HOW TO INCREASE YOUR PROFIT MARGIN By [Connie Laughlin]

Too many small business owners work an entire lifetime scratching out a living, struggling at times, to meet payroll and keep the lights on. While others are successful, working smarter, and enjoying the fruits of a bottom line that’s in great shape. Which category do you fall in?

 

Increase your Net Margin.

The goal is to get your net profit margin as high as possible.  There are creative ways to sell your services or products at a higher rate. Don’t just roll the dice and raise rates. This is where strategic marketing comes into play creating combo deals or added incentives to raise your ticket sales, without alienating existing relationships and still maintain the reputation of offering great deals.

You might have a product or service that isn’t worth your time to keep on the list – drop it.  Especially if it’s a drain on your resources.

Negotiate better agreements with your suppliers, manufacturers, and vendors.  You might consider forming buying alliances, if applicable. 

Automation technologies can streamline processes and increase productivity, in addition to lowering your costs. Some examples are employee onboarding, inventory management automation, and POS systems.  Outsourcing services for managing personnel, bookkeeping, internet, and marketing are all proven strategies you must explore. 

 

Decrease overhead.

Know your exact cost for having employees.  Payroll services, employment taxes, all human resources fees and services, safety programs, and workers’ compensation insurance should be rolled together to establish your true labor burden.  Know the exact percent for each risk classification of employees and add that on top of wages paid.  Or utilize independent contractors, in lieu of employees, if you can effectively do so and legally meet the definition of a 1099 by the IRS.

Be inquisitive, make phone calls, and do comparative shopping.  Examine all monthly costs, such as, office expenses, property liability and auto insurance expenditures, utilities, rent or mortgage costs, interest rates on loans, in addition to marketing expenses. Are you financially burdened with repair and maintenance of equipment and vehicles? Negotiate everywhere you can! When you go through this exercise you might be shocked at the amount of money you are able to hang on to each month!

While you may not consider customer service an area of importance to your net profit margin, it is.  How effective and efficient are your responses to clientele? Are your employees satisfying the customer right away or are there multiple communiques back and forth to handle one simple issue? Are your employees impowered to make certain decisions on their own up to a specific dollar amount? Limit the number of times a company representative must “get back” to a client when one touch would satisfy their needs instead of multiple. Do not overlook response times on inquiries, they must be limited.

Last but not least action Items

When is the last time you looked at your POS solution? Never hurts to run the numbers periodically with another vendor, or two.  In addition, to your traditional merchant services consider the option to offer customers that pay with cash a discount whereas the credit card users absorb the fees that you are currently paying.  

There are merchant services companies that specialize in the cash discount solution. They can provide a comparative stating your current traditional POS vendor fees, matched to their offer for traditional merchant services, along with their cash discount solution to see which of the three is your best fit.   Furthermore, if you decide to go this route, they can ensure you are meeting any special requirements and their high-end equipment is a snap to set up. 

Have you met with a business consultant recently about outsourcing your payroll and the entire human resources administrative side of your company to a Professional Employer Organization?  Outsourcing is a huge winner for so many businesses, especially with evergrowing legal regulations and bombardment of new terminology today. They provide payroll administration, deliver a robust human resources program, safety assistance, and optionally group health insurance, 401k, and other benefits. They not only streamline your operation, they lesson your liability.

If you are currently providing group health insurance to employees you really should investigate the cost to outsource your Human Resources, as mentioned above, to a PEO.  You’ll see deep discounts for healthcare under their large group umbrella not normally found on your own, the savings in that alone could offset any fees for their HR program. Keep in mind some associations or come-ons offer you a “great” deal on health care only to raise the rates after sign-up or upon renewal, due to not underwriting your groups overall health prior to quoting.

Shop all your service providers. Look for a lower cost and a more robust offering.  And don’t forget outsourcing duties to seasoned experts allows you to sleep peacefully knowing you are operating with professional oversight, plus you save a ton of time.

Better manage your employees and resources for the best outcome.

 

For information on various business solutions; including Professional Employer Organization services, health insurance and other benefits, along with merchant services contact Connie Laughlin at [email protected].