Strategy for Business
Profit Margin is the number one goal in business and how you reach your future goals is a product of Great Business systems and processes
The trick is, now that you have made the sale and given the promise, meeting the expectations you have set becomes a daunting task.
Unless you have good business systems in place, delivery to promise becomes a nightmare and the downfall of many businesses.
Roofdraw Solutions will help in delivering some critical information and correspondence to the right people at the right time, to make the customer promise a reality.
Here are seven sure-fire ways to increase your profit margins and improve the financial performance of your business.
1. Analyze the profit margin of each product
Not all products are created equal – including their profitability. If you have a lot of low-margin items stocked in your warehouse, ask yourself how much value they’re delivering. Could you fill that same space with high-profit items? Set up business reporting that shows not just your item revenue, but the actual profit.
2. Make informed pricing decisions
Understanding the cost of goods sold (COGS) can help you make informed pricing decisions. COGS determines the expenses you’ll have each time you make a sale and can be subtracted from the revenue to reveal your gross profit. Understanding this metric helps you identify your profitable items and understand your bottom line. If you don’t have a clear view of all the costs involved to calculate your COGS, it may be time to consider business management software that can provide real-time business data and put crucial financial information at your fingertips.
3. Consider standard price increases
A lot of businesses are hesitant to increase pricing due to competition. The truth, however, is that people expect prices to rise over time. If you’re providing an excellent customer experience and service that keeps clients coming back, standard price increases are reasonable.
4. Discount without freezing
You might think discounting is the quickest way to reduce your profit margin, but not if you do it right. For example, providing a loyalty discount can be an effective tactic to keep more customers coming back. Bulk-buy discounts can also encourage your customers to increase their transaction size. What’s important is knowing how much room there is to move on item profit margins.
5. Negotiate with suppliers
If you’ve identified your most profitable items already, consider whether you can buy them in larger quantities. Then, ask your suppliers for quantity discounts.
6. Be diligent with item receipting
One of the hidden costs for many businesses is the cost of incorrect or incomplete orders received from suppliers. Stock errors can cost your business time and effort to resolve, and potentially cost you customers when you can’t supply items that should be in stock. Being diligent about the receipting process can make sure issues with receipting are identified straight away and don’t end up eating into profits.
7. Use automation to reduce costs further
Cutting down on your team’s repetitive, manual tasks can free up significant time. It’s one more way to reduce your operating costs and empower your team to focus on more profitable activities.
These seven tactics are just the tip of the iceberg. The right business management tools can help you monitor, manage, and improve your profit margins. With a better handle on what affects your profitability, you’ll have the right foundation to grow your business even faster.