Chapter 2 – Financial Control – Rule your money
This is part of the ‘How to’ coaching series. An ongoing series of activities to make your business successful. Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.
Activity 33 – I know how to increase my margins
What do you do to get better margins on your sales? That’s if you know what your margins are… I see it so often; business owners don’t know what their actual margins are. I’m sure you’re not one of those, are you?
Just in case you are, here is a safe place to find out what you could do.
First you need to know your margins. That was covered in ‘HowTo’ post number 31. Here, we talk about knowing how to increase those margins.
Depending on the industry you are operating in, there are typically different margins. Margins in manufacturing tend to be lower than margins found in a professional service, such as a legal company.
For example, a small increase in margin for company producing many thousands of components can lead to a big increase in overall profits. Whereas a bigger percentage increase for a business providing a service to a small number of customers would be required to gain the increase in overall profitability.
There are many areas in a business that may benefit from improvement, below are some basic ideas for starters.
The ‘How to’ bit:
Here are 5 ideas…
- Reduce waste. A manufacturing client introducing an automated system for getting the most out of their materials could see a 1% increase on the bottom line.
- Reduce unprofitable customers. A service industry, with a small number of clients, would do better to focus their resources on clients who are easier to work with.
- Limit discounting. By introducing a schedule of discounting, a store would give less away arbitrarily.
- Focus on profitable products/services. Consider stopping selling a product that gives little or no return.
- Review suppliers. Introduce an annual review of the terms and agreements. It may be that a supplier has keener pricing if you are purchasing more than you were previously.
If you would like to find out more ideas on how to increase your margins, Contact Us…