Are You Getting Crushed by Shrinking Profit Margins?
Dear Business Owner, are you leaking money due to inefficient systems and shrinking profit margins? If so, then today’s blog post is perfect for you! We’ll talk about how to avoid this trap. In today's very competitive markets it is vitally important for your business to operate with healthy profit margins, otherwise you will never be able to move ahead. I'd like to introduce you to several strategies to increase your profit margins that can make a huge impact on the profitability of your business (without spending an extra dime). Here are some powerful ways to do just that...
1. Take a Premium Price Position
Many businesses are afraid of losing customers, so they discount their products and services. But did you know that this is actually one of the least effective ways to position your company? There are limits, of course, but most businesses can easily afford to increase their prices for dramatic improvements to the bottom line. Below is an incredible chart showing the kind of impact even small price increases can have on your overall profitability (yes, even if you lose a handful of customers in the process):
Source: Australian Business Toolkit
2. Negotiate Lower Prices from Manufacturers and Dealers
Negotiating lower product costs from manufacturers and dealers is often as easy as asking. You'll be amazed at the kind of results you can get using this simple question: "Is that the best you can do?" Pull out your budget, identify all of your expenses and inquire if they can offer you better terms. No one wants to lose business, so chances are that you will be able to reduce your expenses at least for some of your vendors.
3. Implement a "Lean Manufacturing" Plan
Lean manufacturing isn't about cutting corners -- it's about improving efficiency and, therefore, quality! You do it by eliminating waste in the form of over-production, excessive defects, too much movement (both on the production floor and in transportation), and unnecessary processing. This is a complex, but vitally important component, of all successful businesses. Be sure to look at how you can make adjustments in your company. And no...this isn't just for manufacturers of tangible products. You can apply these principles for dramatic improvements in just about any industry!
4. Stop Stocking Inventory That Doesn’t Move
One of the fastest ways to lose money is by spending it on inventory that doesn't sell! My rule of thumb is to keep inventory for no more than 45-60 days in advance.
5. Watch Inventory Shrinkage
Unfortunately, employees aren’t always ethical, so keep a close eye on your inventory. Sometimes they are your most long- term employees. Have systems and policies in place to prevent employee theft. If you want to start this week out productively then identify at least three areas of improvement in terms of shrinking margins.
Remember that one of the simplest and fastest ways to increase your profit margins is to increase your prices -- so I strongly recommend you consider this strategy first and foremost. In order to do that it is important that you remember that your customers buy don’t buy based on price. They buy based on the value they receive. So if you are able to bundle some of your products or services, or even partner with another company to provide added value, then then your customers will gladly pay your slightly increase prices.
If you need help determining how to increase your profit margins, check out my new website: www.BreakthroughPerformanceAcademy.com for the most comprehensive system of marketing tools and resources.