Engineering Company - 5 Keys to Improved Revenues and Profits

Do you find it difficult to make a profit? Are your expenses devouring your revenues? Most companies, including professional service firms, like engineering, are always struggling to make a profit. A majority of professional service firms' 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. However, there are many strategies that can produce a similar result.

An engineering company typically strives to make a profit of 10 to 15% after paying all expenses, including salaries. These margins can drop if the market is very competitive or there is a substantial drop in engineering services demand.

Many companies are looking to cut their fees, but this may not be the answer. 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. You can make adjustments to the company budget to keep a certain percentage of the revenue.

Below are five key strategies to increase profits in your company without having to cut 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). Your profit margin would be 50%, if the fee was increased by 5% ($50), or by 50% ($150). The fee increase will not be noticed by your clients but can be very noticeable in your company's Profit And Loss Statement.

Key 2: The workload determines the company size. Your engineering business should include both permanent staff members and independent contractors. The workload will determine the number of independent contractor. Out-sourcing, also known as independent contractors or subconsultants, is also possible. Only those employees who are absolutely essential are permanent. 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. One example would be to have one or two permanent CAD Designers and then a pool independent contractors of CAD Operators.

The federal government has been cracking down on independent contractors in recent years. Independent contractors run their own businesses and can get 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. Discuss any unsavory 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. Pricing should never be the only consideration for professional services like engineering companies. 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 cost of services that are negotiated is often not worth it. Do not pay for the job. Some clients will expect you to make more concessions, such as offering a reduced metal fabrication malaysia fee or free services in order to retain them. 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 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. They will likely return to you if they have done a good job in the past. Even if they have previously contracted with another engineer they might be interested in contracting with you again. It is possible that the new engineer has not treated them as well. Sometimes, clients might have forgotten your contact information. Clients may lose your contact information in these cases.

There is nothing better in business than satisfied clients. This is the foremost marketing tool used in the engineering profession. The loss of clients to other engineering companies results in a immediate decrease in revenue. This can only be recovered by finding new clients. To find new clients, you will need to set aside additional funds for marketing them. This will further lower your bottom line. You can increase your revenue by having existing clients help you find new clients or award you new projects.

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 clients are your best marketer. Referring clients to you will already be convinced of your company's capabilities and services. Sometimes, clients are so large that they need multiple engineering firms. They may offer you a larger percentage of their jobs if you impress them. The best source of new work is always through your existing clients.

5: Keep Your Promises- Clients expect that an engineer will perform all services described in the contract. This is why a proposal is so important. Every effort should be made not to make vague statements. Also a section in the proposal should include what is expected of 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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