How You Can Optimize Your Company’s Profit Margins

Profit Margins Spreadsheet

~by Lizzie Weakley~

What business owner wouldn’t want to continuously widen their company’s profit margins? The bigger the margin between profits and expenses, the bigger the differential you get to pocket or the more gasoline you get to fill your company’s tank to accelerate growth. Achieving these fat margins on a consistent basis, however, takes the right elements meshed and executed precisely.

 

Hone in on the Numbers

Having the precise data on paper is important before proceeding further. You need to know exactly how much your business is earning in gross profit by vetting interim accounts and taking some benchmarking figures from your accounting department. How do your gross profit margins compare to market averages? Looking at gross profit margins alone can still be inaccurate and deceiving at times. Hone in further on the profit margins being earned by each of your product lines and services as well as supplier or client categories.

Increase Your Price Tag

It makes sense to increase your product or service prices if you want to fatten up the profit margin. Obviously, this can be very difficult to balance. You do not want to increase too much to the extent that regular customers start abandoning the brand and the overall customer base begins to drop in numbers. You want to make sure the increase in price can relatively offset the number of customers lost. For instance, if your monthly margin is 50 percent, a 10 percent price hike means you can afford to lose 17 percent of your clients but still break even.

Pursue Higher Education

A higher education gives you a better command of your company. You can make better, more informed decisions. A data analytics master’s degree, for example, can benefit you in more ways than one. It can improve cost efficiency, align your business strategy with long-term goals, speed up the decision-making process, synchronize financial and operational strategies, and increase revenues. It may take some time to earn and fully harness the power of higher education, but rest assure it definitely pays off in the long run with better profit margins posted month after month.

Avoid simply chasing different techniques and alternative systems with increased profit in mind. Make sure the changes you plan on doing are congruent with how you want your brand to be perceived and what mission statement and goals you’ve put in place. Some techniques can have outward benefits to your profit margin, but are intrinsically harmful and unsustainable over the long term.


Meet the Author: Lizzie Weakley

Lizzie is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her 3-year-old husky, Snowball.

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