What will increase profit margin

Successful businesses work hard to ensure that percentage is as high as possible. Here are our top 5 ways to increase your profit margins:.

NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks.

If you need income tax advice please contact an accountant in your area. Maybe, or maybe not. Chances are you or your team already researched the market extensively when your company first introduced the product to consumers, to determine the exact pricing.

The answer will be the percentage of revenues that remain after deducting cost of goods sold. COGS include charges related to:. Talk to your:. Can you negotiate new rates with your suppliers?

Can you re-negotiate with your landlord on the office or factory rent? Are you paying too much? Is too much overtime authorized? What about cross training employees so that they can do more than one task or job? As this post has shown, sometimes a simple tweak in your pricing or a phone call to your vendor can pave the way for wider margins.

Can you think of other tactics that can help retailers improve their profit margins? Let us know in the comments. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest , a free eBook to help retailers future-proof their stores. You must be logged in to post a comment. No fluff. Just practical, award-winning content sent straight to your inbox.

Thanks for signing up to the Vend newsletter. By providing your information you agree to our privacy policy. Free Trial. Free Trial Contact Sales. Events Tips Updates. Learn More. Key takeaways: Improve your inventory management practices. Use those inventory insights to make decisions around purchasing, sales, and marketing.

Key takeaways: Find ways to increase the perceived value of your brand. You can do this by focusing on the emotional and lifestyle values that your merchandise can offer. For example, can your products make people feel better about themselves? Can they elevate the lifestyle of your customers? Brands that are able to these things can often charge a premium for their products. Automate repetitive tasks to save time and further reduce your expenses. Key takeaways: Increase basket size through suggestive selling.

Find your most profitable products and position them high-traffic areas of your store. Promote impulse buys at the checkout counter. Key takeaways: Before finalizing an order, always consider the final cost by factoring in taxes, shipping expenses, and more. This way you can ask for a bigger discount from wholesalers. Key takeaways: If it makes sense for your business, go ahead and raise your prices.

Krista recommends that you start with your top sellers. If so, raise your prices on these products. Factor in psychology or use methods like tiered pricing. To learn more about tiered pricing and other strategies, check out our post on the secrets to irresistible pricing.

Key takeaways: Have a collaborative relationship with your vendors. Engage in Joint Business Planning and figure out how you can both improve profitability. Identify inefficiencies in your supply chain and find ways to reduce them. Vend Tip Are you a Vend user?

Recommended Articles. Web More Posts You can also expand into new market sectors, or develop new products or services. Manage your costs. Have you looked at your key cost areas? Your key cost areas to consider are: Suppliers - are you getting the best deal from suppliers? Can you negotiate better terms or do you need to change supplier? Can you drive better deals by consolidating your supplier base? Can you buy on a 'just in time' basis to make more effective use of your working capital?

Finance - do you need to review your finance facilities? Are you using any loans and overdrafts effectively? Premises - have you examined whether you are getting the most out of your space? Are there more efficient ways to use your premises? Could you sublet some unused space? Production - have you assessed whether you can cut waste and lower the costs of your materials.

Check whether you can adapt your production processes so they are more streamlined, using fewer working hours or resources to cut labour costs. Uncover real costs Using activity-based costing is an effective way to find the real cost of specific business activities. Review your offer. Pricing considerations It's a good idea to review your pricing regularly. Find your best customers It's not just your price list that affects your profitability - the type of customers you're selling to can also make a big difference.

Can you sell more to your best customers? Consider the following opportunities: up-selling - selling them premium products that make a greater contribution to your profit cross selling - analysing what they buy and offering complementary products diversifying - identifying a need and developing new products and services to meet them. Buy more effectively.

Get the best deal from your suppliers Identifying your key areas of expenditure will show where you spend most money.

Cut waste throughout the business A review of common areas of waste could help you see how to reduce them, for example: Can you cut your power costs, e.

Are you getting the best deals from your power suppliers? Are you paying for unused services e. Your premises are a large expense , so get the most from your investment or rental agreement: Can you use your space more effectively by rearranging it?

Could you sublet unused areas? Could you negotiate a lower rental if you agree to a longer contract? Concentrate your sales efforts. Work with your best customers You should know who your best customers are, what they buy and when they buy it. You can usually put your customers and the products or services they buy into one of four categories: high sales and high profit high sales and low profit low sales and high profit low sales and low profit It makes sense to encourage customers that provide high sales and high profit.

Find new 'best' customers Make a judgement on expanding your customer base by finding new customers who have a similar profile to your existing profitable customers. Expand your market. Do your research Before you start, carefully research the potential opportunity. Developing new products and services If you're developing a new product or service for a new market, it's good to carefully consider its viability. Key questions include: Do you have the skills and expertise in-house or will you have to buy them in?

Have you got the commitment and resources available to make the new project work? Can you minimise the risk? Can you be sure there's a demand for the new product or service at a price you can make a profit on? Team up and reduce the risk Rather than going it alone, partnerships and joint ventures can provide you with increased security in establishing yourself successfully in a new or expanded market.

Boost productivity. Using the same example as above, at the same margin of 50 percent, if you discount your prices by 10 percent, you need a 25 percent increase in sales just to stand still. Say goodbye to your day off! Differentiate yourself in other ways, whether by giving superior value, going the extra mile or reducing all the other non-monetary costs of doing business with you — effort, time, anxiety and emotional costs. Learn what your customers want and create more opportunities to sell it to them.

Train your staff to upsell and cross-sell. Highlight opportunities where you could increase the transaction value of a sale. Make sure your processes and systems are designed to maximise additional purchase opportunities. READ: 10 steps to increasing your average transaction value. Increasing your prices or refusing to compete on price becomes much easier if your customers perceive higher value in your brand than in others. Ask your suppliers for a discount or offer to buy goods in bulk. You can often get things more cost efficiently if you streamline your purchasing lines and get all your goods from the same vendor.

Read: Supplier relationship management: How to maintain good relationships with suppliers. Do you have anti-shoplifting or theft prevention systems in place, even for staff? Do you balance your tills? Who does your banking?