Sales, Price, Margins, and The Bottom Line

by Dave Kahle

Question:

It seems like the price is even more an issue today than ever before. In this environment, how do we get the margins up to increase the bottom line?  

Answer:

           Thanks for the question. Believe me; I understand the constant pressure on your price.  I wish there were a simple, 25-words or less formula for increasing your margins.  There isn’t.  What there is, though, is a set of tactics that have been proven effective in increasing your margins, even in the most difficult of markets.  Pick and choose from this list of specific, proven tactics and then apply them methodically, with discipline, over time, and watch your margins slowly grow.

         Add a point to routine quotes and bids.

          Most people get into ruts when it comes to quoting a certain product or range of products.  We fall into habits and just naturally put a standard markup on the final price.  Break out of the rut by trying one point higher.  For example, if you routinely quote some product category at 20 percent gross profit, try it two or three times at 21 percent, or 20 ¾ percent.  Chances are you are leaving some money on the table by using the same mark-ups you’ve used for years.

I know one point doesn’t seem like a lot, but it typically falls right to the bottom line.  Multiply that times every product and quote that you make for a year, and you would have added substantial additional margin to your business.

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Add a point on price and product changes.

        Let’s say several of your customers are routinely buying a product line from you.  You have it in at 18 percent gross margin.  The manufacturer raises his price to you 3 percent.  You refigure the customer’s new price at 19 percent margin.  You’ve just gained a point.

Every price, packaging, and product change is an opportunity to add a point or so.

        Promote higher margin items.

        In every industry with which I’ve been involved, there are high volume items that almost every sales person focuses on, and then there are very low volume items that most people ignore.  That’s too bad, because the high volume items are usually the lowest margin, while the oddball requisition items carry margins that are often multiple times higher.

           A low volume item that is too small in actual dollar volume to interest your competitors is a golden opportunity to increase your margins.  So, make it a point to present and demonstrate those low volume items that... READ THE FULL ARTICLE HERE