If the recent recession has taught us anything, it’s that selling as much as possible, to as many customers as possible, is not a sustainable profit. What really increases a company’s profit margin is focusing on their best customers, products, and services as well as meeting profit targets and building a strong-steady customer base.
So, What is the Right Strategy?
What works well for one business, won’t necessarily work for another.
While ultimately only you know your business’s strengths and weaknesses, I have five bold suggestions to help you increase your profit margin. You choose which ones will work for you.
- Give Your Customers the Axe – Not all of them, of course; but work towards cutting those customers that provide the lowest amounts of profitability. Doing so frees up your resources to seek work that is much more profitable.
- Make Money Doing Nothing – Yes, it’s possible! License your intellectual property to other companies, so that you’re collecting extra monies, without doing extra work. Genius, right? Collecting those monthly checks is a warm welcome to your mailbox!
- Export – Have you looked at your profitable sales growth abroad? Take advantage of the North American Free Trade Agreement! Visit industry trade shows in other countries, (mini-vaca, anyone?) they could lead to potential distribution partners.
- Increase Your Prices – Sounds a bit crazy, but hear us out. Overhead is increasing all the time and most often, we business owners are more worried about our customers than our prices. Increasing prices may lose a customer or two, initially, but if your profit margin is say, 50-percent, increasing your prices by even just 10-percent means you can stand to lose 17-percent of your customer base and still be no worse off! Don’t think of it as losing customers as much as gaining more qualified customers. “Those that matter won’t mind and those that mind don’t matter”!
- Keep a Close Watch on Supplier Bills – This is something you, as the business owner, need to personally check, and check often. It’s not a huge surprise to find you’ve been overcharged for things you haven’t received or have a discrepancy with inaccurate pricing. Stay on top of those mishaps, because eventually, a minor oversight can turn into an expensive “mistake”.
Changing Your Focus!
Increasing your profit margin is about making the most out of what you sell, right now. Unfortunately, there is no magic cure. Improving margins will require major strategic changes for your business, but those changes are well worth it. Trust us!
Building the best,