Increase Your Profit, Not Your Prices In The A&E Sector
Growing your company relies on your cashflow and your profits - find out how to improve both with Enterprise Resource Planning.
Every business faces one common challenge – how to increase profit margins so that they have the cash available to grow. In many industries, the simplest answer would be to raise prices, but in the cutthroat world of architecture and engineering, such a move could price your business out of the market.
This leaves one other option – creating operational efficiencies that equate to cash savings. Your business will need tools - such as Enterprise Resource Planning - and frameworks to better manage each project, along with your organisation in general. Here are some key issues you need to consider that will help you to increase efficiency and profit margins.
Resource utilisation metrics
One of the biggest drains on profitability is underutilised resources. Wherever you have employees or other assets that are not used to maximum potential, you are effectively reducing project margins.
The key is to understand:
- What resources you have available
- The current utilisation rate for each resource
- The historical utilisation rate for each resource
Using this information, you can reassign resources to realise maximum profit from each. You will also be able to better forecast future resourcing needs.
Target the most likely prospects
Over 61% of businesses win less than half of the projects they pitch, meaning that for the majority of organisations, half of all time and effort spent preparing pitches is wasted money.
Your business needs to identify the projects which you are most likely to win. By analysing past pitches and how you managed to win the deals, you can then apply those observations to future tenders:
- What has worked in the past?
- What has failed in the past?
- Is there a particular sector or project type that has been particularly profitable?
Improve budget accuracy
Each project you undertake will have an operational budget, designed to cover staffing and expenses. The better you understand the cost of a project, the more accurate you can make future bids and pitches. As well as helping deliver pinpoint costings for your clients, accurate budgets help your business forecast improved profit margins.
Cutting costs to boost profits
There are several ways to cut costs and boost profits without raising prices, but most rely on having a project-based Enterprise Resource Planning solution to assist in the planning and visibility that is required to allow you to focus on:
- Measuring resource utilisation
- Reassigning resources to ensure maximum use
- Refining your pitch process to target only the most likely prospects
- Improving your budgeting processes to better forecast cash flow