Special Report : Consultants Streamline, Sell More When Work is Harder to Find

Most geologic and mining engineering consulting firms* began to experience the recession with declining billing levels, number of inquiries, and proposal requests in late 1981 or early 1982. As of today, most of them have been functioning at reduced income levels for nearly a year. And while many consulting firms have apparently reached a stabilized income level, they can see little prospect for attaining normal (pre-late 1981) billing levels and income for the remainder of 1983. A few firms have escaped being affected by the recession. Such com panies almost without exception are small (fewer than 20 personnel), offer a limited range in technical capabilities, and tend to be highly specialized in a particular niche. They include those specializing in the heap leaching of precious metals ores, in ground water testing programs, and in the derivation of computer-aided programs to monitor particular mineral processing functions. Those firms affected by the economic downturn have instituted a variety of policies and undertaken actions to cope with significantly reduced incomes to bring fixed costs in line with the depressed demand for services. These changes fall into the following broad categories: • management and management practices; • markets and market definition; • marketing and the pursuit of assignments; and • administration and personnel relationships. Not all of the perceived changes have necessarily been instituted by every consulting firm, and any one appears sporadically instituted. Management and Management Practices In favorable times the managers, and often the owners of the equity, of consulting firms tend to concentrate their attention on the part of the business they find most satisfying and enjoyable. For some, this means acting as project or assignment leaders, even undertaking a specific technical aspect of the job. For others, it means constant marketing with the associated heavy travel and entertainment schedules. In unfavorable conditions, such as the current recession, managers tend to spread themselves far more thinly, expending time and effort on all facets of the business including marketing, proposal preparation and cost estimating, budgeting, general administration, accounting and cash flow monitoring, project/assignment overview, and actual client work. The manager who in favorable times concentrated on client work is now less billable. The manager who concentrated on marketing is somewhat more billable. The manager now needs to pay attention to and expend equal effort on each facet of the business just to keep all the facets in relative balance. Falling behind schedule on a client job or carrying an unduly large percentage of accounts receivable exact a cost to the firm. Clearly the absolute cost to the firm is the same whether demand for service is good or slack. But in periods of slack demand the firm is frequently less able or even unable to bear such costs. Marketing and Market Definition Markets appear to have undergone some significant changes: • Federal and state governments have assumed a greater importance as providers of work vis-a-vis both industry and private groups. • Projects with increase-in-capacity aspects have given way to projects with maintenance or reduced operating cost aspects. • Projects searching for new deposits of minerals in generally new locations have given way to projects reviewing known mineral districts or known deposits. • Industrial mineral and mining companies have exhibited a great propensity to cut back the use of consultants and to undertake as much work as possible in-house. Further-more, a number of industrial mineral and mining companies have entered the competitive arena with consulting firms, submitting proposals (usually to the federal government) in an effort to keep their staffs intact and occupied. In response, consulting firms have reevaluated their capabilities by reviewing old work and reassessing personnel. The purpose is to broaden the services offered and the potential client base, thus redefining the available market. For example, a firm specializing in assessment of technical and cost parameters of a deposit would normally assist a prospective lender in judging the deposit's suitability for project financing. That same company could easily expand into the field of analyzing production costs for an individual operation -something that is needed in periods when lower prices reduce profit margins. Similarly, a firm that has confined such economic assistance to commercial banks could expand to provide its expertise to other lending and even equity buying in-stitutions such as insurance companies. Marketing and the Pursuit of Assignments With few exceptions, consulting firms have significantly increased their