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How to Increase Your Profit Margin

Posted by Rieva Lesonsky

Apr 11, 2013 7:00:00 AM

144804396By Rieva Lesonsky

It’s part of your business plan and crucial to the outcome of your small business bank loan application. It affects your working capital and every part of how you run your business. Understanding your profit margin is important to the success of your business. The idea that selling your goods or services for more than they cost to produce or provide is basic to every business, but what constitutes a good profit margin varies from business to business and industry to industry. High-margin companies like jewelers and software companies can sell less because they make a high profit per unit sold. Low-margin companies must churn out more products and sell more services in order to make the same amount of profit.

If you’re like most entrepreneurs, your profit margins probably took a dive during the recent recession. If your business has seasonal highs and lows, your profit margin fluctuates with the seasons. But there are simple ways to improve your profit margins. Here are a few:

  • Cut costs. Look over all your expenditures and cut some fat. Have you done an energy audit to see where you can save on your electricity bill? Would it be more cost efficient to buy your office printer or lease it? Instead of traveling to a meeting across the country, can you teleconference? If you need help going over your expenses, talk to your accountant or schedule an appointment with a mentor at your local SCORE office.
  • Lower your material costs. Talk to your suppliers about lowering the costs of your materials or shop around for better prices. Ask about ordering more quantity for a lower per unit cost.
  • Do an efficiency audit. Can you outsource some of what you do, like payroll, so you can spend more time on marketing your business for more customers? Instead of hiring full-time workers, can you hire part-time virtual employees and get the job done just as well?
  • Harness social media efforts. This is where you may need an expert to step in and tell you what you don’t know. There are so many new social media strategies and opportunities you are probably not aware of yet. Affecting (and improving) your search engine rankings is only the tip of the social media iceberg. Local search, content marketing and mobile efforts are a few of the other strategies your company could be using to attract new customers—and increase profits
Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at, follow her on and visit her website,, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports..

Topics: working capital, small business loans, small business owners, small business

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