If your client has a gross profit margin problem, what is the natural reaction you are going to get in 70% to 80% of the cases? “Customers are leaving and I can’t put my prices up. There’s a new bloke down the road. He’s just started up and is undercutting me – I can’t do a thing. There is no way I can improve my gross profit margin.”
Business is always competitive- there’s always a ‘competitor down the road’. That’s no excuse for not improving the business, however. Well … here is a list of some ways to increase gross profit – and the last one is ‘raise your prices’.
So let’s illustrate a few points.
What is the first way you can deliver more gross profit to the business? Advertising. Why is that important? If you can sell ‘more’ at a profitable price, then you deliver more dollars of gross profit. As long as you’ve kept the other costs like labour in check, then you’ve started to build the net profit figure.
If you are talking about advertising, you are not necessarily saying: “go out and spend more”. Instead, say: “Look at how effective your current advertising is. What outlay and what response? Are there any advertising programs that have not yielded a result? If so, then drop them.” Suddenly you have freed up a few hundred dollars in the advertising budget. Now, how can you use that money to generate more sales? Should you do some direct mail to your current customers? Or should you make some phone calls? The message is: you don’t have to spend more, you just have to spend better.
That one example should give you an idea about taking each area in a checklist and having a focussed discussion with your clients about ways of improving their business.
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