What makes one SME riding the rough seas of a recession decide to sell up while another is able to diversify and grow? Ruby Kitching asks John Byrne, co-founder of the recently expanded consultant Byrne Looby, for his perspective.
According to the Department for Business, Innovation and Skills, small and medium enterprises (SMEs) - that is businesses with fewer than 250 staff - across all markets account for 59.3% of employment and 48.1% of turnover in the UK private sector. Homing in on civil engineering, NCE’s Consultants File 2014 reveals that the vast majority - 186 of the 234 companies listed - have between 10 and 250 staff, employ 9,384 people and produce a turnover of £667.7M.
So, while attention is often focused on the big players in the industry, their big turnovers and contract wins, SMEs make a hugely significant contribution to the UK economy and, most importantly, to local economies.
Fluctuations in workload create some of the biggest challenges for SMEs, since most are lean outfits that can be easily destabilised by dips in the economy.
We desperately wanted to keep the skilled workforce we’d built up over the years and didn’t want to see it depleted
Also, owners are often overstretched, taking on multiple roles in human resources (HR), finance, office management, recruitment and procurement of everything from IT systems to swivel chairs and coffee - all while leading the company and being responsible for winning work.
There comes a time when these support roles get in the way of winning work or, conversely, the owners, being relatively unskilled in many of these roles, start to make mistakes.
John Byrne, co-founder and joint managing director of consultant Byrne Looby, realised that such a situation was looming in 2008, 10 years after he and Michael Looby started the company.
“As an owner, you come in every morning to sort out anything and everything,” says Byrne. “When we decided that we needed to grow the company in order to survive, we quickly realised we had to be released from many of these “business support” leadership functions so that we could focus on our main aims - to maintain relationships with our customers and lead technical excellence across our market sectors.”
Back in 2008, before the economic crash, the company had 30 staff in offices in Ireland (Belfast, Galway and Dublin) and England (Guildford). At the time, Byrne and Looby were concerned that the company was too heavily invested in Ireland where work was unsustainable.
“We decided that, in order to survive, we needed to grow geographically and diversify into other sectors. We desperately wanted to keep the skilled workforce we’d built up over the years and didn’t want to see it depleted through a reduction in workload,” Byrne recalls.
Built in 1878, the Connaught Tunnel is 550m long and runs between Royal Victoria Dock and Royal Albert Dock close to London City Airport.
As part of the works for Crossrail, the existing tunnels are being enlarged to accommodate Crossrail trains and overhead line equipment.
Byrne Looby’s work on the project included analysis of complex temporary works for contractor Vinci. It developed computer models to accurately predict the in-situ condition of the existing brick arches, proving that the inherent stability of the arches could be used to considerably reduce the tunnel’s temporary support during construction works.
The company set out to achieve sustainable growth by moving into new geographic markets and identifying sectors that were suited to its skills and culture. As a result, it has now expanded into the Middle East and has opened a new office in Manchester, focused on the rail sector.
The consultant has also been growing in the water sector, and last year bolstered its expertise in this area by acquiring consultant PH McCarthy, which had previously been part of WYG’s Irish business. That acquisition, combined with organic growth, has seen the company grow from 30 people to 100 since Byrne and Looby identified the need to look beyond its traditional markets.
Byrne says he and Looby undertook formal business training to gain a better understanding of how to develop the business, and released technical staff and themselves from business support functions by recruiting managers in finance, marketing, HR, health and safety, and IT.
We’ve always tried to be the sort of company which promotes entrepreneurial spirit - and we want to stay that way
He recalls that the process of finding individuals whose work ethic aligned with the company’s was not always easy, and being aware that the addition of non-engineering staff would instantly add to overheads made him all the more picky.
Many SMEs are put off expansion for this simple reason, he believes.
“Many SMEs are unsure that this level of investment will yield any sizable return. But hiring an HR manager, for example, has been vital to attracting, recruiting and retaining staff to allow growth and for technical staff to focus on what they do best,” says Byrne, who says that 15 of the 100-strong workforce are employed in business support roles.
Byrne Looby was set up to provide specialist consultancy services for contractors in 1998 (see box) and nearly 80% of the company’s work still comes from contractors.
It has been a successful strategy but, says Byrne, the market for engineering services has been very competitive and even over-serviced by consultants over the past six years.
Developing a sustainable business in this competitive environment is only possible, he says, if the company can demonstrate that it has high levels of engineering expertise in the sectors it works in, and that it really understands the needs of its clients.
The firm’s project portfolio includes detailed design of the triple basement beneath the Shard in London; diaphragm wall design and construction methodology for Crossrail’s Stepney Green shaft; temporary works design for enlarging the Connaught Tunnel for Crossrail (see box); design of the shaft at Deephams sewage treatment works; and 43km of link sewer tunnel design on the strategic tunnel enhancement programmme in Abu Dhabi.
And so, despite the recession, the firm has been able to maintain a steady workload while growing. But, while the practice intends to continue expanding, Byrne says he has no ambition to become a “large” practice.
“As an SME, if we hadn’t started that journey [to grow and diversify] we wouldn’t have survived the recession. But, equally, we don’t want to become a large consultant and we don’t want to be multi-disciplinary. We just see opportunities to grow while staying focused on our core areas of work.”
He adds that the company is still on this journey, and he is aware that, although luck may have something to do with the company’s success, it is also the result of a balance between good market intelligence and gut instinct. “We’ve always tried to be the sort of company which promotes entrepreneurial spirit - and we want to stay that way,” says Byrne.
“But you also have to balance that with the hard facts of economics. I do believe that, without the “go on, let’s have a go” spirit, you could end up in a state of paralysis through analysis - never being able to make a decision and never moving forward.”
Meet John Byrne
John Byrne (interviewed below) and Michael Looby formed consultant Byrne Looby in 1998. Both are geotechnical engineers.
What made you start your own business? “We both previously worked at Arup where we spent a lot of time working for the end client [developers], but saw an opportunity to work as designers for civil engineering contractors to produce packages of work - drawings, specifications risk assessments, bills of quantities - as well as specialist geotechnical design. At the time, we were probably unique in that space and formed strong relationships with contractors.”
What has helped you become successful? “You have to think about what you offer which is different to everyone else. We decided to focus on specific areas of consulting engineering and be experts in those areas.
“We are confident we can add technical value to a project, but what else? Well, we want to build relationships with our clients and understand, from a business perspective, what they want to achieve - and make that our aim too.”
What has allowed you to grow? “Having committed staff with strong technical abilities who are focused on understanding client needs.”