If more time and money are going out the door than revenue coming in, there is a serious problem.
Dallas, TX (PRWEB) March 31, 2015
When it comes to knowing where a business stands financially, profit margins are vital. This is especially important for small to medium-sized businesses as they continue to realize their full growth potential. David Kiger, founder and executive chairman of the global logistics company Worldwide Express, shares a few tips for improving any business’ profits.
“It’s not enough to bring in revenue,” said Kiger. “Companies have to strike the perfect balance. If more time and money are going out the door than revenue coming in, there is a serious problem.”
1. Figure out your gross profit margin.
When making future plans, it’s vital to know your current financial status.
“Be careful, your overall gross profit margin could be deceiving,” said Kiger. “Find out the gross profit margin on each of your products and services, and analyze your gross margins over different product categories according to your business. This way you can identify both low margin or loss-making items and profitable activities or products. You may want to stop selling low margin products and focus on the ones that work.”
2. Consider increasing your prices.
Doing some research when considering a price change can uncover a few surprises.
“You might lose a customer or two, but that’s the nature of any business,” said Kiger. “Think of it this way: 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.”
3. Reconsider discounts.
Many small business owners don’t realize the disastrous effects discounting can have on your margins.
“If you have a margin of 50 percent and discount your prices by 10 percent, a 25-percent sales increase is still necessary,” said Kiger. “Consider the cost and benefit before making these seemingly-minor changes.”
4. Don’t compete on a price.
Giving superior value, going the extra mile or reducing all other costs of doing business are just a few ways you can set your business apart from competitors.
5. Take cash discounts from suppliers.
In some instances, sellers will offer an incentive to a buyer in return for paying a bill before the scheduled due date.
“Even if you’re borrowing, taking advantages of these discounts is a better deal than trying to delay payment,” said Kiger.
6. Prevent theft.
Theft prevention systems are your best bet when it comes to losing cash or inventory.
“No business owner wants to think of their staff or customers stealing,” said Kiger. But, unfortunately, it happens and you could end up paying a costly price without a system in place.”
7. Watch supplier bills.
Unfortunately, it’s common to be billed at the wrong price or charged for services you haven’t received. A watchful eye can take care of these problems.
“Check your bills personally,” said Kiger. “Then you’ll know when something is off. A watchful eye goes a long way.”
With any business, if you understand how important profit is, you are on the right track. Businesses need to push for greater margins. By delivering the quality that your customers expect, your business will thrive.
About David Kiger
David Kiger, founder and executive chairman of the global logistics company Worldwide Express, offers advice to entrepreneurs through his blogs, Business Chat and Cultivating Knowledge, Driving Action, and his popular Twitter account (@DavidKiger).