Profit Margin: Profit margins can be impacted almost immediately with the right strategy. If a business negotiates a blanket order with a 5% decrease in their cost of goods from their vendor, it can go immediately to the bottom line. A 5% increase in prices will also increase profits as soon as it is implemented. Many businesses are scared to increase prices and yet with increasing costs, their profits have been slowly eroded away. The New Year is the perfect time to align prices with the value you provide. Eliminating habitual discounting in the sales process can also have a major impact. People are often very surprised when I show then the true cost of discounting and demonstrate how much additional turnover then need to generate simply to cover the cost of the discount.
Here are some strategies that will help to improve your profit margins:
- Increase your prices
- Move your worst customer on – create room for more “best” customers
- Provide team training to improve value
- Undertake a productivity review
- Challenge your team to reduce overheads by, say, 10%
Overall the profit margin often offers the fastest way to bottom line impact.