profit margins

Increase Profit Margins to Enhance Your Business Value

Conducting a regular review of your profit margins should be a crucial part of your business plan, yet some owners don’t do this enough.

As part of your annual budgeting and planning process, you should be taking the time to review your current and historical profit margins to determine whether they are increasing or decreasing. Analyze the profitability of each of your offerings and look at their contributions to your overall profitability.

Actionable Ways to Increase Margins:

  1. Increase Prices 

Some business owners are afraid to raise prices, assuming their customers will find a new, cheaper competitor to replace them. While this may happen with a few, your most loyal customers will stay with you regardless of pricing increases due to factors like inflation, demand for your product/service, and brand loyalty.

You can create brand loyalty as a barrier to entry for competitors and keep your customers committed to your brand for the long haul. Read more about building barriers to entry like brand loyalty here.

2. Reduce Business Expenses

If you have recently raised your prices, another way to increase margins is through cost reduction. However, reducing operational costs will only work if your sales remain the same or experience an uptick. Simple ways to reduce business expenses typically include cutting back on certain office supplies or renegotiating maintenance and other service contracts.

Since the COVID-19 pandemic, many businesses discovered they could be just as productive or more than in the office. Business owners could also save money telecommuting by forgoing office supply orders, heating and air conditioning bills, employees’ parking, and more. If handled correctly, remote work can reduce overhead costs and increase productivity with more time spent working and less commuting. Kate Lister, president of Global Workplace Analytics, said her company conducted a study on teleworking. According to a Forbes article, her research estimates that “a typical employer can save about $11,000 per year for every person who works remotely half of the time.”

Of course, these strategies may not be for every organization. If you would like to learn more about a specific plan for increasing profit margins for your business, contact us today. ACT Capital Advisors has been working with companies in various industries since 1986, developing strategic plans before they go to market, ensuring they achieve the best value possible.

If you are interested in learning more about ACT’s sell-side services, use the following links: 

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