Engineering Company - 5 Keys to Improved Revenues and Profits

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. The majority of a professional service company's expenses are labor related. Many companies choose to focus on a few things to increase profits, increase work load or decrease staff. There are many other strategies you can use to achieve the same result.

A typical engineering company aims to achieve a profit between 10 and 15 percent after taking out all expenses, including salaries. These margins can be reduced by a very competitive market or a drop in demand for engineering services.

Although many companies have seen a decrease in their fees because of the current market, this is not necessarily the best option. Every engineering company understands that there are certain costs they cannot avoid. Staff salaries, professional licenses, business and professional insurance, as well as office expenses are just a few of the many costs that engineering firms must pay. It is possible to adjust the company budget in order to keep some of the revenue.

Here's a list with the top 5 strategies that will increase your company’s profits without reducing staff.

1: Increase Service Fees This might seem counterintuitive during a recession but it can have a significant effect on your profits. One example: A service you offer costs $1000 and has a profit margin 10% (100). The fee could be increased by 5% ($50), which would result in a 50% increase in profit ($150). Although your clients won't notice the slight increase in fees, it could be noticeable on your Profit and Loss Statement.

2: The Workload Determines the Company Size Your engineering company should have both permanent staff and independent contractors. The number of independent contractors can vary depending on the workload. It is possible to hire independent contractors and sub-consultants. This is called out-sourcing. The only permanent employees are the absolutely necessary. Outsourcing allows the company to restructure to handle a large number of new contracts when the times are good and then reduce the number of contractors when there are fewer contracts during poor economic conditions. For example, a company might have one to two CAD designers as permanent employees and then an independent pool of CAD operators.

In recent years, the federal government really cracked down on independent contractors. Independent contractors run their own businesses and can get work from many sources. The government will not approve of the arrangement in which an independent contractor has an office within your company. You should discuss any questionable agreement with your tax advisor.

Key 3: Do not Focus on Sectors with Very Small Profit Margins - Although during a tough economy companies may be forced to take on what ever comes along, do not focus your marketing efforts on those sectors that constantly contract with the firm with the cheapest offer. Engineering firms and professional services firms shouldn't compete solely on price. A good engineer will save a developer thousands to even millions of dollar, and that amount will almost always exceed the engineer’s fees. The expense of service fees that are not competitively charged is almost always prohibitive in certain sectors. You don't buy the job. You may be expected to offer more concessions in difficult times. For example, a reduction in fees or a free service. It is almost never a good idea buying a project just to have work. It is important to know where your company breaks even and what services and sectors make the most profit. Anything less will force your business to possibly close.

Keyword 4: Get in touch with previous clients and existing clients to get new contracts. These are the best sources 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. They may be willing to contract with you again, even if they've used another engineer. They may not have been treated as well by the new engineer. In some cases, clients may have lost your contact information. In such cases, they will be delighted to hear from engineering company in Malaysia again.

Satisfied clients are the best thing for business. This is the number one marketing tool for the engineering profession. You can't lose clients to engineering firms. It will cause a loss in revenue immediately. You will need additional funds to market your clients to find new customers. This will further decrease 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 be so pleased with your performance they do not realize that you require 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. Their referrals will have already heard about your company and are ready to recommend you. Some clients might require multiple engineering firms to assist them. They might give you more jobs if they like your performance. Your existing clients can be the best source to find new work.

Key 5: Deliver on your Promises – Clients expect that the engineer will deliver all the services specified in the contract. This is why the proposal is so important. Every effort should be made not to make vague statements. A section of the proposal should also include the expectations for the client. Before signing an Agreement, ensure that you and the client fully understand each other's expectations. 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 matter whether the economy has been in good times or not.

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