6 ways to increase your gross margin now

If your client accounts are set up correctly, 100% of any increase in gross margin will drop directly to the bottom line. Yet all too many founder-led consultancies aren’t putting improvement plans in place.

Here are some ideas to start improving gross margin in your business and making it a habit!

1. Increase what you charge

Any price increase goes straight to the bottom line, so when did you last increase your prices?

Other questions to ask yourself include:

·??????? Do you know how your prices compare to your competition?

·??????? Does your pricing match your brand aspirations?

·??????? Which quartile do you think your pricing should be in?

·??????? What price increases will you implement in the next 3 years?

Have you increased your prices for existing clients as well as new ones? There is an art to this but it is achievable.

Do you have regular price increases linked to inflation in your terms and conditions? If you do, are you acting on them?

2. Stop or reduce discounting

Discounting affects your operating profit, so ask yourself why are you doing it? If you don't value your services at full price, neither will your clients or your team.

If discounting is an embedded sales technique to get deals over the line then I would recommend you come with alternative ways to create urgency such as expert resource availability.

If you are discounting as a strategic play to increase the volume of work clients place with you, then that is different. It then becomes about the extent of discounting. One simple change is to discount in 2.5% increments instead of 5% increments – this will immediately half the amount of margin you are giving away.

3. Reduce what you pay your associates

In the early years of a founder-led consultancy, it is common to be reliant on trusted associates. However, you need to reduce this dependency over time to maximise your gross margin. The key is to ‘own the market’ – have enough associates so that you dictate what you pay rather than the other way around.

If you charge your fees based on outcomes, do the same with your associates. It will reduce your risk and reward them for maximising the impact they have – win/win.

4. Increase utilisation of staff

How do you want your staff to make the best use of their time? In my consultancy, we called it the 'perfect pie'. I.e. the % breakdown of how staff contribute to the business by supporting internal process development, contributing to the sales effort and of course doing billable work.

As your team grows, monitoring utilisation becomes more and more important. Check out our Utilisation-to-Profit calculator to establish the profit value of a 1% increase in utilisation of your team. I think you will be surprised.

Discover ways 5 and 6 in the full article here:

To compare your gross margin with your peers, get access to the Consultancy BenchPress report which includes:

·??????? the average gross margin of founder-led consultancies in UK&I

·??????? how often you should measure your gross margin for the best results

·??????? the average operating profit % of consultancies and the best % to aim for

·??????? and lots more data including what consulting owners earn, their biggest new business challenges and what the top 10% of consultancies charge.