Are you finding it hard to earn a profit? Are your expenses devouring your revenues? Most companies, including professional service firms, like engineering, are always struggling to make a profit. A majority of professional service firms' expenses are labor-related. This is why so many companies decide to do just one or two things to increase profit, work load, and/or reduce staff. There are many other strategies you can use to achieve the same result.
A typical engineering firm strives to achieve a profit of 10% to 15% after deducting all costs, salaries included. Margins can be reduced due to a competitive market or a decline in market demand for engineering products and services.
Many companies are looking to cut their fees, but this may not be the answer. Every engineering firm knows that certain expenses cannot be avoided. These expenses include staff salaries and professional licenses. It is possible to adjust the company budget in order to keep some of the revenue.
Below are five key strategies to increase profits in your company without having to cut staff.
Key 1. Increase Service Fees. This may sound counterintuitive right now in a recession. However, a small increase can have significant impacts on your profits. Your firm offers a $1000 service with a 10% profit margin ($100). If you increase the fee by 5% ($50), your profit would increase by 50% ($150). While your clients may not notice an increase in fees, it can make a big difference on your company's Profit & Loss Statement.
2: The Workload Determines the Company Size Your engineering company should have both permanent staff and independent contractors. Depending on the job, the number or sub-consultants that you need can vary. It's also possible to outsource. The only permanent employees that are required are the ones that are absolutely vital. Outsourcing allows the company flexibility to manage a large number new contracts, and reduce the number when it is difficult to find contractors. An example is to have one or two CAD Designers as permanent employees and then a pool of CAD Operators that are independent contractors.
The federal government has been cracking down on independent contractors in recent years. Independent contractors can work with many sources and are in business for their own benefit. The government will not approve of the arrangement in which an independent contractor has an office within your company. Any questionable agreement should be discussed with your tax advisor.
No Focus on Sektors with Very Low Profit Margins. While it is possible for companies to take on more work in times of economic hardship, your marketing efforts should not be focused on those industries that contract with the most expensive firm. Engineering firms and professional services firms shouldn't compete solely on price. A skilled engineer can help developers save thousands, if perhaps millions of dollars. The engineer's fees will almost always be more than the engineer's. The expense of service fees that are not competitively charged is almost always prohibitive in certain sectors. Don't pay the service fees. Some clients will expect you to make more concessions, such as offering a reduced fee or free services in order to retain them. It is almost never a good decision to purchase a project for the sake of getting work. You should know what your breakeven point is for your company and which sectors or services generate the highest profit. Anything less will force your business to possibly close.
4: Call Existing and Past Clients to Get New Contracts. The best source for new work is existing clients or past clients. If they were satisfied with your work in the past, they may be willing to hire you again. Even if their previous engineer was less than satisfactory, they may choose to contract with your services again. They might not be treated the same by the new engineer. Sometimes, clients might have forgotten your contact information. Clients may lose your contact information in these cases.
Client satisfaction is the best marketing tool in business. This is the best marketing tool for engineers. The loss of clients to other engineering companies results in a immediate decrease in revenue. This can only be recovered by finding new clients. Finding new clients will require you to invest additional funds in marketing them. This will reduce your bottom line. You can increase your revenue by having existing clients help you find new clients or award engineering company in Malaysia you new projects.
Your performance may have been so satisfying that they didn't notice that you needed additional work. Your clients may know others who work in the same industry and are also unhappy with their professional designer. Your best marketer is your clients. Clients are your best marketer. Sometimes, clients are so large that they need multiple engineering firms. If they feel you are good at what they do, they may give you a bigger share of their jobs. Your existing clients are always the best source of new work.
5: Keep Your Promises- Clients expect that an engineer will perform all services described in the contract. This is why the proposal is so important. The services to be provided should be as explicit as possible, and every attempt should be made to restate any vague language. A proposal section should clearly state what the client can expect. Before you sign the Agreement, make sure both the client and you understand what each other expect. You may be accused of providing a service the customer does not agree to. This may lead to problems later on and can make the client unhappy and unwilling to do more work. It does not matter whether the economy is doing well.