Boosting your Business Profit Margins


A business obviously has to make a profit to survive, but once a profit is being made the next goal is increasing it. If a business isn’t making a profit or barely breaking even then clearly more income is required. In both cases the remedy is to increase profit margins – but how?

The simple answer is to either increase income or lower expenses – ideally both for an extra boost to margins.

Lowering expenses

Increase efficiency – improving stock control and cutting down on wastage can be achieved through using modern stock tracking software.

Reducing waste immediately cuts expenses on re-stocking and perhaps over spending on stock that’s not required so helping profit margins widen.

Good stock control systems provide intelligence about what’s selling and when, so you can focus more on products that are shifting quicker than slower moving items.

Review your buying habits – are you getting the best deal from your suppliers? It pays to regularly check. Maybe buying in more bulk might reduce the overall price per item? Be careful not to overdo this though and end up with items sitting around unsold tying up money.

Check you’re not paying over the odds with other items such as utilities and stationery supplies. Any savings you can make all help improve margins.

Marketing costs – you may be able to reduce the cost of each sale by lowering how much you spend on getting each customer ‘through the door’.

If you haven’t looked into digital marketing methods such as social media maybe it’s time you did? In general, social media and email marketing can cost much less than traditional forms such as on page advertising.

Focus on existing customers – it’s far less expensive to sell to existing customers than finding new ones, so spend time actively selling to your existing customer base.

Reduce overheads – perhaps consider the following:

Premises – maybe you could scale back on where you do business. Perhaps you’re not fully utilizing the space you’re paying for so smaller and less costly premises might be worth considering.

Staffing – redundancies are a major move in reducing overheads, but other less drastic measures can reduce costs.

Outsourcing instead of hiring for certain roles could save money; no office space to provide, no pension contributions and other ‘plus salary’ costs. If someone has left perhaps their job can be absorbed by others or outsourced?

Increasing profits

Increase average customer spend – the classic way many successful companies maximize revenue and margins is to sell more to the same customer. Fast food giant McDonald’s has the classic “do you want fries with that?” or “go large for XX extra” as a way of making more from each sale.

People spending even a little more per sale can make a huge difference to the bottom line. When factoring in Business Process Outsource for use, this will ensure the best savings.

Along with offering add ons, up selling and cross selling is worth doing if appropriate in your business. Amazon do this as a matter of course by showing other items on product pages under the captions: ‘others also bought this’ and ‘you might also be interested in this’.

Focus on higher margin and best selling lines – if you offer a range of products or services then maybe it’s worth focusing on those with the best margins or those that sell the best.

Spending time and money in lower performing areas could be cut or at least reduced so focusing on the higher margin areas.

Raise pricesan obvious move to increase margins but when did you last raise your prices?

This will largely depend on what business you’re in of course, and maybe it’s a very price sensitive market you’re in, but as your costs increase you’re in effect lowering your profit margin if your prices stay the same.

Overall review of service

It’s worth periodically reviewing your business offering and how you provide it. By changing aspects of your service you may be able to, for example, lower overheads without compromising on the quality of your products or services


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BDC 305 Jun 2023