6 Ways To Boost Your Profit Margin

ACROSS THE BOARD PRICE HIKES. We know a man who owned a construction business that went bankrupt. When asked what happened, he said: "I was always the lowest bidder." That meant he worked his brains out, did more projects than his competition, but still went bust. His mistake was trying to compete on price. Let the other guy play the "I've got the lowest price game." You play: "I've got the best profit margin game." That means not dwelling on price, but raising your prices and then providing quality, excellent customer service, while creating the perception that your price is still very competitive. In selling, perception is everything.

Quick Tips and Action Points:

1) Find the courage to charge more. You may be delighted to find it doesn't change your customer flow one bit, while you simply make more money.

2) Have the lowest price on a few items, but maintain higher prices on everything else. That way you can promote low prices, while mostly selling high.

3) Try a 10 percent hike across the board, then monitor the traffic flow.

DEAL IN HIGH MARGIN PRODUCTS. Calculate net profits on everything you sell. Even a less expensive item can have a better profit margin than higher cost items. It's the margin that matters. Put your time and energy into that which makes you the most cash.

Quick Tips and Action Points:

1) If you don't know your profit margins, you're working blind.

2) Low profit margin items can help you by bringing in customers, but you only make it worthwhile if you have a plan to steer those customers to your real profit producers.

FORGET DISCOUNTING. Why do business owners discount? They think it will bring in more people and sales because people want a discount. That's true, but people want a lot of other things as well, such as high quality, good service, prestige and more. If you focus your marketing messages on the latter, you simply don't have to play the discount game because you will have made that agreement with your customer base via your marketing messages. You want them to think: "I'll come here when I want the best, I'll go to the discount store when I'm strapped for cash."

Quick Tips and Action Points:

1) It's up to you to mold customer perception about what kind of dealer you are. Strive to be a quality dealer, not a discount store.

2) Guarantee satisfaction. To get higher prices, you have to convince that you deliver the best, or their money back.

3) Target your efforts on high quality customers.

KEEP YOUR CUSTOMERS COMING BACK BY TREATING THEM RIGHT. There's no question that customer service pays off in higher profits. Your current and future income is dependent on how well you or your staff treat your customers and keep them loyal to you and your business.

Quick Tips and Action Points:

1) Regularly educate and train your staff and employees in good customer service principles and techniques.

2) Offer rewards such as "Employee of the Month" for the employees who do the best jobs, or who gets the most return or repeat customers or sales.

3) Create an easy-to-use form for your customers to fill out detailing their experience in dealing with your business, and have a question or two about their experience with a particular employee. Reward (or correct) the employee accordingly.

4) Give your customers rewards for completing surveys that help you control or grow your business.

INNOVATE. No one says you have to do things the same way all the time, or the same way other businesses in your industry or profession do them. Look outside your industry and see what's being done in other totally unrelated businesses. Then see if you can adopt and adapt them to fit your business.

Quick Tips and Action Points:

1) Banks in America got the great idea of drive-through windows from fast food restaurants. Totally unrelated businesses, yet the same concept can apply to both of them.

2) Keep your eyes and ears open for new, innovative or unusual ways to operate your business.

3) When you find a new idea, act on it right away. The longer you wait until you "perfect" it, the less chance you'll have of implementing it, and your competition might beat you to the punch.

4) Sell your employees and staff on the benefits of providing this new and unique service.

5) Inform and educate your customers and prospects of your new innovations, and let them know how they will benefit from them.

OVERHEADS AND COSTS CONCERN AND AFFECT EVERYONE. How much money a business brings in (their top line) is of little consequence when compared to how much money they earn after expenses (bottom line). Every time an employee or officer of your company takes something that belongs to the business home for their personal use, it hurts the bottom line profitability of the business. Bottom line profits are what runs a business. The more profits a business has, the faster it can grow, the more technology it can implement, the more customers it can handle, the better service it can render, and the more salaries, bonuses and commissions it can pay its employees.

Quick Tips and Action Points:

1) Implement a bonus system based on bottom line profits, rather than gross sales or top line income, then educate your employees as to how it will benefit them.

2) Reward them on their willingness to contribute, and well as the actual monetary figures and increases realized.

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