Managing design and engineering businesses to ensure you are consistently making a profit

One of the main assets of a design or engineering business is the knowledge and skills of its people. Similar to the projects they serve, the development and management of resources becomes increasingly complex as the business grows. It’s often said that project-based businesses become difficult to manage when all decision makers can’t fit around a conference table.

Here are our recommendations to ensure profitable growth by improving the use of resources and gaining tighter control of business finances.

1. Leverage: how is the business structured in terms of the ratio between business directors and other client-facing employees?

In design and engineering businesses in particular, business leaders are often client facing, specifically because it is their talent that is the face of a major project. To manage the spread of billable hours across a team, businesses will often structure with a number of high-performing client facing staff who report to each director. This in turn creates a layer of trusted and skilled employees who can spread the load of the billable hours created by any one client.

2. Utilisation: how do design and engineering businesses maximise billable time while avoiding burnout?

Utilisation can be increased by billing more hours from higher-billed staff, however the ability of people to take on these hours needs to be managed carefully. Design businesses often run into problems when their highest performers work an excess number of hours because those hours are the most profitable for the business. Avoiding burnout for your best performers is critical to business success. It can make more business sense to hire new client-facing staff at a less senior level to take on more billable work in comparison to what could be achieved by top talent working overtime. This strategy is likely to produce larger profits for the business without talent burnout.

3. Fees: should billable hours be determined by the firm or the market?

The reality for design and engineering businesses is that fees are often driven by external factors, such as the competition within the industry and the fees the market will bear. Firms that are providing a premium service can refuse to compete on price on the back of a superior or unique project offering for which clients are willing to pay.

4. Salary levels: can a firm afford market rates for top talent, and if so, should it?

While project-based firms certainly have control over what they pay their employees, businesses should consider the external marketplace and what competing firms are paying for talent. In times of overall market growth, underpaying talent creates a risk that you might lose them to a competitor. Fostering and nurturing creative talent beyond remuneration can also go a long way to promoting staff loyalty and excitement for the job. If businesses can broaden the skills of their staff without stretching resources, they will reap the rewards.

Inefficient use of resources and poorly defined business strategies are two of the biggest problems faced by design and engineering firms. Left unchecked, these issues cause businesses to miss out on increased efficiencies, higher engagement and morale among staff and consistent profitability. Getting business efficiencies, strategies and systems under control will stabilise your business and allow you to focus on what you do best.