Global business leader David Kiger recently offered his professional insight to the owners of small and medium-sized businesses seeking to improve their profit margins. The founder and chief executive officer of the global freight shipping company Worldwide Express noted, first, that balance is key to achieving attractive profit margins. Companies must focus on more than simply earning revenue, ensuring that the time and money that they put out does not exceed the value of what they’re bringing in.
When attempting to increase its profit margin, a company should first assess its current financial status. Business leaders should determine their gross profit margins for individual products and services, as well as across separate product categories or business areas. In this way, they can evaluate not only the performance of the company as a whole, but also the profitability of specific business activities.
After identifying areas for improvement, a company might consider raising its prices or removing certain discounts to increase its profit margin. Although many business leaders fear losing customers due to higher prices, Mr. Kiger notes that once a firm raises its prices to achieve a higher profit margin, a minor drop in customers is not likely to impact its profitability. Mr. Kiger also advises businesses not to compete with other companies on pricing, but to instead focus on areas such as customer service and overall value.
Taking a closer look at the supply chain can also help companies identify opportunities to improve their profit margin. Business leaders should pay close attention to bills from suppliers to make sure that they have not been overcharged or charged for items that they have not received. Additionally, they should be aware of possible supplier discounts for actions such as early payments.