The 5 Myths of Mastering Profit Margins

Entrepreneur highlight the apparent, that yes – every organisation wishes to increase their profit margins due to it being a direct impact on the bottom line, but there are five myths we need to dispel in order to truly master margins.

Do not fall for the following myths:

  • Increasing margins can only be done by reducing costs
  • Increasing margins can only be done by raising prices
  • You should compare your profit margins to your competitors
  • Profit margin and mark-up are the same
  • We need to set a minimum profit margin target for everything we sell

To maximize margins, there are nine different profit levers you can pull:

  • Pricing and payment terms
  • Procurement and managing suppliers
  • Cost of goods sold
  • Supply chain optimization
  • Customer growth and retention
  • Employee empowerment and retention
  • Brand recognition
  • Operational excellence
  • Innovating and collaborating

By mastering which of these levers to pull and when, you will be well on your way to maximizing your profit margins on every sale.

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