Do you Worry of Profit Margins

You can achieve profit margins with same customers, physical sales, same systems, no more staff or extra overhead costs, existing premises and capacity. There are several ways of achieving it using simple methods.

First you need to figure out your profit margin. It’s no good using estimated inventory figures or working from the figure in your last Annual Financials.

Second, analyze your profit margins.  Find out the gross profit margin on each of your products and services, and, in addition, analyse your gross margins over different business divisions, product categories, suppliers or customer categories according to your business. This way you can identify both low margin or loss-making items and profitable activities or products. Then you can stop selling low margin lines and focus on the ones that work.

Third thing you should increase prices. It is quite difficult. In this process we can lose the odd customers . If your margin is 50%, a 10% increase in prices means you can lose 17% of your customers yet be no worse off!

You should offer no discount. Discounting can be the death of many businesses that don’t realise how badly this destroys your margins. At that same margin of 50%, if you discount your prices by 10%, you need a 25% increase in sales just to stand still. Say goodbye to your day off!

Take cash discounts from customers. It’s normally a much better deal than trying to delay payment, even if you’re borrowing.

You should prevent theft of any kind. Whether stolen by staff, customers, losing cash is very costly. Do you have anti-shoplifting or theft prevention systems in place, even for staff? Do you balance your tills? Who does your banking?

Increasing your margins is all about making the most of what you sell right now.

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