Welcome to Thinc Strategy’s Early Reactions: A&E Firms and COVID-19 study. This study provides a snapshot of the early response, activities and business conditions reported by A&E Firms in the eight weeks after federal, state and local governments imposed initial restrictions on travel, gatherings and business activities. 80 firms participated in the survey. Responses were fielded between April 15 and May 12, 2020. Firms were asked a range of questions including the immediate impact on their business, the actions they took in response and their outlook on the future.
We believe the study results will benefit firm principals, finance teams, as well as other business leaders who engage with the A&E industry, as they conduct business planning for the balance of 2020 and 2021.
Respondent firms started 2020 from a position of strength, with approximately 80 percent at revenue levels equal to or surpassing the previous year. Nearly half (47%) reported higher year-over-year revenue in the prior six months. The expectations for the future were more modest with over 60 percent expecting future revenues to fall behind the prior year.
Even with lower revenue forecasts, there’s a mix of responses to the current business climate. Not all firms are cutting spending. Nearly half (44%) had not cut expenditures at all and close to that same number (45%) had no plans to in the future.
That leaves approximately 55% of firms indicating they have or are planning spending reductions. Those reductions cut across all aspects of business from IT and marketing investments to eliminating positions. One area that looks to be a more likely consideration for future cuts is salary reductions, with 35% of respondents indicating that’s an area they are looking to for future cuts.
Firms are not sitting passively waiting for the revenue picture to improve. They are deploying a mix of approaches to drive new projects. At the top of the list is outreach to current and recent clients. And nearly two-thirds are actively responding to RFPs.
In addition to pursuing new work, firms are taking steps to shore up their cash position. Almost every firm (94%) reported applying for a Payroll Protection Program loan and almost all of those (93%) had been approved.
Considering questions regarding PPP loan forgiveness, increases in remote work and a need for financial scenario planning, not surprisingly the top three potential areas for outsourcing are legal, accounting and finance and IT services.
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