MAXIMISING YOUR GROSS PROFIT MARGIN MADE EASY

Nick Roberts

Many business owners think it's too hard to improve their profits and blame others for their predicament. It's true some just don't have a strong enough core offering or are straight-jacketed by their business model but if you're not, you need to look at the individual components of your business operations to see how each can be improved. Your gross profit margin, in particular, is vital to your business success so what is important here?

• Understanding mark-up and margins. I met a retailer recently who still didn't how to calculate these after three years in business.
  
• Pricing. What is your value proposition? How do you set your prices? Are you able to calculate the turnover and margins you can gain or lose by changing your prices?
  
• Inventory Control. Many retailers have no idea of their stock levels or how many months worth they have collecting dust!
  
• Discounting. One of the quickest ways to go out of business.
  
• Buying and Supplier Incentives. Do you budget and use an order system? Are you receiving all the incentives you are entitled to?
• Security. I visited a retailer recently with no inventory control with boxes of stock stacked just inside the back door which is habitually left open.

In these days of cheap systems and accounting software there are endless tools available to monitor and analyse your gross profit margins so any excuses for doing nothing will be wearing thin! For example, if you're a retailer or wholesaler I have a very useful Checklist and Action Plan I can go through with you.

If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail nick@abac.co.nz or use "Contact Us" on www.abac.co.nz.

The information in this article is of a general nature and should not be relied upon as a substitute for specific advice.