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5 Strategies to Improve your Business Profit Margins


5 Strategies to Improve your Business Profit Margins

Running a successful business is a balancing act that can come to a halt if spending exceeds your income. In fact, most small businesses make surprisingly small profits and have much lower profit margins than you would expect.

To stay afloat and remain attractive to market investors, your business must remain on the right side of the balance sheet. Understanding how to increase the profit margin in your business is fundamental to its growth because this is how much money you actually have left after the business of the day (or month) is completed.

Here are some ideas to help you get started

  1. Increase your Prices

To increase your profit margin, you may need to revise your pricing strategy, but before doing so, be sure that you understand how the price elasticity of demand for your products works.

This is a fairly obvious fact. If you raise your product prices too much and your sales decline, your profit margin will not increase as a result. You need to strike the right balance between incremental price increases and meeting the budget requirement of your customers.

  1. Reduce Costs

To increase your margin, you can increase the price, but another alternative is to also try to reduce the amount you are paying for the goods you sell.

Ask your distributors to lower their price. This may require you to negotiate with your supplier for a better deal.

Or you can consider buying in bulk.

It may ultimately result in you having to do a little research to find an alternative supplier that offers better terms. However, find ways to reduce business costs as this will help you increase your profits.

  1. Protect Against Exchange Rate Fluctuations

Doing business abroad can be good for the success of your business, but certain situations can affect your business profits.

If you operate overseas, take steps to protect your company from adverse exchange rate fluctuations by opening a relevant bank account or agreeing with your bank to buy a certain amount of currency at agreed-upon exchange rates at a fixed date.

It’s important to not that when doing this that your keep your personal current account separate from your business, so as make life easier when it comes to taxes, business bookkeeping etc.

  1. Change How you do Business

Another essential key is to generate more sales while reducing expenses. There are several ways you can make this happen, but two operational changes that can boost your profits is to encourage new customers to try your products or encourage old customers to try new products.

To boost sales, try introducing and offering new services or products that complement what you currently offer.

  1. Carry Your Workers Along

One way to boost your profitability is to increase your current workforce production. Regardless of the type of business you run, there’s a good chance your employees aren’t as productive as they could be.

According to the Harvard Business Review, businesses are losing more than 20% of their productive capacity due to organisational drag – “the systems and processes that absorb precious time and keep people from doing things.”

As such, it’s important to review the business processes to make sure they don’t slow your workforce down. The goal is to come up with procedures that your employees can quickly duplicate and enforce even when you are not around.

Wrapping up

Most companies are getting into a habit of giving their customers expensive services that they can easily stop without any loss of customer satisfaction.

Look at the little services you provide to your customers. Is there anything you can stop that will reduce expenses without affecting your sales? If there are, then discontinue them.


I am the founder of Startup Today. I am the main writer and have put in many hours of work into creating this blog. If you want to find out more about me then lets get in contact.

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