past decade to develop its leadership, management skills and business processes and procedures to put a stout deck beneath your feet. As the water drops, and the rocks of economic uncertainty begin to surface all about you, you’ll be well prepared to steer clear. If not, and you make it back to deep water with your hull reasonably intact, take steps once and for all to build an organization that is every bit as expert and professional as a business as is the quality of the engineering services you render your clients. Past is prologue. The economy will indeed recover and, sooner or later, it will most certainly falter once again. The question is—will you be ready?

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