Strategic Growth Tips for Environmental Consulting Firms
Believe it or not, it’s November already, which means the end of the year is coming up fast. It’s time to start thinking about how your firm is going to jump start the first quarter of the new year—and set growth targets and outline strategies for achieving them. I spend a lot of my time talking to environmental due diligence consultants across the country about their top challenges. A common refrain I hear at those meetings is that it’s extremely difficult to grow in a mature services sector that is uber-competitive with the next economic downturn on the horizon. There are hundreds of popular business management books preaching that a company’s key to success rests in your ability to examine how the external market is changing, where your strongest capabilities lie, and where they align with opportunities for growth. But that’s easier said than done given the frenetic pace of a typical work day.
On Wednesday, I had the pleasure of hosting a webinar, titled Accelerating Strategic Growth in the Environmental Industry, with leading strategic consultant, Al Spiers, Founder and CEO of San Francisco-based 2020 Environmental Group. He had some words of reassurance for all of us—along with solid tips for developing an effective strategic growth plan. Here’s what he had to say.
1. How Big Is Our Industry? Remediation Tops the List
The U.S. environmental market is currently around $30 billion, with the top three sectors as follows:
- $6 billion soil and groundwater remediation
- $5.3 billion waste management
- $4.8 billion water resource management
“It is also a maturing market, a very competitive one, as well as one in which we are seeing significant consolidation by mature buyers today.”
2. What’s Growing? Real Estate, Land Development Leads the Pack
“Four years ago, energy/oil and gas was big and people couldn’t spend enough money to get into fracking. Times have changed. We’ve seen a fairly significant decline in oil/gas as a market driver. Today, real estate and land development is at the top, along with municipal infrastructure/transportation and water rounding out the top three. Oil/gas was in the tank until very recently but don’t rule it out. It is slowing recovering so you could start seeing your work pick up in that area.”
3. What Growth Can We Expect?
The graph below shows the annual growth rate of the environmental C&E industry going back to 1996. The modest three to five percent uptick of the past few years is evident, but it is worth noting that rates are very much a function of firm size. Larger firms are having a harder time hitting 2 to 3 percent organic growth, while smaller ones have an easier time achieving growth rates in the 5 to 10 percent range.
Are we expecting it to continue, and will we ever return to the 10% growth rates like the last two peaks?
“I don’t think so. Both of those peaks had something else going on, and that was: very strong new regulatory drivers, strong market drivers and the economy all in sync. Today we have the economy in sync and some market drivers in sync, but we haven’t seen a regulatory driver in many years. Without that, our growth rates will stay closer aligned with what the economy is doing.”
Geographically, Southern California continues to have a very strong growth rate as well as the Pacific Northwest and Southeast U.S.
4. Do Your Homework: Answer the Tough Questions
To set the foundation for a strategic growth plan, you have to give some serious consideration to questions like these:
Which of our core business services are growing and profitable? “You need good financial accounting data ready at hand or someone who can get it for you from your internal system.”
What markets are growing and profitable? “Here you can look to trusted external sources.”
What new services or markets would we like to move into? “Now you turn your focus to ideas for new expansion initiatives.”
What services or market areas aren’t profitable and therefore we should get out of? “This is critically important—and probably the toughest to talk about with your team. It’s not meant to be about what department or service line you are going to close down. Not at all. It’s really about freeing up cash in order to apply it to another area that will give your employees career growth opportunities.”
Does our company have an “entrepreneurial spirit? “Look internally at your culture to assess whether you have a risk-taking, a growth mindset.”
“This is not a time to be sitting back and just cruising. This is the time to start planning for an economic downturn. It’s out there, happens pretty much every seven years so you have to think ahead. Think strategically. Think about specific services, markets, geographies and clients that are growing and profitable. And then put your attention there.”
~Al Spiers, CEO and Founder, 2020 Environmental Group
NOTE TO READERS
For more advice on how to address internal bottlenecks, build your brand name visibility and set clear, reasonable growth strategies, listen to the replay of our webinar Accelerating Strategic Growth in the Environmental Industry, including a Q&A session that includes his answers to questions like:
- “We want to buy a Southeastern US firm of about $10-$20M. What do you suggest?”
- “We’re having a hard time filling staffing needs. How are your clients finding new mid-level professionals?”
Thanks to Al for a timely and insightful event. Readers, feel free to contact him directly for his thoughts on growth strategies for your firm.
ABOUT AL SPIERS
Al Spiers is Founder and CEO of 2020 Environmental Group, a San Francisco based management and M&A advisory firm focused purely on the environmental industry. Al brings a new vision to the business of the environment that includes working with Founder/Owners, CEOs and Boards, as well as private equity investors on strategies for growth into new markets, financial performance, ownership transition, and sell- and buy-side M&A transactions. Since forming the company in 2010, Al and his 2020 partners have advised more than 75 environmental and engineering consulting firms across the U.S. UK, Canada and China, and led 25 sell-side and buy-side M&A transactions. Prior to 2020, Al held executive positions with some of the largest environmental C&E firms in the world including URS, Dames & Moore, and Entrix. Al attended Stanford Graduate School of Business, and holds an M.S. in Environmental Engineering from Stanford University. Al can be reached at firstname.lastname@example.org.