A lot of business owners assume the only way to make more money is by significantly increasing sales. In a lot of cases this is a difficult task, especially for smaller businesses. Another way you can make yourself some more money is by increasing your profit margins, which is how many businesses make more money when they just aren’t making enough in sales. Here are a few ways to increase your profit margins.
Work out your gross profit margin
You need to make sure that the gross profit margin you work out is up to date, not by using estimated inventory amounts or the figure in your previous annual financials. Consult your accountant for some benchmark figures, and compare to the industry average.
Examine your profit margins
Your overall profit margin may well be deceiving. To make sure you have an accurate figure you will need to find out the gross profit margin of all your products and services. This will help you to work out what items are low-margin or are responsible for losses. With this knowledge you can focus on what is working for you, and stop selling what isn’t.
Price increase
A price increase is something business owners are very hesitant and worried about doing, often more worried than the customer is about it. With outgoings increasing all the time, why shouldn’t you up your prices a bit? A price increase could lose you a few customers, but these more than likely won’t be your best customers. So by increasing your prices, losing a small percentage of your customers will leave you no worse off.
Review your prices
Are you charging all of your customers the same price? You will find that larger companies or the government will be less price sensitive, because they have the backing and resources to pay whatever your price is. You also need to consider supplier’s prices going up, and if your own prices match the increase.
Avoid discounting
Discounting seems like a good option for businesses not making enough sales, but in reality this is what kills a lot of business’s margins. It’s often the case that even when a business drops their prices, they still struggle to increase sales, which just leaves them at a stand still. Discounting can often make you have to work twice as hard than if you had stuck to your original price.
Keep an eye on supplier bills
It’s always a good idea to check supplier bills yourself. You can then get a feel for them, and be more likely to notice when something isn’t right. By doing so you will probably soon realise that you have been overcharged for goods or services, something that would have gone unnoticed before.
Use an inventory system
Having an inventory system in place is ideal for keeping you more organised and saves you the hassle of handling it all yourself. This means you’ll have more of a handle on what products are selling best, keeping an eye on theft or losses and also being able to know exactly how much each product costs. Saving you the trouble of going through piles of invoices to get the information yourself. These systems are effective and make life easier for you.
By increasing your profit margins you’re making the most out of what you are able to sell right now. If you are unable to increase the amount of sales, then this is a way to make sure you are still increasing profit, as well as making changes to set you up better for the future.
You need to make sure that the gross profit margin you work out is up to date, not by using estimated inventory amounts or the figure in your previous annual financials. Consult your accountant for some benchmark figures, and compare to the industry average.
Examine your profit margins
Your overall profit margin may well be deceiving. To make sure you have an accurate figure you will need to find out the gross profit margin of all your products and services. This will help you to work out what items are low-margin or are responsible for losses. With this knowledge you can focus on what is working for you, and stop selling what isn’t.
Price increase
A price increase is something business owners are very hesitant and worried about doing, often more worried than the customer is about it. With outgoings increasing all the time, why shouldn’t you up your prices a bit? A price increase could lose you a few customers, but these more than likely won’t be your best customers. So by increasing your prices, losing a small percentage of your customers will leave you no worse off.
Review your prices
Are you charging all of your customers the same price? You will find that larger companies or the government will be less price sensitive, because they have the backing and resources to pay whatever your price is. You also need to consider supplier’s prices going up, and if your own prices match the increase.
Avoid discounting
Discounting seems like a good option for businesses not making enough sales, but in reality this is what kills a lot of business’s margins. It’s often the case that even when a business drops their prices, they still struggle to increase sales, which just leaves them at a stand still. Discounting can often make you have to work twice as hard than if you had stuck to your original price.
Keep an eye on supplier bills
It’s always a good idea to check supplier bills yourself. You can then get a feel for them, and be more likely to notice when something isn’t right. By doing so you will probably soon realise that you have been overcharged for goods or services, something that would have gone unnoticed before.
Use an inventory system
Having an inventory system in place is ideal for keeping you more organised and saves you the hassle of handling it all yourself. This means you’ll have more of a handle on what products are selling best, keeping an eye on theft or losses and also being able to know exactly how much each product costs. Saving you the trouble of going through piles of invoices to get the information yourself. These systems are effective and make life easier for you.
By increasing your profit margins you’re making the most out of what you are able to sell right now. If you are unable to increase the amount of sales, then this is a way to make sure you are still increasing profit, as well as making changes to set you up better for the future.