- Like
- Digg
- Del
- Tumblr
- VKontakte
- Buffer
- Love This
- Odnoklassniki
- Meneame
- Blogger
- Amazon
- Yahoo Mail
- Gmail
- AOL
- Newsvine
- HackerNews
- Evernote
- MySpace
- Mail.ru
- Viadeo
- Line
- Comments
- Yummly
- SMS
- Viber
- Telegram
- Subscribe
- Skype
- Facebook Messenger
- Kakao
- LiveJournal
- Yammer
- Edgar
- Fintel
- Mix
- Instapaper
- Copy Link
Your business’s profit margin plays a vital role in the success and the life-span of the company. It indicates how well expenses are managed and gives an overview of the company’s overall performance in its market. This means that the higher the profit margin, the more investments the company is likely to attract and the higher the profits made, which would, in turn, lead to the success of your business. So, how can you increase your business’s profit margin? Here are a few strategic ways to do just that!
1. Increase your prices
Although this may sound like a way to make less money, increasing your prices is an excellent way of minimizing costs and maximizing your profit margins. Factors such as your business’s plan of growth and inflation may cause an increase in your overall expenses. By increasing your prices, you can cover these expenses and make a profit, increasing your profit margin. However, you should do this cautiously as a drastic increase may cause a decline in sales, which may increase your profit margin but reduce your profits. A slight increase in your prices would not deter your customers.
2. Take advantage of your loyal customers
The good thing about your existing customers is that they spread the word about your company (making them a relatively cheap marketing strategy) while spending more on the goods and services your company offers. In addition to this, return customers are also less expensive to keep as you do not need to spend on marketing strategies to retain them. All these help maximize your company’s profit margins. However, you can create a win-win situation for your business and customers by introducing loyalty programs. Giving your customers benefits such as discounts, cashback, and various rewards give them affordable options and gives your business a steady means of income, which in effect also maximizes your profit margin.
3. Let go of unprofitable customers
The truth is, just as you have loyal customers that help your business grow and achieve success, there are also some bad apples in your customer base you need to be wary of. These include customers who continuously ask for unreasonable prices or hurt your business with unproductive and unrealistic complaints. Such customers, unfortunately, need to be “fired.” Unprofitable customers add to the expenses that the company incurs as extra time and money is used on them. Although letting go of these customers may decrease your customer base, the benefits of doing so, in the long run, make it worthwhile.
4. Go back to the drawing board
If your profit margins are relatively low, it is time to go back to the drawing board to consider why this is so. Is it an issue of discounts? Are you spending too much money on an area you can cut back on? An efficient and strategic way to increase your profit margin is to assess and analyze the current state of the business. Doing this would help you easily identify the gaps and problems within your business that seem to cause the decline in your profit margins. Going through your expense reports, personnel reviews, budgets, fx charts, and other reports would also help you establish a more precise and more accurate gross profit margin.
5. Revise your terms with suppliers
Your suppliers are both a blessing and, to some extent, a burden to your business. Suppliers make it easier for you to gain the necessary resources for your business to operate at a high level of efficiency and productivity. However, if the costs of doing business with your supplier are relatively high, this would negatively affect your profit margin. To ensure that this does not happen, you can revise the existing terms between you and your supplier. For example, you can choose alternative delivery options that would cost less, or you can combine orders to one shipment to reduce the charges associated with making a multiple number of orders at separate times.
6. Waste less and save more
What’s a better way to save money than avoid waste? Materials such as paper, printing ink, and other ancillary products that your business uses can go a long way in producing waste in your business. How so? Well, these materials usually tend to suck your business out of money that could be used to fund its growth goals or start up a new and exciting project. To practice wasting less and saving more, you should carefully consider areas where more cost-effective alternatives can be used. For example, the cost of paper can be saved by investing in cloud storage solutions such as Google Drive. This way, all documents are backed up electronically, giving you the chance to save more instead of spending money on paper and a manual filing system that could lead to more costs eventually.
7. Cultivate an innovative culture
The thing about your profit margin is that it looks at the ratio between your expenses and your profits. The healthier this ratio is, with your earnings carrying a larger hold, the higher profit margins would be. This also means that your business would need to find innovative ways of keeping the margin as healthy as possible. In being strategically creative, you can find solutions to the problems your customers face. An example of a company that has significantly benefited from being strategically innovative is Netflix. They identified the need of many to stream movies rather than to hire rentals. Over a number of years, they have satisfied their clients’ needs through continuous upgrades that their clients truly enjoy. This could be the case for your business too! Adopt an innovation culture to explore new ways to make profits for your business.
8. Start small
Increasing your profit margin can be overwhelming, and you may be so focused on seeing a change that you may lose track of all the little steps you need to take to reach this goal. Instead of trying to make a large and significant margin increase, you should narrow your focus by seeking to achieve gradual growth. By focusing on gradually increasing your profit margin, you can keep track of progress efficiently, quickly identify problem areas and monitor the overall performance of the business.
- Like
- Digg
- Del
- Tumblr
- VKontakte
- Buffer
- Love This
- Odnoklassniki
- Meneame
- Blogger
- Amazon
- Yahoo Mail
- Gmail
- AOL
- Newsvine
- HackerNews
- Evernote
- MySpace
- Mail.ru
- Viadeo
- Line
- Comments
- Yummly
- SMS
- Viber
- Telegram
- Subscribe
- Skype
- Facebook Messenger
- Kakao
- LiveJournal
- Yammer
- Edgar
- Fintel
- Mix
- Instapaper
- Copy Link