How to increase profit margins
Increasing profit margins and generating good cashflow is always going to be the primary aim of any business. The ability to increase sales is essential to growing your business and there are always tweaks and measures you can explore to swell your bottom line.
Let’s explore some simple ways to increase the net profit of your products and services.
1) Increase prices
Shocking, we know, but selective and careful price raising is your go-to measure. When increasing prices, and thus profit margins, don’t go and add a percentage to all your offerings. Instead, run some reports from your accounting software on your most popular items and then selectively nudge them up. Popular will remain popular, so don’t be afraid of a small price increase.
2) Get focused
Many businesses try and become everything to everyone, this creates confusion and will have you spending time, resources and headspace on minor stock.
If things aren’t moving or they represent a cluttered stock list, risk being out of stock, or otherwise detract from your core offerings, eliminate them.
Concentrate on items with high turnover and high profit margins, even if this means jettisoning other offerings.
3) Elevate perceived value
Value is not always a measure of benefit over price (as it normally would be). Oftentimes, you can influence the perceived value of your product or service through pursuits like branding.
Sharpen your brand, professionalise your website and present your offerings as ‘premium’. The psychology of perception is a powerful ally when it comes to increasing profits.
4) Work on increasing total sales per order
What can you do to increase the shopping basket of your customers? If you already have a client or customer, concentrate on methods to achieve upselling and the purchase of multiple items.
To boost your profit per customer, offer discounts and suggest ‘like’ offerings. You already have a customer over the line, which is the hard part, adding one more sale to an existing customer is always easier (and cheaper) than gaining a new customer.
5) Stop checkout cold feet
If you’re running an ecommerce store, you need to counter the massive drop off you’ll receive at the checkout. Consumer hesitance is a major barrier to increasing sales, but you can certainly employ tactics to combat this.
For starters, make sure you have a guest checkout option with minimal fields, clear security credentials, professional layout and visible customer reviews. Inspiring confidence at the checkout is key, alongside a clear and easy process with the least number of steps to a sale as possible.
6) Streamline your processes
Are your business processes really streamlined? Really? Technology moves at an incredible pace and staying abreast of modern solutions to old problems is key. There is undoubtedly a new and low-cost app or solution to further eliminate wasted time and inefficient workflows.
Think about more efficient ways of processing sales, communicating with customers, doing your admin and working with employees. There is undoubtedly a better, more automated and less cluttered way of working out there. See if you can find it.
7) Business advisors
If you want increased cashflow, find out how to lower your overheads and ways to negotiate compliance, get thee to an advisor.
Business advisors and bookkeepers exist for a reason, they’ll squeeze the most out your taxes, look at ways to rejig your business model and take a critical eye to your business’ profit and loss.
8) Supplier renegotiation
Are you getting the best deal here? Likely not. No matter how comfortable you are with your current suppliers, tactfully interrogate whether you can get a better deal to increase your bottom line.
You’ll also need to search far and wide for competitors looking to score new business.
Don’t be afraid to turn the screws and see what kind of savings you can really extract form every supplier you have to increase cashflow and direct profits. Make this a regular part of your annual business review.