Get your business working smarter so you don't have to work harder! Challenge your margins....

1. Pricing

Review your prices regularly!

• Are they at least following inflation??
• How do they compare to other similar products and services in your area??
• How price-sensitive are your current and prospective customers?

2. Understand your cost structure

Understand your fixed and variable costs and ensure they are all absorbed into your pricing. ?????????????

• Fixed costs are as their name suggests unlikely to vary with the level of sales, for example, rent and administrative salaries.
• Variable costs are by definition the opposite.? With each sale, an incremental cost is incurred, for example, shipping, packaging, direct labour, and of course raw materials.

3. Identify your cost drivers (internal and external)

Cost drivers can be internal or external to your organization and are the factors that determine whether a cost is essential or can be mitigated.

• Examples of internal cost drivers are quality standards, waste reduction, stock levels,?appropriate use of technology and labour competency.
• Examples of external cost drivers are regulation, competition and severe economic forces. These tend to be easy to spot, but very difficult to manage.

4. Implement cost reduction measures

It may sound obvious, but reducing costs is a clear way to improve your margins, provided that this doesn’t come at the cost of quality and ultimately declining customer satisfaction.??

Possible strategies include;

• Negotiating with your suppliers / service providers based on quantity of orders, good payment record and longevity of the trading relationship.
• Outsourcing or automation of processes.
• Reducing wasted materials, energy and time.
• Investing in technology or research and development.
• Leveraging economies of scale.

5. Leverage liquid assets

If your business has adequate liquid resources such as stock and cash, you can charge premiums for speedy delivery, give discounts for higher volume orders or negotiate extended payment terms, all making your business more attractive to new customers and for existing customers to spend more with you.