Are you finding it difficult to earn a profitable business? Are your expenses devouring your revenues? Companies, including engineering firms and professional service providers, are constantly struggling to make profit. The majority of professional service company 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. 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.
The current market has driven many companies to lower their fees significantly, but is this really the answer. Ever engineering firm knows that there are certain expenses that they can not escape. There are many expenses that must be paid, including staff salaries, business licenses and professional licenses, insurance for business, professional and office expenses, as well professional licensing and business insurance. You can make adjustments to the company budget to keep a certain percentage of the revenue.
Below is a list of the top 5 key strategies to increase your company's profits without cutting staff.
Key 1: Increase Service Fees - This may sound a little counter intuitive right now during a recession, but a small increase can have a significant impact on your profits. Your firm offers a $1000 service with a 10% profit margin ($100). Your profit would rise by 50% if you increased the fee by 5% ($50). The fee increase will not be noticed by your clients but can be very noticeable in your company's Profit And 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. Hiring independent contractors or sub-consultants were possible is also known as out-sourcing. Only those employees who are absolutely essential are permanent. 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.
In recent years the federal government has really cracking down on who is an independent contractor. Independent contractors are in business for themselves and are able to obtain work from numerous sources. This arrangement is not considered independent contractor and will be frowned upon by the government. Talk to your tax advisor about any questions.
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 engineering company in Malaysia your marketing efforts on sectors with low profit margins . The price is not the only thing that should be considered by professional service companies such as engineering firms. 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. 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. Find out what industries and services are most profitable and where your company is at break-even. Anything less can force your company to shut down.
Key 4 - Contact Previous and Existing Clients for New Contracts. This is the best way to find new work. If you have done a great job for them in the previous, they are more likely to return your services. Even if their previous engineer was less than satisfactory, they may choose to contract with your services again. It is possible that the new engineer has not treated them as well. Clients may have lost their contact information in some cases. 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. In order to find new clients you will have to sit aside additional funds to market them, which will further reduce your bottom line. Your existing clients can increase your revenues by either awarding you with new projects or by assisting you in finding new clients.
They might not be aware that you may need to do more work because they are satisfied with your performance. You may be able to refer clients to other professionals in the same field who might also be dissatisfied with your professional designers. Your best marketer will be your clients. Referring clients to you will already be convinced of your company's capabilities and services. In some cases your clients may be so large a firm that they require the services of several engineering firms. You might be offered a greater share of the jobs they have if they are satisfied with your performance. 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. The proposal should contain what the client is to expect. Before signing an Agreement, ensure that you and the client fully understand each other's expectations. 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 doesn't matter whether the economy has been in good times or not.