Your profit margin is how much money you actually get to walk away with after a transaction is complete (revenue – costs = profit). It makes sense then, that businesses who want to grow, focus on increasing this margin. The bigger the margin you have, the more you will thrive and be able to power through challenges like the economic climate that we find ourselves in today.
So how do you do it? How do you increase your profit and master your margins?
- Identify what is not working – before you can fix something, you need to know what’s broken. Take an objective look at your business and your processes and identify the gaps.
- Streamline your processes – the faster you can provide a service, the faster you can generate revenue and increase your profit margin. Where can you speed up your processes to trim costs without impacting quality? I.e using cloud accounting software.
- Discover any areas where there is waste – where does your business spend money? Are you losing money through inefficiency or waste? Can you reduce your expenses?
- Market those higher-end services – what services sell best and deliver the highest profit? Prioritise these in your marketing and focus your efforts on pushing these more.
- Aim for incremental growth – try not to get ahead of yourself. Set yourself small goals and you’ll find that you’ll make consistent, and more importantly, sustainable progress.
- Focus on building your team – a happy, motivated, and productive team, one that supports your growth goals, can make a world of difference to your profit margin.
- Be innovative in your strategy – if the pandemic has taught us anything, it’s how to strategically innovate our service. What are you not offering your target audience that they really need? What can you replace in the service that you’re offering now?
- Cross-promote to increase your credibility – if you get a good response from running webinars or writing content, think about ways you can cross-promote with someone influential in certain topics. Not only does this increase your credibility, but it capitalises on the other person’s time, money, and resources too.
- Identify other pillars for revenue – is there a service that brings in the majority of your revenue? If there is, try to see what other areas you can focus on to build another revenue-generating pillar. You don’t want your strategy to be dependent on a single pillar (what if that pillar fell down?). Your aim should be to strengthen another area or two and this will increase your margin too.
- Create a loyalty programme with your clients – your clients know, like, and trust you, and they are your best advocates. They are your free sales team, so help them spend more with you and tell others about your services. How can you create a loyalty programme to reward them?
- Raise your fees – if you haven’t had a rate increase recently, you have an easy way of increasing your profit! Just make sure to approach this right, conveying your increase in value rather than your profit margin.
- Outsource certain tasks – a great way of increasing your profit margin is to outsource some lower-value tasks to freelancers or contracted workers. You can use them only when demand is high or part-time.