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Make Your Small Business a Winner: Increase your profits

by Anna Hipkiss

Every business would like to make more profit, and usually the barriers are internal, not external, though we often blame others: “I can’t charge any more because people will go to the shop down the road.” “My supplier has put his prices up and I can’t change mine.”

Generally people err on the side of pricing low, not high. Setting a price is a big decision. It’s easy, if you price too high, to bring the price down, so it’s safer to be more expensive. If you start low, you’ll be unpopular when you increase the price, and even more so if you do it more than once, whereas no one will complain at a series of reductions.

Selling more is an obvious route to increase profits, but do not let that blind you to your cost and pricing structure. How much better to sell more at a 40% margin than a 20% one!

Price is at one end of the margin, and cost at the other. Ask yourself how well you are buying, how tough a negotiator you are. Do you just accept a price increase or do you shop around and check on your suppliers?

Ask yourself also if your costs are all essential. Do you need a big office, a new van, a fancy PC or expensive stationery? Do not just carry on buying what you have always bought – do a purchasing spring clean and see what it can do to your profit level.


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