SMALL FIRMS

For some consulting engineers, a small firm offers the independence, the hands-on work and company culture that no increase in pay or corporate prestige can match. Others, like Wojciech Remisz, P.Eng., cite a passion for problem-solving–the quest for an elegant solution–as the fuel that keeps their small consulting business going, despite the challenges. When the owner and president of Remisz Consulting Engineers in Ottawa entered a project in Consulting Engineers Ontario’s annual competition last fall, he was “dreaming big” for his 13-person firm. “I just wanted to be part of the group … and to show that small can be beautiful, small can be smart, small can be practical.”

Small can also be a hard way to make a living, as Remisz well knows.

Buy-up cycle ending

About a decade ago, there was a noticeable increase in the acquisition of small firms by larger ones, says Ian Steele, P.Eng., principal of PBX Engineering, a firm of 23 people with offices in Vancouver, Victoria and Qualicum Beach, B.C. “It seemed as though the small firm model was diminishing in importance, making it difficult to be competitive and sustainable… However, in the last five years, there has been a strong resurgence of small, nimble firms.”

“Their [small firms] appearance often results from dissatisfaction with the larger corporate model, fueled by a strong desire for independence, or simply capitalizing on market opportunity,” Steele explains. “Either way, small firms that offer specialized expertise are a very important part of the consulting ecosystem.”

Practising in a niche market affords some protection from a buyout because large firms would have trouble absorbing so many engineers with the same specific expertise. “The work (in a larger company) wouldn’t support 25 engineers doing our specialty,” says Brian Howe, P.Eng. Howe is president of HGC Engineering, who are noise, vibration and acoustics specialists in Mississauga, Ontario.

Another explanation given for why fewer small firms are being purchased is that in today’s economy large firms don’t have enough work for the employees they now have.

Finding work – a worrying trend

One aspect of the consulting engineering business that is becoming increasingly challenging for small firms is the effort they must put into getting work. Over the past five to 10 years, preparing proposals, even for minor jobs, has become a significant part of the work load in engineering firms. For small firms, this is particularly onerous.

Robert Poisson, P.Eng., president of R.E. Poisson Engineering in Guelph, Ontario finds the stiffening of procurement practices a worrisome trend. “We used to be able to get work with a two-page letter proposal. The clients had more ability to choose consultants based on our previous good work, or our knowledge of the particular systems. Now, for all but the smallest of jobs, more and more clients are required to demand full-scale proposals, open to everyone in the business. Proposal preparation is becoming a larger part of our overhead costs.”

Others find it especially frustrating that after putting all the work into the proposal, contracts are mainly awarded based on the engineers’ price. Remisz, a former municipal government employee, remembers when contracts could be awarded in the course of a few days, based mainly on knowledge of a firm’s capabilities and experience, rather than on an expensive proposal and a low price. “(Now) even small projects require elaborate write-ups, resumes, descriptions of methodology, timelines, innovation … but at the end of day, only cost matters,” he says.

Although his firm can access various bulletin boards where prospective clients post their upcoming projects, he says the subscription fees can be prohibitive, particularly given that the two sites he uses (MERX and Biddingo) post many of the same projects, list projects that are too large, or don’t list many projects in the Ottawa area.

“We are at a disadvantage compared to larger firms that can pay multiple subscriptions and have someone on staff checking them daily full time, and who have a few proposal-writers and graphic artists to do nice covers,” says Remisz. “The proposal-writing effort can be well over 3 per cent of the value of the work it’s getting you.” He says it can take a week’s worth of work to land an $80,000 project fee.

The advantage of a niche

One school of thought is that general practitioners survive for the long haul, while specialists have to market their services extensively to get by.

Or perhaps the success of small firms is usually driven by niche expertise, as PBX’s Steele believes? “The ability to offer unique, focused skills and boutique technical services enables small firms to offer value in areas where larger firms often have difficulty being competitive.”

HGC’s marketing and business development manager, Bernard Feder, agrees: “If you’re going to be small you have to be in a niche to prosper. Technical sophistication is increasing: you can’t be a 25-person firm and be generalists.” For one thing, the acoustics and vibration specialists don’t end up competing against 10 to 15 firms, because there aren’t a lot of players in their niche, he says.

