Improvements can always be made at the margin. Small tweaks to your processes or systems can make a massive difference to the end result. It’s the same with your business margin – a 1% increase in your gross margin on $500,000 of sales is an extra $5,000 on your bottom line.
The best part about improving your margin is that you increase your profit without needing to lift your sales.
Here are 10 strategies to lift your margin:
- Negotiate better prices with your suppliers.
As they say, ‘the squeaky wheel gets the oil’, so if you don’t ask, you won’t get.
- Update your pricing model.
Make sure you’re using the most recent supplier prices and that all costs are included in your price.
- Back cost jobs regularly.
Review exactly what you spent on 2-3 jobs each month and compare the actual cost to what you anticipated the cost would be when you quoted the job.
- Get rid of slow-moving items or work that has a poor return.
Selling old stock at cost will drop your margin, but if you replace those items or jobs with higher-margin items, you’ll achieve a higher return in the long run.
- Set budgets and targets with your team.
Give your team something to aim for. Celebrate success when the targets are achieved.
- Report your results on a cloud-based, real-time system.
You can’t manage what you don’t measure! Regularly monitor your most important Key Performance Indicators on your dashboard.
- Reduce wastage and re-work.
What processes need to be updated to help reduce wastage and re-work? Or, if the processes are correctly documented, what training do you need to provide to your team to ensure the processes are being followed to reduce wastage and re-work?
- Review your sales process.
Does your sales team know which products or services have the highest margin? Do they know how to upsell to those higher-margin products or services? Identify the sales skills gaps in your team and implement training.
- Make a plan.
There are plenty of areas for improvement in your business. Unless you write them down, you’re unlikely to bring the correct focus to them. Make a plan to improve one area at a time.
- Involve your accountant.
Not only to help you with idea generation and building a plan, but also to hold you accountable to do the things you need to do.