Industry expertise Engineering firms eye strategies for growth

While the precise impact of potential tariff shifts is yet to be determined, there are several factors creating growth opportunities for industries, projects, and investments that need E&E services.

• Government programs: Infrastructure Investment and Jobs Act, IRA, CHIPS Act, and other federal legislation ensure that public money will continue flowing into manufacturing and infrastructure programs over the next five to six years.
• Repairs and upgrades to aging infrastructure: Many water and sewer systems need urgent attention, while electric utilities require upgrades due to growing demand from data centers, electric vehicle adoption, green infrastructure grants, and government policies that favor electricity over fossil fuels.
• Sustainability programs: Initiatives such as solar farms and power generation from remote windmills remain priorities for government and corporate interests.
• Private industrial projects: Municipalities are turning to privatized projects to meet water and waste needs as existing systems are already running at full capacity.
• Commercial and residential construction projects: Expanding the supply of housing means more construction, and many residential and commercial projects demand significant soil testing, engineering, and remediation services.

Increased project sophistication and potential regulations have organizations considering the specialized capabilities of environmental firms—but not all are ready to benefit from the wave of work. E&E firms that invest heavily in technical skill development, efficiency, and scalable systems will be best positioned to capitalize on this growth.

Concentrating on the right things can help your business capture more value now—and in the years to come.

1. Invest in talent as your greatest strategic asset.

Many firms today struggle to find enough skilled engineers and onsite managers to shoulder all the new projects available, and companies that have people with advanced, niche skills are more likely to maintain margins.

Actions:

• Partner with organizations to access talent pipelines or to train talent yourself.
• Step up employee engagement and retention programs.
• Prioritize employee growth and development of leadership/management potential.
• Invest in continuing education as the landscape changes.
• Enhance employee performance and improve employee experience, through digital transformation of the work environment.

2. Extend and bundle your services to better meet customer needs.

Owner and general contractor customers can face unexpected bottlenecks due to labor shortages and a growing number of regulations. This often results in higher costs, delays, and pressure on profitability. To help your customers manage that complexity, your firm can offer new services or bundle existing ones to address these issues.

Actions:

• Explore ways to add value to your larger customers by helping them reduce backlog, streamline operations, and limit underutilization of resources. In one example, an engineering firm observed that delays in soil testing results were creating a significant bottleneck for its major customers. By identifying the issue and advising these customers on redesigning their soil testing workflow, they delivered additional value that strengthened the relationship.
• Add adjacent services that boost profits for your firm. If you already have expertise or capacity, consider offering additional services such as technical testing or project management that can generate healthy margins.
• Create turnkey bundles of services that reliably deliver on larger portions of your customers’ projects. Whether bundling allows you to more clearly claim credit for delivering business results or simplifies your customer’s contracting process, that additional source of value delivered could translate into more revenue for your firm.

3. Build tools that make your financial operations more efficient.

Adopt advanced cash management technology to support billing, payments, receivables, and to track your company’s cash position. The backlog for large infrastructure E&E firms often runs as high as two years. Ensure you carefully manage contracts and terms to avoid margin compression due to inflation or labor market changes that may occur over lengthy contract periods.

Actions:

• Focus on planning, budgeting, and predictive modeling to meet market changes and project disruptions, whether from legal or regulatory delays or from supply chain interruptions.
• Explore digital payment methods and treasury tools that can help you improve your cash conversion cycle and effectively manage working capital. Consider embedded finance for managing cash flow.

4. Leverage technology to boost your competitive edge.

Having the right equipment, and implementing it appropriately, will help you work more efficiently and deliver more impactful results for your customers.

Actions:

• Evaluate whether legacy systems meet your current needs and determine whether upgraded digital solutions could help you:
  • Maximize operational efficiency and minimize operational risk
  • Reduce human error or enhance customer service
  • Improve the cash conversion cycle
  • Increase market share
• Identify the latest technologies that could help upgrade your business, whether it’s what you deliver to customers, or how you could deliver it more efficiently. Consider:
  • Generative AI for streamlining key workflow steps and improving your customer experience
  • Robotic process automation (RPA) for operational efficiency
• Formulate a plan for funding the latest technologies at the optimal pace to implement and integrate them into your operations. Remember that the ongoing costs of maintaining older technology can build up over time, affecting your ability to implement newer platforms.

5. Actively manage growth investments and capital.

Given the long timeline on many contracts, E&E leaders must look at how to maximize cash generation from operations and reduce working capital needs.

Actions:

• Plan out loans, leases, and use of revolving credit. With interest rates on the move, it’s especially important to actively manage existing loans and anticipate future financing needs. 
• Consider all available sources of capital, including private equity and family office investments.
• If private equity investment is in the cards, start learning about financial sponsors that target E&E and their investment criteria. You’ll be ready to find the right capital—at the right costs—with investors who can help you meet your growth goals.

6. Understand the role of mergers and acquisitions. 

Sometimes, M&A can be the most effective way to obtain the talent you need, increase capacity, or acquire key customer relationships.

Actions:

• Evaluate how M&A can best support your business plans, whether you’re looking to grow or see your business as a key piece of a strategic acquirer’s business.
• Stay in touch with leaders’ business and personal plans. Have active conversations about transition, particularly if your firm is a second- or third- generation family business.
• Work with lenders who understand how to value asset-light, niche, professional services businesses in the E&E sector.