Mistake: We Opened an Office on the East Coast!

“Really?” I said. Hmm. “Did you do any market research—competition, market capacity, pricing?” “No, but I’ve got a relationship with someone who knows someone there.” “Is it a client?” (That’s different.) No. I’m thinking: just shoot me now.

Two years later and more than $200K invested, the client closed their office in the region. Reluctantly, I asked why. The truth was, I already knew. No work, no demand for work, too many competitors, preferences for union workers, and the list went on and on. This wasn’t the first time I had heard this and it wasn’t going to be the last.

Too often, firms rationalize pursuits of project types and regions that common sense would suggest are ridiculous! The answer is always, “But we can do it!” My question is, “Are you the best at it?” In this economy, recovery has taken hold in some regions but not others. Even in those areas on the road to recovery, opportunities might be tighter, and business has radically changed.

It is no longer acceptable to invest hundreds of thousands of dollars in regional or market sector expansions without prudent exploration first. How do you do that?

1. Set a budget. If your annual revenue is $2.5M/year then a $200K investment might be substantial. Set a budget that defines travel and subsistence for a fixed number of secondary research meetinga. The sky is not the limit here.
2. Do some recon before you leave the building. There are some wonderful research tours and sources available. FMI Resources, PSMJ and even local Economic Development Corporations have very inexpensive and useful tools that can be used to assess regional or market sector viability.
3. Use your resources. Local chapters of CMAA, ACEC or even agencies and municipalities have public information available that give you a sense of the competition from both majority and minority firms.

Here’s the funny part of this tragic story: The office manager—the lowest person on the firm totem pole—said this was a bad idea. For the cost of her annual salary, they should have listened before wasting all that time and money.

Karen Compton, CPSM. Karen Compton is principal of A3K Consulting (Glendale, CA), a business development and strategic planning firm specializing in the architecture, engineering and construction industries. Ms. Compton is also the founder of Industry Speaks™, a web-based business-to-business portal that connects AEC firms with experienced consultants, provides peer reviews of consultants, reports on key industry trends, and publishes expert reviews of professional courses and books. Contact her at kcompton@a3kconsulting.com.