10 Effective Ways to Improve Your Business Margin
Small changes can significantly improve your business performance. Even slight adjustments to your processes or systems can majorly impact your profit margins. For example, a 1% increase in your gross margin on $500,000 of sales adds an extra $5,000 to your bottom line without increasing sales.
The best part? Boosting your margins is one of the most effective ways to improve profitability without additional revenue. Here are 10 strategies to help improve your business margin:
1: Negotiate Better Supplier Prices
If you don’t ask, you won’t get. By negotiating with suppliers, you can reduce the cost of goods and instantly improve your margin. Don’t be afraid to shop around and ask for discounts or better terms. Read more about negotiating supplier prices here.
2: Update Your Pricing Model
Ensure that your pricing accurately reflects all current costs. Regularly review supplier prices and factor in overheads to avoid underpricing. Pricing updates should be consistent to maintain healthy margins.
3: Back-Cost Jobs Regularly
Review the actual costs of 2-3 jobs monthly and compare them to your estimates. Regular back-costing helps you spot discrepancies early, allowing you to adjust future quotes and improve profitability.
4: Remove Slow-Moving Items or Low-Return Work
Holding onto old stock or continuing low-margin jobs can drag down your overall profit. Selling outdated items at cost might hurt in the short term, but replacing them with higher-margin products will pay off over time.
5: Set Budgets and Targets with Your Team
Involve your team in setting financial goals. When everyone knows what they’re aiming for, they’re more likely to work efficiently. Celebrate milestones to keep morale high and maintain momentum.
6: Use Cloud-Based, Real-Time Reporting
You can’t manage what you don’t measure. Track your most critical Key Performance Indicators (KPIs) on a cloud-based system in real time. This allows you to make data-driven decisions that keep your margins in check.
7: Reduce Wastage and Re-Work
Wastage and re-work erode your profits. Assess your processes to find areas where materials or time are wasted. Proper documentation and staff training can ensure that work is done right the first time, minimising costly re-work. Watch more about reviewing waste here.
8: Optimise Your Sales Process
Does your sales team know which products or services generate the best margins? Equip them with this knowledge and provide training to help them upsell high-margin items. Sharpening their sales skills can make a big difference to your bottom line.
9: Create an Improvement Plan
Identify areas where your business can improve. Write down your goals and create a clear plan to improve one area at a time. A step-by-step approach ensures sustained progress.
10: Consult with Your Accountant
An experienced accountant can offer fresh perspectives on improving margins. They can help you with strategy, forecasting, and, most importantly, keep you accountable for implementing changes.
Let’s Improve Your Business Margin
Improving your business margins is an ongoing process; even small tweaks can lead to significant profit increases. Don’t wait—start implementing these strategies today to see positive results.
Need guidance on lifting your margin? Contact us to get started.
“To improve is to change; to be perfect is to change often.” – Winston Churchill.
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