When you cannot seem to predict a bright future for your business for the new financial year, do not lose hope. There are certain techniques that you can apply to improve profitability of your business venture at the start of the new financial year without having to make huge investments.
If you’re a new entrepreneur, take a look at the 5 tips on how to increase your profit margin effortlessly without cutting down costs or making adjustments.
Know Your Market
Perhaps one of the biggest reasons why newly launched business ventures seem to lag behind in terms of profitability is because the business owner may not have conducted thorough research of the target market. Your product may be unique, may offer great benefits and the pricing may be spot on; but if the product is introduced to the wrong target audience, it is destined to crash and burn miserably.
The best way to ensure high profitability of your newly launched business venture is to analyze each and every component of the target market prior to launching your new product.
Spot on Pricing
It is a common misconception that lowering the price of your product may generate more sales revenue. On the contrary, setting a lower than average price for your new product in the hopes of increasing sales, may hurt the overall business venture by decreasing the gross profit margin considerably.
As a new entrepreneur, remember that is okay to raise the price of your product from time to time in order to maintain a stable profit margin. If you’re still unsure, do math yourself and see the difference. It’s perfectly alright to let go of 5% customers to enjoy the benefits of a 10% price rise.
The Direct Costs Dilemma
The surefire way to ensure high profitability of your business venture is to keeping the direct costs at an absolute minimum. But it is equally important to weigh the pros and cons of switching to another supplier because the prime objective is not only to find a supplier that charges the lowest rates but he must also be able to keep up with the service levels that you are looking for.
Simply put, the direct costs dilemma is all about increasing sales income while keeping the direct costs in control to raise the overall gross profit margin.
Minimizing Overhead Expenses
Another way to improve the profitability of your business is to strip the business expenses as well as additional overhead expenses to the bare minimum. When it comes to maintaining low overhead costs, remember that negotiation is critical. But at the same time, try to maintain cordial relations with the supplier so you are the first to know about new deals and discounts.
Bookkeeping Is Essential
Last but not the least; bookkeeping is important. You must always be aware of the revenue generated by the business and the expenses incurred at any point during the financial year. If you wish to pin point the underlying problems leading to low profit margin and be able to rectify them, then you must make the effort to maintain regular, reliable and detailed accounts.
If you need help with book keeping or filing tax returns, contact SK Financial CPA; the best accounting firm from where you can hire expert tax accountants, CFOs and CPAs on a contract basis at incredibly affordable rates.