6 tips to growing your gross profit
A healthy gross profit margin has been difficult to achieve in recent years with increased competition and consumers becoming more focussed on price.
Here are 6 ideas to help you grow your gross profit and gross profit percentage.
1. Increase your price – yes this can be difficult when customers are so price sensitive, but generally most businesses undersell what they do. Be proactive in telling
your customers why you are better, why they will benefit more from dealing with you and why they should pay a bit more for your product or service.
2. Review and negotiate with suppliers - unfortunately in the current difficult trading environment, loyalty to one supplier may not be rewarded. All suppliers are
chasing new business hard so you may find significantly cheaper prices from alternative suppliers.
3. Compare your business gross profit % regularly to prior years and other comparable businesses. This helps identify earlier if you have an issue with your margins
and gross profit, so you can take action to improve gross profit. Kennas has access to a variety of industry benchmarks which help our clients better understand
how they are going.
4. Sell more products and services – make sure you know your ideal client type, target market and your point of difference from your competitors. Learn how to
articulate this in words your customers understand, and what benefits they will receive. Review how you are getting your message across to your target
market and work out how to do this better.
5. Control your stock better to minimise slow moving stock (which consumes cash) and allow a better experience for your customer, monitor stock turnover
regularly, have in place a purchase order system to avoid over purchasing, set automatic re-order points to speed up stock replacement and focus on
stocking the highest and quickest selling products.
6. Increase productivity – for those businesses where employees are directly responsible for producing the items you sell (like manufacturing and professional
services businesses), look for innovative ways to improve productivity. This can include investing in technology, reviewing and improving systems and
processes, reviewing the manufacturing layout, providing incentives and empowering employees and improving workplace culture.