Even as design firms struggle to balance backlogs and employee resources, chief financial officers’ projections of revenue growth and profit increases in the coming year may be too rosy, according to statistics and comments offered at a gathering of about 110 CFOs in New York City on April 21.
The financial managers projected a median internal growth estimate of 8%, excluding acquisitions, for this year and 7.5% for 2018, according to data from a January survey, presented by financial investment and management consultant EFCG at its sponsored gathering.
The projections compare to firms’ actual 4.2% median 2016 growth, which followed an earlier 6.7% estimate. EFCG Managing Director Andrej Avelini said 60% of CFO respondents “missed” on both growth and profit projections for last year.
Jan Bouten, CFO of Arcadis, said its environment-related revenue was down, mostly due to the sluggish oil-and-gas market. The firm will focus on fewer markets in its 2017 growth strategy, Bouten noted.
HNTB Treasurer Craig Denson pointed out that his firm’s transportation-exclusive work benefitted backlog growth, although larger projects are “increasing the strain on resources and being able to perform.”
EFCG also sees more acquisition activity in small and medium design firms. For companies under $25 million in revenue, it predicts 3.2% of total growth fueled by purchases in the next five years, up from zero since 2012. For firms between $25 million and $50 million, acquisition will boost 2.4% of total growth. CFOs noted their key role in determining a company’s long-term sustainable growth rate. “Above 10%, you can’t train people fast enough to take care of clients,” said WSP CFO Bruno Roy. “Below that, you can’t keep good project managers.”