How to increase revenue and profit margins

The easiest way to increase your profits is to focus on your margins. The gross profit margin is a powerful number. It tells you exactly how much money you have left after you pay your production costs, marketing, sales, fixed overheads etc and still have enough money left to make a reasonable profit for your time, effort, and risk. This number is also a great indicator of the overall efficiency of your business. Knowing your gross profit margin helps you look strategically at your pricing. It tells you which customers, products, or projects are the best margin business to chase and which you should consider dumping. I can help you to increase your turnover (revenue). Here are some ideas from The Business Minder notebook for you to consider

• Invest resources in increasing your sales volume.

• Look for new markets and distribution channels. For instance, are you really making the best use of the internet? Can you form a strategic alliance with a complementary business or a joint venture to tackle work you don’t have the resources for on your own?

• Actively sell. Don’t just take orders. Businesses that are content to simply take orders are less likely to survive, let alone grow.

• Retain existing customers through good service and explain to your staff why the lifetime value of customers makes this effort worthwhile.

• Review your credit limits if sales to a particular customer go up significantly and consider a credit check. If they are stable and worthwhile customer, increase their limit or find out what else you can do for them.

• Maximise the value of your sales. Consider moving upmarket and providing a premium product and service. Add features to products if the perceived value to the user is greater than the cost to you.

• Keep your product or service up to date. If appropriate, extend your product range or work to ensure it stays ahead of the competition.

• Compare your price and quality with competing products or services. Aim to charge a full price and offer value for money from the extras you provide, such as after-sales service, installation and training or bundled extras.

• Focus your efforts on your most profitable customers. Look after the customers who place large or frequent orders, pay the full price on time and are low maintenance.

Businesses that offer a menu of products can use a simple technique to improve overall profitability. This involves reviewing sales and profit margins periodically, and dividing products into four categories

• ​High percentage of sales and high profit margins – nurture these stars

• High percentage of sales but low profit margins – consider a price increase and examine how you can cut costs to increase your profit margins

• Low percentage of sales but high profit margins – consider a sales push

• Low percentage of sales and low profit margins – eliminate these where possible

Take into account any possible effects before making decisions. For example, a low-profit product might be the one that brings other business from a major, highly profitable customer.

For more ideas on growing your business contact The Business Minder today. Helping business owners in ASEAN countries with clients in Singapore, Malaysia and Bali Indonesia.