There’s No Margin For Error!

I hear that we are now in a triple dip recession, whatever the hell that means!

We are all constantly reminded how tough the economic climate is and that we all have to fight that bit harder for sales and customers.

Now, whilst that may be true and I don’t advocate denying reality, the old saying that it is easier to sell to an existing customer, may well be a valid observation, but there is even an easier way to make money from existing customers and that is to concentrate on the profit element of your products and services that you’ve sold.

One of the major components to a company’s success is the difference between the value of the sale and the direct cost incurred to make that sale. In other words, your gross profit. If you are a business turning over £500k and your typical cost of sale is 30% (i.e £150k), then imagine if you were able to reduce your cost of sale to 25% and thereby increase your gross profit from 70% to 75%. That 5% extra is worth £25,000 clear profit to your company. Ask yourself how many new customers currently you’d have to win to make £25,000 of net profit.

Of course it is easy to quote changes to percentages, but how difficult is it really? It is going to involve an increase in your unit sale cost or a decrease in the cost you pay your suppliers. Ask yourself these 7 key margin questions?

Where can I squeeze more margin from on the supply and delivery of my products?
When did I really review the cost of goods I buy for resale?
When did I last ask my suppliers for a 5% reduction in costs?
Can I buy the same products for resale cheaper?
What would happen if I put up my prices by 10%?
How can I deliver the same product or service a bit cheaper?
Is there any wastage incurred in my products that I can tighten up on?