Pump up your Profit Margins
Get profitable with the profit expert.
As a business owner, you’ll always be seeking opportunities to improve your profit margins. In the current era, they’re likely being squeezed mercilessly by inflation and rising costs—so it’s even more important to be looking for chances to maximise profit.
Wider profit margins mean better cash flow, taking some strain off your finances (and your nerves). They can also allow you to reinvest in the business, accelerating growth and providing better products or services to your clients.
We’ve teamed up with Jerome from Rise Advisory, an experienced and results-focused business coach/advisor, to share some opportunities for profit margin improvement that are fairly common across SMEs, and how best to take advantage of them.
Regular price increases
No-one really likes increasing prices! The reality is, it’s necessary to do so even if it’s simply to keep up with inflation.
Jerome’s advice in this case is to keep increases small and regular rather than large and infrequent. An increase of 2% is easily swallowed, a 10% jump is not—even if it’s the first in five years.
The effect that raising your prices will have on your profits is clear. The issue becomes balancing it with the risk of losing clients or customers. Smaller increases more frequently can help with retention.
Accurate measuring of costs
When quoting or setting prices, it’s crucial to make sure you’re considering the right metrics. Are you looking at the true estimated gross profit, taking into account all the costs? Often, costing will include only the immediate expenses relevant to a job and not the full picture of employment, office overheads, and all the other things that go into running your business.
Declutter your customers
Some customers suck profits rather than boost them. It’s a difficult truth, but a truth nonetheless. Consider which regular customers take far too long to pay, requiring time and resources to chase them down. It’s never easy to “sack” customers, but when you crunch the numbers and they are costing you money, it makes sense.
Get your systems sorted: efficiency, productivity, and time management
These are three areas that can be responsible for large sums of wasted money.
If you evaluate each of these areas individually, you can quickly identify which of them are costing you money. Notifying your team of the minimum performance standards expected of them is a great start towards fixing your profitability problems. Think about what is really possible. What could the best employee achieve in a day? With the right support, your team can be working towards that level.
It’s funny; when you ask more of people, they tend to find a way to stretch themselves and reach the next level.
Your own individual efficiency can be improved by using a diary effectively and “chunking” your time. Block out chunks of time for one focused activity, project or goal, one at a time. Don’t allow yourself to be distracted and only work on one thing in the time chunk. Break down big goals into “baby goals”.
This “chunking” method can apply to your leisure time, administration, selling, thinking, and planning—balance these areas out. Whatever your current focus, ensure that’s all you’re doing for the time you allocated. Keep asking yourself: Is this the best use of my time? Don’t play games with yourself and make excuses for being distracted.
If you don’t take adequate leisure time, then your brain will take it’s “leisure time” whether you like it or not, during work.
Reduce ALL costs by 10%
It’s not easy but with a bit of effort it is possible to reduce all your costs by at least 10%. The best way is to sit down with your team or business partner and run through every cost you have in your business. Think of at least two ways to reduce every cost by 10%. Pick one, make a commitment to do something about it, and create an action plan. Lower overheads mean greater profits, so you need to devote some time to this area. Think outside the box—how is it possible to cut every cost by 10%?
Jerome at Rise Advisory can help business decision makers take control and maximise their profits! His profit calculator, pictured above, is a powerful tool that has helped myriad business owners using solid, tangible strategies. If your goal is to increase your net profit by 50% or more, call him on 021 769 016 for a no obligation chat. Alternatively, you can book in a 15-minute no-obligations chat here.
Check out some real results that Jerome’s clients have seen:
