6 Keys To Increase Engineering Firm Profits

Are you finding it hard to earn a profit? Are your expenses devouring your revenues? Many companies, including professional service firms, like engineering, are struggling to make a good profit. The majority of a professional service company’s expenses 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. But there are many other strategies that can have a similar effect. 

A typical engineering company usually strives for a profit of 10 to 20% after all expenses including salaries. A very competitive market or a significant drop in the market demand for engineering services can drive these margins even lower. 

In tighter markets many companies lower their fees significantly, but is this really the answer? Every engineering firm knows that there are certain expenses that they cannot escape. Such as staff salaries, business licenses, professional licenses, business insurance, professional insurance, office expenses, and on and on the list goes. With a good handle on the company budget various adjustments can be done to retain a portion of the revenues. 

Below is a list of the top 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. As an example, your firm has a service which charges $1000 with a profit margin of 10% ($100). If you increase the fee by 5% ($50), your profit would increase by 50% ($150). This small increase in fees will most likely not even be noticeable to your clients, but it can be very noticeable on your company’s Profit and Loss Statement. 

Key 2: Workload determines the Company Size – Your engineering business should be set-up with permanent staff level and independent contractors. The number of independent contractors can vary depending on the workload. Hiring independent contractors or sub-consultants where possible is also known as out-sourcing. The only permanent employees are those that are 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. 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 cracked down on who an independent contractor actually is. Independent contractors are in business for themselves and are able to obtain work from numerous sources. Having an independent contractor set-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. 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 whatever comes along, do not focus your marketing efforts on those sectors that constantly contract with the firm with the cheapest offer. Professional services companies like engineering firms should never 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. Sectors that haggle the service fees are usually not worth the expense. In essence do not buy the job. There are those clients that will expect that when 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 idea to buy a project just to have work. Know where your company’s break even point is, and what sectors and services make the most profit. Anything less will force your business to possibly close. 

Key 4: Contact Existing and Previous Clients for New Contracts – The best source of new work is from existing or previous clients. If you did a good job for them in the past, they will be more than willing to use your services again. Even if they have gone with another engineer, they may want to contract with you again. The new engineer may have not treated them as well. In some cases, clients may have lost your contact information. In this instance they would be glad to hear from you again. 

There is nothing better in business than satisfied clients. This is the foremost marketing tool used in the engineering profession. Losing clients to other engineering firms, means an immediate loss in revenues and can only be regained by finding new clients. In order to find new clients you will have to set aside additional funds to market to 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 may be so satisfied with your performance that they may not have noticed that you need additional work. Your clients know other people in the same industry who may be also dissatisfied with their professional designers. Your clients will be your best marketer. When their referrals call you they are already sold on your firm’s abilities and services. In some cases your clients may be so large a firm that they require the services of several engineering firms. If they really like your performance, they might just give you a larger share of their available jobs. The best source of new work is always through your existing clients. 

Key 5:  Update Your Website –  It’s vital for a new civil engineering firm to have a great website. This means plenty of content, dynamic graphics, and a focus on how you can help clients. After this, tell them why your business in particular is the one to choose for their requirements.   

If you’re not a civil engineer by day and a web-designing genius by night, you may want to consider outsourcing your website updates to a marketing agency and will be able to support all your marketing activities. Or you could just employ a graphic designer or web developer if you want to do much of the work yourself. Yes, this is an added expense, but it’s worth it: when potential clients visit your site, they’ll find the right messages backed by a professional design. Civil engineers are trusted with important tasks that affect countless people; clients want to know with certainty that they can put their faith in a company. 

While the web design is being handled by a pro, focus on content. Include detailed information on company founders, including education and level of experience. Use high-resolution photos of completed projects or other renderings to show off your accomplishments and explain how you’ll be of benefit to them, and why your company is the right choice over a competitor. Remember, clients are buying you, so it’s all about ‘trust’. 

Think of a website as a shopfront or exhibition of your business. You would never leave a shop’s windows unwashed, with peeling paint on the door. Treat a company website with that same level of respect and dedication if you want to attract business. 

Professionally designed and built, with good quality and regularly updated content, your website should soon scoot to the top of your chosen specialism Search Engine results pages. 

Key 6: Deliver on Your Promises – Clients expect that the engineer will provide all of the services as stated 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 in the proposal should include what is expected of the client. Before signing the Agreement make sure that both you and the client understand what is expected of both parties. If the customer believes you are to provide a service that is not in the contract, may cause serious problems later, and may cause the client to be disgruntled and not willing to do any more work with you. Whether the economy is in good times or toughexplicit language in the contract is extremely important. 

Take some time to re-review all of you contracts and update any areas where conflicts could arise. 

Joe Sturtevant
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