Do you find it difficult to make a profit? Are your expenses devouring your revenues? Even professional service firms such as engineering struggle to make money. The vast majority of expenses for professional services companies are labor related. This is why many companies chose to do one or two things to increase their profits; increase work load, or reduce staff. However, there are many strategies that can produce a similar result.
A typical engineering company usually strives for a profit or 10 to 15% after all expenses including salaries. Margins can be reduced due to a competitive market or a decline in market demand for engineering products and 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 knows there are some expenses they cannot avoid. Such as staff salaries, business licenses, professional licenses, business insurance, professional insurance, office expenses, and on and on the list goes. A good understanding of the company budget can allow for adjustments that will help retain some revenues.
Here is a list highlighting the top five strategies to increase your company’s profit without cutting staff.
Key 1 - Increase service fees - While this may seem counterintuitive in a downturn, a modest increase can make a big difference to your profits. For example, let's say your company charges $1000 for a service that has a 10% profit margin (100). You can increase your profit by 50% by increasing the fee by $50 ($50). 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. Outsourcing is the term for hiring independent contractors or sub-consultants. The only permanent employees are the absolutely necessary. Outsourcing allows the company's to restructure to be able to handle large amounts of new contracts at the right time and to reduce the number to deal with less contracts during tough economic times. 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 has taken a hard line against independent contractors. Independent contractors are independent contractors who are self-employed and can obtain work from multiple 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.
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. Engineers and other professional services firms should not compete on price alone. A good engineer can save a developer thousands if not millions of dollars which will usually far exceed 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. Clients will expect that you make concessions to them in times of difficulty. They may ask for reduced or no fees to continue being your client. It is almost never a good thing to just get work on a project. Find out what industries and services are most profitable and where your company is at break-even. Any less than that will cause your business to close.
4: Call Existing and Past Clients to Get New Contracts. The best source for new work is existing clients or past clients. If you have done a great job for them in the previous, they are more likely to return your services. Even if they have previously contracted with another engineer they might be interested in contracting with you again. They might not be treated the same by the new engineer. Clients may have lost their contact information in some cases. In these instances, clients would be pleased to hear back from you.
Satisfied metal fabrication malaysia clients are the best thing for business. This is the best marketing tool for engineers. 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 existing clients can increase your revenues by either awarding you with new projects or by assisting you in finding new clients.
Your performance may have been so satisfying that they didn't notice that you needed additional work. Clients may know others in the industry who are dissatisfied by their professional designers. Your clients will be your best marketer. Referring clients to you will already be convinced of your company's capabilities and services. Some clients might require multiple engineering firms to assist them. If they really like your performance, they might just give you a larger share of their available jobs. 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. This is why the proposal is so important. It is important to clearly state the services being provided and to clarify any ambiguities. In the proposal, a section should outline what is expected from the client. Before signing an Agreement, ensure that you and the client fully understand each other's expectations. It can cause problems for the customer if they believe you are required to perform a service not specified in the agreement. This could lead to dissatisfaction and make the client unwilling to work with you again. It doesn't really matter if there is good economic news or harsh explicit language in your contract.