While it’s true that some giants, like Amazon, have low profit margins, that doesn't mean your business strategy will support the practice.
Having a good profit margin allows your business to cover costs and continue to grow. And there’s no better time than now to boost your margins; that’s why we’re offering these eight smart ways to hit a good profit margin in 2019.
What Is a Profit Margin?
The formula for your profit margin is simple. You take the total of your sales and subtract the total of your expenses. The result of the equation is your profit margin.
The more complete definition is, according to Investing Answers:
"Profit margin usually refers to the percentage of revenue remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted. The formula:
(Total Sales - Total Expenses)/Total Sales = Profit Margin"
Understanding the definition of profit margin is simple, but increasing the profit margin is often more difficult. Use the tips below to increase your ability to make more profit in your business.
1. Don't Do It All Yourself
It can be tempting to do everything yourself. Things like digital marketing can be outsourced to companies that specialize in it. Something like digital marketing can cost a lot of money when you're doing it in-house.
Having someone else take care of it doesn't mean you have to offshore work. You can nearshore to companies that have similar governments and customs but still cost less than American workers.
When you don't do everything in-house, you will decrease the amount of money you spend on training, office space and more.
2. Encourage Word-of-Mouth Marketing
Word-of-mouth marketing has always been an important part of making more sales. Many times, it is easy to forget about the methods that have always worked for something flashier and new. While the new flashy methods are great, you shouldn't throw out things that are working.
You can encourage word-of-mouth marketing a few different ways. You could offer incentives when people use a code that is tied to the referrer’s account. You could offer supporters special perks and other benefits for sharing your information with their friends.
3. Let Data Drive Your Decisions
When you make decisions, you might be compelled to "make them with your gut" or "do what makes you feel good." While that sounds very cool and it might work out sometimes – go with the data.
When you make data-driven decisions, you can go with what makes the most sense by the numbers. Instead of arguing with your business partners, the board, or whoever else might want to argue, look at the facts and see what works.
You've been gathering data every time someone comes to visit your site, so what are you going to do with it? That's right! You're going to use it to make decisions that will impact your business's future.
Sounds a little scary when we put it like that, but it should be very reassuring.
Compare your marketing timeline and site performance.
Look at what you've been doing in your marketing over the last year. While you're looking at your marketing timeline, compare it with your site's analytics. You'll be able to see if one marketing activity moved the needle more than another one.
When you see the big spikes, check into it to see if there are other outside factors that might have affected these peaks. Was it Christmas, Mother's Day or some other holiday that usually gets your site a lot of traffic?
Who’s looking at your site?
You may be targeting and talking to a certain target audience, but are there other audiences you’re missing out on? Or maybe your marketing isn’t attracting the people you want to visit your site.
When you look at who you are attracting, you can figure out how to create content that will attract the right people. You may also want to create content that will serve the new influx of visitors that are interested in what you have to say.
Which channel is giving you the best results?
Most websites don’t have even traffic from all channels. Most websites also notice a higher conversion rate from specific channels. Depending on the business, one platform might work better than another.
Focus on the channels that are giving you the best return and axe the channels that are costing too much.
4. Change Operating Procedures
Continually improve your and your team's knowledge and skills. Leadership, management, and strategic planning have undergone and continue to undergo big changes.
While the way you operated may have worked in the past, if you want to continue to grow and increase your profit margins, you need to make some changes. Increasing your ability to be productive is one of the top things you should look into when you're changing your operating procedures.
When employees can accomplish more in the same amount of time, your revenue goes up without your cost going up.
5. Increase PPC ROAS (Return on Advertisement Spending)
If you're using pay-per-click advertising (PPC), you can spend a lot of money in the wrong places. Instead of sinking money in your PPC campaign, increase your return on advertising spending.
The best way to get a better return on your advertising spending is by targeting the right people. If you're trying to sell products to people who aren't looking for what you're selling you might get a couple of impulse sales, but that's it.
Focus on proper targeting and compelling messaging, and you'll start to see a better return on your advertising spending.
6. Stay Top-of-Mind
No one is going to do business with you if they don't know about you or remember you. Even if you've been marketing to a target audience for a significant period of time, that doesn't mean they're going to remember you when it comes time to do business.
Get accredited, join associations and networking groups that can help you stay top-of-mind with your potential customers.
7. Video for Social
You may have a video on your sales letters or other areas of your site, but are you using video on social media? Failing to advertise on social media using video is like missing out on a modern-day gold rush for your business.
There are many different kinds of videos you can make to promote your company.
Make videos that share stories about your company so people can get to know you. When people know what's behind your company and its story, they are more likely to form an emotional connection and rapport with your business.
You can also make videos that showcase your company's products and services. You might have your customers send in videos that show their with experience with your product. Customer-created content can be very powerful when used properly.
Are you having a promotion? A video sharing the details of your latest promotion is a great way to drive sales for your business. Make sure to keep your promo video short so that it catches attention while its main goal is to get people to go to your website and make a purchase.
8. Everyone Gets to Sell
It’s likely you have a team of sales people led by a sales manager. While it is great that you have a dedicated team that is working to bring in sales, you need to boost your sales team.
How do you boost your sales team without hiring more salespeople? Have everyone selling. If they work at your company – they can sell your company's wares!
When your employees are in meetings, emailing or involved in other activities -– they can be selling. Give your employees proper training so they can hold confident conversations about your products and services.
And don't forget that selling is a learnable skill and one that can always be sharpened. Invest in regular sales training for members of your team, they are the very heart of your business success and survival.
Increase Your Knowledge and Win in Business
Understanding what a good profit margin is and how to increase your profit margin is important, but there's more to learn. When you're in business, there is constantly something new to learn.
Whether you're focused on digital marketing, offline advertising, business development, or other parts of your business – you need more knowledge. You don't need just any knowledge though. You need knowledge that can help you grow yourself and your business.