Is Your Target Market Starting to Soften?

Is Your Target Market Starting to Soften?

You’ve had a good run. No, a great run. Backlog is strong. Your teams are busy. Margins are solid. Not too long ago, you were turning away work. But lately, you’ve noticed something a tad unsettling—maybe fewer RFPs, a couple of delayed projects, or a key client pulling back on spending. It’s subtle, but it’s there: One of your main markets is showing signs of softening.

Before you go full Chicken Little, take a breath. The sky isn’t falling. But it would be a mistake to ignore what could be early warning signs. The smartest AE firm leaders know that downturns—whether mild, sector-specific, or full-blown recessions—are part of the cycle. The key is to act early, act smart, and position your firm for whatever comes next.

Here’s your playbook:

1. Diagnose the Slowdown: Is It a Blip or a Trend?

First, figure out whether this is a passing phase or a real shift in your market. Look at:

• Your pipeline. Are leads drying up? Are project delays becoming cancellations?
• Client budgets. Are they cutting back on scope? Holding off on new work?
• Industry trends. Are other firms in your space seeing the same thing?
• Economic indicators. Interest rates, real estate cycles, infrastructure funding—are external forces at play?

Talk to your business developers and project managers. Often, they’ll have a gut feeling before the numbers fully show it.

2. Lock Down Your Key Clients

When markets tighten, competition for work heats up. The clients who’ve always come to you may suddenly have more firms knocking on their doors . Now is the time to:

• Deepen relationships. Get in front of your best clients. Ask how they’re doing, what their concerns are, and how you can help them adapt.
• Be proactive. Offer solutions to stretch their dollars. Can you phase projects differently? Bundle services? Shift priorities?
• Strengthen contracts. If you have long-term agreements, make sure they’re still solid. Look for ways to extend them before your competitors do.

3. Pivot to Adjacent Markets

If one of your core sectors is slowing, where else can you apply your expertise?

• Look around. If a commercial development is stalling, is the education sector holding steady? Can you shift to infrastructure, health care, or government work?
• Geographic expansion. What other regions are on the upswing? Can you set up partnerships or hire talent in those areas? Can you convince a friendly client to take you there?
• Service expansion. What can you add to your offerings that aligns with your expertise? If you’re an architecture firm seeing a slowdown in multi-family, could you expand into repositioning/reuse projects?

Look at where your skill sets translate. Your firm might already have the expertise—you just need to reposition it.

4. Shore Up Your Business Development Game

When work is abundant, AE firms often neglect business development. But when things tighten, suddenly, everyone scrambles. Don’t be that firm.

• Re-evaluate your hit rate. Where are you winning and losing work? Adjust your approach accordingly.
• Be more aggressive. Ramp up client outreach. Stay visible. Attend industry events. Don’t be a stealth marketer. It doesn’t work.
• Invest in BD training. Many PMs don’t think of themselves as salespeople, but give them the tools to help sell your firm, and they’ll close more than you might think.

5. Optimize Operations Without Knee-Jerk Layoffs

Too many firms respond to slowdowns by slashing staff at the first sign of trouble. That’s short-sighted. Talent is hard to find and even harder to replace. Instead:

• Control costs wisely. Look at overhead, not just payroll. Travel, extravagant benefits, office expenses—where can you trim without gutting capabilities?
• Enhance productivity. Are there processes slowing your teams down? Can technology or better project management tools help?
• Reallocate staff. Move underutilized people to growth areas instead of cutting them outright.

If you must make cuts, be strategic. Protect your top talent (not necessarily the most senior staff) so you don’t eliminate your ability to rebound.

6. Get Financially Fit

When work is plentiful, it’s easy to overlook financial discipline. But when things get a little uncertain or slow, cash flow is your best friend.

• Strengthen your balance sheet. Pay down debt where possible. Build cash reserves.
• Tighten up AR. Clients may start stretching payments. Get ahead of it by reinforcing billing discipline.
• Diversify revenue streams. Recurring revenue models, small consulting engagements, or alternative fee structures can help keep cash flowing.

Financially fit firms that experience slowdowns in their target markets can still make moves.

7. Use the Time Wisely

If you do experience a slowdown in your sector, don’t just wait it out. Use the time productively.

• Invest in training. Develop your team so they’re ready to lead when things pick up again.
• Strengthen internal systems. Is your firm running as efficiently as it could? Now’s the time to fine-tune.
• Double down on culture. When firms go through dry patches, culture takes a hit if leadership isn’t intentional. Keep people engaged and motivated.

We all hope the good times keep on rolling. But crossing your fingers doesn’t count as risk management. Stay disciplined, stay proactive, and be ready if everything doesn’t continue to come up roses.

Contact Mark Goodale at 508.254.3914 or email [email protected].