Are you finding it difficult to earn a profit? The expenses are eating up your revenue? Most businesses, including professional service firms, such as engineering, are increasingly struggling to make a profit. Most of the costs of a professional service company is its workforce. This is why many companies have chosen to do one or two things to increase their profits; increase the workload, or reduce staff. But there are many other strategies that can have a similar effect.
A typical usually engineering company is committed for a profit, or 10-15% after all expenses including salaries. A very competitive market or a significant drop in market demand for engineering services can drive these margins even lower.
The current market has led many companies to lower their taxes significantly, but it is really the answer. Never engineering company knows that there are some expenses that they can not escape. Such as staff salaries, business licenses, professional licenses, insurance companies, professional insurance, office expenses, and so the list goes on. With a good handle on the budget society various adjustments can be made to retain a portion of the revenue.
Here is a list of the top 5 key strategies to increase profits of your company without cutting staff.
key 1: increase the service fees - This may seem a bit 'counter intuitive time during a recession, but a small increase can have a significant impact on your bottom line. As an example, your company has a service that charges $ 1000 with a profit margin of 10% ($ 100). If you increase the 5% tax ($ 50), the profit would increase by 50% ($ 150). This small tax increase will most likely not even be obvious to your customers, but it can be very clear on the income statement of your company.
Key 2: workload determines the size of the firm - Your engineering firm should be sit-ups with permanent staff level and independent entrepreneurs. The number of independent contractors may vary depending on the workload. Hiring of independent contractors or sub-consultants were possible is also known as out-sourcing. The only full-time employees are those that are absolutely necessary. Outsourcing allows the company to restructure to manage a large number of new contracts when times are good and therefore reduce the number of entrepreneurs, when there are fewer contracts during poor economic conditions. One example is to have one or two CAD designers as permanent employees and then a pool of CAD operators who 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 get a job from numerous sources. Having an independent contractor, sit-up an office within your company and one contract with your company is probably not an independent contractor, and the frown serious government on this provision. You should discuss any controversial agreement with your tax advisor.
Key 3: do not focus on sectors with very small profit margins - Although during a strong economy companies may be forced to take what ever comes, do not focus your efforts marketing of those sectors that constantly contract with the company with the best offer. professional services firms such as engineering studies should never compete on price alone. A good engineer can save a developer thousands if not millions of dollars that are usually far outweigh the engineer's fees. The sectors that Haggles service fees are usually not worth the expense. Basically do not buy the work. There are customers who expect that since the times are rough you should provide even more concessions; free taxes or drastically reduced to keep them as a customer. It 's almost never a good idea to buy a project just to have a job. Know were break-even point of your business, and what areas and services make the maximum profit. Nothing less will force your business as close as possible.
key 4: existing and previous customers contact for new contracts - the best source of new business is from existing or previous clients. If you have done a good job for them in the past, they will be more than willing to use the new services. Even if they went with another engineer, you may decide to contract with you again. The new engineer can not have them treated so. In some cases, customers may have lost the contact information. In this case they would be happy to hear from you again.
There is nothing better in the world of business from satisfied customers. This is the most important marketing tool used in the engineering profession. Losing customers to other engineering companies, means an immediate loss in revenue and can be recovered only by finding new customers. In order to find new customers will have to sit aside additional funds to commercialize them, which will further reduce the bottom line. Your existing customers can increase revenues from its assignment of new projects or to assist you in finding new customers.
They may be so pleased with the performance that they may not have noticed that you need extra work. Your customers know other people in the same industry who may also dissatisfied with their professional designers. Your customers will be your best marketing. When you call their references are already sold in capacity and services of your company. In some cases, clients may be so great an undertaking which require the services of several engineering companies. If they really like the performance, they could only give a greater share of their available jobs. The best source of new job is always through existing customers.
key 5: deliver on your promises - Customers expect the service technician will provide all services as indicated 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. Also a section of the proposal should include what is expected of the client. Before signing the agreement to make sure that both you and the client to understand what is expected of both parties. If the customer thinks you are going to provide a service that is not in the contract, it can cause serious problems later on, and can cause the client to be unhappy and not willing to do more work with you. If the economy is in good times or tough explicit language in the contract it is extremely important.
Most technicians have excellent technical skills, but not necessarily the same level of competence in the management. And 'the technical responsibility for developing these management skills through continuing education. This training can be achieved through community colleges, universities, vocational training programs, professional organizations and online training courses. In most states these continuing education courses qualify for continuing education units (CEU) or professional development hours (PDH).
In Part 2 we will discuss five strategies that you can implement to increase revenues and profits. Managers are often called upon to make difficult decisions that can affect the size of the support staff, have a list of other strategies that do not require cutting staff maybe the difference between a good and a bad manager.
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