4 Strategies To Increase Profit Without Increasing Price

If you’re looking for a creative way to increase your profit without increasing the price of your goods or services, you’re in the right place.

In this article, we will share four (4) practical strategies that would help you increase your profit without increasing your prices.

Small and large businesses can increase profits at their current prices by optimising their profit margin. This will enable them to gain more value per sale.

What Is profit margin?

Profit margin is the percentage of profit your business earns from revenue. It tells you how much you put into your purse as a business owner.

For every N1000 your business sells, the portion of that money your business takes as profit after your expenses are deducted is your profit margin.

It is calculated as (Net Profit/Revenue) * 100

Four (4) Strategies To Increase Profit Margin Without Increasing Price

Price increments are the most popular way for small business owners to increase their profits. However, this can be dangerous and cause loss of sales and customers if not handled carefully.

The alternative strategies shared below would help increase and sustain your profit margin without the dire consequences of a price increase:

1. Prioritize products with a better profit margin

Start by assessing the profit margins of all your products and services.

This would help you determine which products contribute little or no profit to your business and which ones bring in more profit.

After categorizing your products into these two categories, you should evaluate them for the following factors:

A. Are these products loss-leaders you’re using to lure customers to your store or are they serving any other strategic objective?

B. Can you improve profit margins by reducing costs or increasing sales?

If your answer is no to both, you should consider dropping those products or services from your offering.

You can also opt to introduce more products with better profit margins as you phase out those with poor profit margins. This is if they don’t serve any strategic goal.

2. Negotiate lower prices

Your business will be in great shape if you can retain 100% of revenue as profit.

But we know that is not possible because costs always accrue.

What helps, however, is reducing the cost of producing or distributing your goods to customers.

The lower the cost, the higher the percentage of revenue your business earns as profit.

So, to increase your profit margin, you should look for ways to negotiate lower prices from suppliers, logistics companies, etc., by consolidating your orders, asking for discounts, buying in bulk or signing long-term contracts.

3. Avoid product markdowns

Markdowns occur when goods and services are reduced in price because they cannot be sold at their original price.

Say you sell a pair of shoes for 8000 Naira, If you reduce it to 7500 Naira, you’ve marked down your product by N500. This will reduce your profit margin on those shoes.

Instead, you should:

A. Try to create more perceived value for the product.

B. Improve your inventory management to prevent leaving products in stock until near their expiration date. As a result, you would have to sell them at a giveaway price.

4. Improve your efficiency

You’ll find that the more efficient your business is, the more its profit margin improves.

To improve efficiency, start with how you manage your business.

Operate a lean business model, which means focusing on cost efficiency.

If your business adopts technology and business automation, it can accomplish more results in less time, effort, and cost.

An improved profit margin means a lot to a small business.

It increases your chances of growth, places your business in a better position than your competitors with lower margins, and ultimately means additional money in your purse for the same effort.

Implementing the above strategies would help your small business capture more value from your efforts.

Now, all you have to do is just implement them.

PLUS: Whenever you’re ready, here are ways you can work with us in?starting, growing and scaling your business:

1. Do you want direct advisory and mentorship and would like to work with me one-on-one??

The Accelerator, our exclusive 12-month programme, is for entrepreneurs who are looking to increase their profitability, create more balance in their lives and are ready to become wealthy by building self-managing, owner-independent businesses.?Click here to apply now

2. Buy my book,?click here

3. To visit our YouTube channel,?click here