Both new and established companies will set their sights on increasing their annual profit margin. Build a healthier business revenue and enjoy long-term profitability by executing small tasks cheaper and more effectively than your industry rivals.
While it might feel easier said than done, your company can embrace various tactics to lower its overheads and generate a significant return on its investment. Learn how to increase your startup’s profit margin.
Understand the Average Industry Profit Margin
The first thing you must do is identify the average profit margin for your chosen industry, which will provide your business with a goal to work toward. While every company is different, it is wise to learn how your profit margin might compare to your rivals.
For example, beverage companies often enjoy an average profit margin of 11.95%, but the industry is saturated with competition. If your business sells electrical equipment, aim for an average profit margin of 7.63%.
If you have developed a unique product idea, you will likely turn your attention toward manufacturing. To make a product a reality, you may feel tempted to invest in a 3D printer or expensive manufacturing fees. However, Shapeways enables entrepreneurs, engineers, and individuals to upload and sell their 3D objects through their marketplace, which will slash a company’s overheads. It will allow your business to affordably print and sell quality 3D products without CAD modeling experience, and you will not need to invest in expensive in-house printing technology.
Lower Operating Expenses
A company’s operating expenses can eat into half of its profitability. To increase your business’s profit margin, find ways to lower various overheads, such as
- Business travel
For example, your business could save money by paying invoices immediately, as many vendors provide an early payment discount. Also, routinely review your employees’ necessity to the company to reduce salary expenses. If your team can work remotely, it might be time to say goodbye to an overpriced office and invest in a smaller, more affordable space.
Raise Your Company’s Pricing
Many new companies are afraid to sell products at a high price point, as they might not have the same knowledge and experience as their rivals. However, an increased product price can equal a bigger profit margin. Plus, many consumers will view a more expensive price point as a reflection of a product’s quality and the customer experience.
Conduct market research to identify the prices your target demographic would be willing to pay for your products or service. You might be surprised by their opinions, which could prevent your business from selling an item at an unnecessary low price.
Proactively Sell Products
Don’t build a website and social media profiles and wait for clients or customers to find you. Generate a healthier revenue and a large profit margin by proactively selling your products to customers using affordable tactics.
In addition to taking orders from customers, give people a call to pitch your product or service. Attend industry events, online seminars, exhibitions, and trade shows to promote your business, increase brand recognition, and build a bigger annual profit. Also, look for ways to retain existing customers to enjoy a huge return, such as sending exclusive deals or discount codes to their inbox.