4. HERE ARE 10 TIPS TO
INCREASE YOUR PROFITS
Analyse your profit margins. ...
Increase your prices. ...
Review all your prices. ...
No discounting. ...
Don't compete on price. ...
Take cash discounts from suppliers. ...
Prevent theft.
5. NOW THE 10 GOLDEN WAYS TO
INCREASE YOUR PROFIT MARGINS
Figure out your gross profit margin
Analyse your profit margins
Increase your prices
Review all your prices
No discounting for a period of time
Don’t compete on price
Take cash discounts from suppliers
Prevent theft
Watch supplier bills
Use inventory systems
6. FIGURE OUT YOUR GROSS
PROFIT MARGIN
Make sure you know your up-to-date, overall gross
profit margin. It’s no good using estimated
inventory figures or working from the figure in your
last Annual Financials.
Prepare some interim accounts to the last month-
end from your accounting software. Using
the inventory system in MYOB means there’s no
need for a stock take.
Get some benchmarking figures from your
accountant. How does yours compare to the
industry average?
7. Analyse your profit margins
Your overall gross profit margin could be deceiving.
Find out the gross profit margin on each of your
products and services, and analyse your gross
margins over different business divisions, product
categories, suppliers or customer categories
according to your business.
This way you can identify both low margin or loss-
making items and profitable activities or products.
Then you can stop selling low margin lines and
focus on the ones that work.
8. Increase your prices
Yes, I know it can be difficult. But often we
business owners are more worried than our
customers about price, and, let’s face it, our
overheads are going up all the time.
It’s true that you might lose the odd customer, but
if your margin is 50 percent, a 10 percent increase
in prices means you can lose 17 percent of your
customers yet be no worse off!
9. Review all your prices
Do you charge all customers the same price? If so,
why?
You’ll invariably find that some are less price
sensitive than others, especially if they’re not
paying for the bills themselves, e.g. government or
larger organisations.
Have you increased your prices to match supplier
price rises and kept up with the competition?
10. No discounting
Discounting can be the death of many businesses
that don’t realise how badly this destroys your
margins.
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.
11. Don’t compete on price
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.
12. Take cash discounts from
suppliers
Nothing much to say about this particular topic, I
only have to say that-
It’s normally a much better deal than trying to
delay payment, even if you’re borrowing.
13. Prevent theft
Whether stolen by staff or customers, losing cash is
very costly.
Do you have anti-shoplifting or theft prevention
systems in place, even for staff? Do you balance
your tills? Who does your banking?
14. Watch supplier bills
Check all supplier bills personally. After a while
you’ll get a feel for things which aren’t right. Don’t
be surprised to find that you’ve been overcharged
for goods or services you haven’t received or been
billed at the wrong prices.
15. Use inventory systems
Use the inventory system on MYOB to keep track of
your inventory. You’ll find you have less working
capital tied in inventory, suffer less theft and stock
obsolescence, know when you’re running out of
products that are selling well, and know exactly
how much each of your products cost you without
wading through old purchase invoices. It’s easy, and
it works well.
Increasing your margins is all about making the
most of what you sell right now. As Jay Abraham,
the marketing guru would say: “Get everything you
can out of all you’ve got!”
