10 Ways To Increase Profit Margin Percentage
April 15, 2015
If you want to know how to ‘squeeze the fat’, ‘make more money’ in your business doing EXACTLY what you are doing right now (with a few slight tweaks), then don’t stop reading now… we’re about to share the love with the 10 Ways to Increase Profit Margins in your trade business.
1. Better negotiation skills
Negotation can be the difference to saving your business hundreds, if not thousands of dollars a year, therefore it is wise to learn this skill and use it to the benefit of your business.
There are many different definitions of negotiation. We could say that negotiating is ‘reaching an agreed settlement between two or more parties’ or ‘reaching a compromise between conflicting needs’.
Negotiation skills are extremely important for business success, and can play a large role in personal affairs as well. If you’re a good negotiator, you can find equitable ways around difficult situations, help your business thrive, and even improve relations with your spouse or family.
Poor negotiators, on the other hand, tend to make bad situations worse and have a tough time making headway with complex issues. It is therefore imperative for management success to master this skill.
2. Check invoices
Its astounding the number of small businesses that ‘do not’ check their invoices, not even a glance. In fact the bills are received by their business and they simply add them to the pile ‘to pay’.
How do you know the invoice is right? “Computer generated invoicing” you tell me. So are you saying that the computer is always right? That the person entering the information into the computer never makes a manual error?
Yes, food for thought.
This is a great topic for increasing profit margins and one in which we have had plenty of hands on experience.
It is critical you scan your eye over your business invoices as they are received by your business. If you don’t, it could cost you thousands of dollars.
Checking your invoices certainly should not stop at your supplier invoices. Consider what cost savings you may gain by glancing your eye over your phone invoice, IT invoice, in fact any and all invoices that are sent to you business.
Now we never said that it should be you that checks these invoices. If you have staff, consider how you can leverage your time by delegating this checking process to your team. This will free up your time to focus on profit producing tasks.
3. Do it right first time
Why waste valuable time and money returning to a job when you could have done it right first time? It is important to take pride in your work and ensure the job is complete before you leave the job site.
Why is this so critical? Because the act of having to return will cost you both time and money. Let me explain why…
The act of having to return will not only infuriate your customer, it will cost you any additional word-of-mouth work that you may have attracted through this disgruntled customer. Bad for business! The act of having to return will cost you money simply because you are unable to move onto any new work and hence consumes valuable time that you could have spent competing this additional work and/or working on profit producing tasks within your business.
Make better use of your time by competing work to a high standard and ensuring the job is done right first time.
4. Keep overheads to a minimum
‘Trim the fat’
Sit down with your bookkeeper once every 3 months and review your profit & loss statements line by line a quarterly report and annual report in comparison to last year’s same period.
Let me give you an example: Hypothetically it is the 2nd week of April 2010.
Print one report that compares:
1. A quarterly report, January – March inclusive report for 2010 and
2. A quarterly report, January – March inclusive report for 2009
With a ruler in hand, we review every line and compare the expenses.
Write notes to the right in red pen to explain why some expenses were higher than same period of the previous year.
Basically, why have the rates increased or decreased.
Complete this exercise comparing a full year, even monthly if required. Once having completed this exercise and having gained a good grasp on the expenses it is time to ‘trim the fat’.
You would be surprised how quickly expenses creep up. You commit to many individual small purchases that collectively equate to a large sum of money.
It is for this reason you need to review your profit & loss statement to
ensure you have a really good grasp on the expenses within the business
make cuts where possible, reducing spend where you can