Are you struggling to make a profit in your business? Are your expenses devouring your revenues? Most companies, including professional service firms, like engineering, are always struggling to make a profit. Most professional service companies' expenses are related to labor. This is why so many companies decide to do just one or two things to increase profit, work load, and/or reduce staff. But there are many other strategies that can have a similar effect.
A typical engineering company strives for a profit of between 10 and 15% after expenses include salaries. Margins can be reduced due to a competitive market or a decline in market demand for engineering products and services.
Many companies have reduced their fees in response to the current market. But is this really the right solution? Ever engineering firm knows that there are certain expenses that they can not escape. This includes staff salaries, professional licenses for employees, business insurance, professional liability insurance, and office expenses. You can make adjustments to the company budget to keep a certain percentage of the revenue.
Here is a list highlighting the top five strategies to increase your company’s profit without cutting 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. As an example, your firm has a service which charges $1000 with a profit margin of 10% ($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.
Key2: The workload determines company size. - An engineering firm should have both permanent staff as well as independent contractors. Dependent on the amount of work, the number and type of independent contractors needed can vary. Out-sourcing, also known as independent contractors or subconsultants, is also possible. The only permanent employees are those that are absolutely necessary. Outsourcing allows the company the flexibility to restructure and handle large numbers of new contracts in good times, while reducing the number of contractors during difficult economic times. As an example, one or two CAD Developers could be hired as permanent employees. Then there would be a pool of independent contractors who can assemble CAD Operators.
In recent decades, the federal government has made it very clear who is an independent contractor. Independent contractors operate independently and are able obtain work from many sources. Having an independent contractor sit-up an office within your business and only contract with your firm is probably not an independent contractor, and the government will seriously frown on this arrangement. Any questionable agreement should be discussed with your tax advisor.
3: Don't Concentrate on Sectors With Very Small Profit Margins . During a hard economy companies may have to accept whatever is offered. However, you shouldn't be focusing your marketing efforts on sectors with low profit margins . Pricing should never be the only consideration for professional services like engineering companies. An engineer who is a good one can save developers thousands, if not even millions of dollars. This will often far outweigh the engineer's fees. It is usually not worth it to pay for service fees in sectors that negotiate. Don't pay the service fees. There are those clients that will expect that since times are rough you should provide even more concessions; free or drastically reduced fees to keep them as a client. It is almost never a good decision to purchase a project for the sake of getting work. Determine your company's break-even point and the sectors and services that make the biggest profit. Anything less will force your business to possibly close.
Key 4: Contact Past and Existing Clients - This is the best source of new work. If you did a good job for them in the past, they will be more than willing to use your services again. Even if they have previously contracted with another engineer they might be interested in contracting with you again. They may not have been treated as well by the new engineer. In some cases, clients may have lost your contact information. In these instances, clients would be pleased to hear back from you.
Nothing is better than happy clients. This is the foremost marketing tool used in the engineering profession. In order to recover lost revenues, you must find new clients. Finding new clients will require you to invest additional funds in marketing them. This will reduce your bottom line. Your current clients can help increase your revenue by either assisting you with finding new clients or by awarding you new projects.
They might not be aware that you may need to do more work because they are satisfied with your performance. Clients may know others in the industry who are dissatisfied by their professional designers. Your clients will be your best marketer. When their referrals call you they are already sold on your firm's abilities and services. In some cases your clients may be so large a firm that they require the services of several engineering firms. They may offer you a larger percentage of their jobs if you impress them. Your existing clients are the best source for new work.
Key 5 - Deliver on Your Promises Clients expect the engineer to provide the services stated in the contract. It is important to have a proposal. The services to be provided should be as explicit as possible, and every attempt should be made to restate any vague language. A section of the proposal should also include the expectations for the client. Before you sign the Agreement, make engineering company in Malaysia sure both the client and you understand what each other expect. A customer who believes that you are obliged to provide a certain service is likely to cause major problems and cause client dissatisfaction. It doesn't really matter if there is good economic news or harsh explicit language in your contract.