Buzz about Business: How to improve Profit Margins
In our capitalist, Pakistani economy, one thing is crystal clear: your business will not survive unless you make profit.
For small businesses, though, the story is a lot more challenging; they often face the problem of selling just as much as their competitors, but never receiving the same amount of profit. Why is that?
It’s because small business owners often ask the wrong question: “How do I increase my sales?” They think that increasing sales equals increasing profit margin, which is wrong. In reality, many factors determine a store’s profit margin, and chances of profitability.
We have compiled five of the most effective ways you can ensure increased profit margins and success:
Analyse profit margins
We know – this sounds pretty vague, but only if you read it at its surface.
Owners take the shortcut by analysing overall profit margins of their businesses, which is like the cover of a book: it won’t tell you the story, not until you open the book and read every page. You can do that by analysing profit margins for each of your products, divisions, product categories, or customer categories. This way you can identify which products are selling best and worst; now you can stop selling low margin lines, and focus on your strengths.
Don’t compete on price
Entrepreneurs are quick to think that profits depend only on the price of your products when in reality, profits depend on value.
The best part is that in the business world, you can define what “value” means to you. The most efficient way to add value to your business is by providing it to the customers through various means: you can give superior value to customers based on their loyalty or referral, you can innovate the overall customer experience through technology, you can keep customers involved by consistently getting their feedback.
Point of sale software in Pakistan like Oscar POS let you reward your customers for their loyalty through a modern loyalty program, while simultaneously making sure their concerns are heard through Customer Relationship Management (CRM) Software.
Reports are the basis of the analytical part of your business, but too often they focus on events that have already happened or are too lately received to react to. In order to create a new level of work efficiency, you need to be able to handle reports in real-time.
Modern business software like Oscar POS have systems that give you filtered and/or categorised reports and alerts in real-time so that you’re always updated on the happenings of your business. This includes inventory, sales, and even stock levels.
This will help you act on the information you receive as soon as possible, thereby putting effective controls and efficient solutions in place. Managing your margin in real-time this way gives you greater control over how you want it to rise.
And we don’t mean the basic counting of warehouse products and writing it all up on paper. We mean to take it a step further.
Make a habit of using inventory systems to keep track of your inventory, by knowing which products are running obsolete, and which are running out. This will give you a better picture of what is selling well and what is not.
Oscar manages to give low stock alerts, check stock levels to keep them updated even as you’re selling, while simultaneously detecting any chances of pilferage. This indirectly reduces chances of thefts. Such systems are easy to work with – and they work well.
There are two perspectives to this factor: getting sales from employees and expanding your business reach.
The first way deals with enhancing employee performance – i.e. making them sell more. There are many ways you can do that; provide better training, incentivizing them to motivate good performance, giving them a degree of authority to give them confidence – the possibilities are endless.
The second way to increase sales is by growing the reach of your business. That relies mainly on marketing – so take advantage of POS software like Oscar to maximise marketing strategies; understand customer preferences through customer profiles and run targeted ad campaigns through email, SEO, social media and more.
Although external factors like political uncertainty can affect a business’s development, that is by no means a reason to feel demoralised. As an inspired entrepreneur, you can always make improve your profit margins through simple, sophisticated and easy-to-apply solutions.
In the end, you can always make a difference.