Warren Buffet mentioned once when talking about investing, “Look for companies with high profit margins.” Now, wouldn’t it be great if you could be in the same league as such companies?
It’s one thing having large revenues, but if you are making a measly profit margin, it’s not so impressive. But, how do you go about increasing your profit margins? The key is to take a methodical approach and follow strategies proven to work for countless businesses.
So now, let’s take a look at five strategies to boost your business profit margins.
Conduct a Full Price Review
If you don’t keep track of your prices, you risk missing out on loads of opportunities to increase profit margins. One thing you have to look at is do you charge the same prices to all your customers?
When you think about it, some customers will be less sensitive to prices than others. For instance, large organizations and governments may not be so bothered if your prices increase.
You should also look to see if supplier prices have risen at all. If they have, make sure to increase yours, stating to your customers the reason.
Stop Doing Discounts
Doing discounts may help you gain more customers. But, if you keep doing them, you’ll never boost profit margins.
There’s a time and a place for discounts. However, at some point, you have to get realistic and focus on making money for your business to not only survive but flourish.
Don’t Get Caught Up in Price Wars
It can be tempting to follow competitors and lower your prices when they do. You might do this in the hope of staying competitive.
However, price wars are damaging to business profit margins and can cause severe damage to your business in several ways. Instead, vouch for the quality of your products or services. In the end, customers may see what you have to offer is superior as it’s valued higher than what the competition has to offer.
Cross-Sell and Up-Sell
If a customer is already happily spending money with you, surely they have more cash to burn! Right when they are purchasing something from you, it’s the perfect chance to try and cross-sell and up-sell services or products.
The key to this is good research on what customers may need to complement what they are already buying. Plus, you need to develop your staff training so that employees are confident in selling other services or products.
Negotiate With Suppliers
Ask for discounts with suppliers to improve business profit margins. Your reasoning can be that you’ve been loyal to them for some time.
After all, you can always search elsewhere for better prices. When you do this, you might find you’ve been paying over the odds with your current suppliers.
To manage your spending better, you can use software to keep things in check. Bento offers an award-winning business spending management platform.
Simple Strategies To Boost Profit Margins
As you can see, the five strategies we’ve given you to increase your profit margins are straightforward and very doable. Review your prices, stop discounting, and avoid price wars. Also, start cross-selling, up-selling, and negotiating with suppliers.
For more advice on this subject, go to our blog.