But specializing in water and wastewater engineering puts Robert Poisson’s six-person firm in direct competition with many others, large and small. He remembers a recent proposal call attended by 30 firms, six of which were completely unknown to him. “So it’s not really a niche,” says Poisson. “We have to distinguish ourselves by doing good work and getting repeat business or referrals.”

Urban or rural?

“If you are a niche player, and do most of your work sub-consulting to the larger firms, then being in a large centre matters,” Poisson suggests.

The percentage of work done as a subcontractor to a larger firm varies widely, with some companies not subbing at all, while others indicate that subcontracting accounts for as much as 40 per cent of their jobs. Most agree that relationships with big firms – whether as subcontractors or as members of a project team – are very important, and that referrals from larger firms are an invaluable source of business.

Poisson believes that there are advantages for general practices located in smaller centres: “In smaller centres, the projects tend to be smaller, and clients feel – justifiably – that they may get better service from a smaller firm.”

The preference of some clients for spending contract dollars locally, along with the “face-to-face service advantage,” are among the reasons that small, rural firms are successful, suggests Steele. And because smaller projects of a size not of interest to larger firms constitute a significant portion of the overall market, the small firm model can be very successful in big cities and rural areas alike. “This is why there are so many small, successful firms,” Steele suggests.

Remisz brings the subject down to earth. The bonus he sees for firms who work on smaller or rural projects is the clients. “You are dealing with a road superintendent, a technician or a technologist who’s wearing safety boots and hard hats, [rather than] a CEO or a senior bureaucrat in Gucci shoes.”

Being in the Greater Toronto Area has been beneficial for HGC, Howe says, because the market there has been good lately. For him the bonus is that their location is excellent for attracting engineering talent: “That would be harder to do in a smaller centre.”

Computers and the internet – the great levellers

Has computer technology and the internet levelled the playing field between small and large firms?

In terms of marketing, “There are no real technological impe
diments relating to firm size, as similar tools are available to both large and small firms,” says Steele. “Marketing opportunities through a web presence and social media are very much within the reach of, and effective for, all types of companies.”

Smaller firms “can look like a million-dollar firm on the internet,” says Feder: “Larger firms keep secrets, and don’t put everything online. Smaller firms put it all out there.” HGC recognized the value of the internet in its early days, he says, acknowledging that you have to “keep up with the game” online.

The ability to access live data remotely has allowed HGC staff to work on international projects that could never have happened without the internet. But the firm’s approach to technology is to become a “brain trust” – gaining expertise and developing skill sets. “We don’t want to get too caught up in the shiny new toys that are available.”

Keeping staff – small firm culture

While it may not be difficult to attract graduate engineers to entry level positions in small firms, keeping them can prove challenging. “The problem is, a few years after training them, giving them hands-on, hard-hat experience, you cannot match the salary, wages, benefits, or stability of larger firms,” Remisz says. Young employees will “upgrade and move on, leaving small firms as a training institution to get them to P.Eng. level.”

On the other hand, Poisson points out: “Someone who decides to work for a small firm isn’t less of an engineer than someone who decides to go to a large firm. Working at a small firm has its advantages. There are no ‘back room guys’ in our company, grinding out the same designs year after year. Everybody gets to meet the clients, do some project management and business development. It’s a different thing, and a lot of perfectly smart people prefer it to working at the big companies, me in particular.”

Steele finds that prospective employees consider job offers from large and small firms to be on a relatively equally footing. “Usually, well run small firms will offer a different culture and work environment compared to larger firms, one that appeals to the type of engineer who is naturally attracted to consulting.”

The common drive that connects small firms, no matter where they practice or where their expertise lies, may be just that – a natural attraction to consulting – enjoyment not only of what they’re doing, but how they are able to do it in a small firm culture.

“I am 65 years old, and I love what I’m doing,” says Wojciech Remisz. And yes, his firm did show that small is beautiful by taking CEO’s top honour in the 2014 awards with their Rockcliffe Parkway Recreational Path project. “It is an ‘Oscar’ for me personally, for my firm, and for my employees who dedicated their minds and hearts to this unique public project.” cce

Sophie Kneisel is a freelance writer based in Baltimore, Ontario and a former editor of Canadian Consulting Engineer magazine.