Top 10 Proven Tips To Increase Profit Margins for Your Business

. 7 min read
Top 10 Proven Tips To Increase Profit Margins for Your Business

A successful business means maximum sales and profits. Since profit margin is measurable and proves that the business is doing well, you should always aim for improving it.

Hence, when you are not making enough profit then it’s a point of concern for your business. It might be that your profit margins have not been tracked or you’re offering discounts to customers without thinking about the profits. Your calculations may fail to compare the total costs incurred in a business against the total profits you earned. Moreover, failing to track your profits can hamper your business growth and stop you from increasing your overall profit.

Therefore, profit is your benchmark that you should always aim to improve.

The following ways can help you to increase the profit margin and achieve successful growth in your business.

1. Avoid Price Reduction and Know Your Inventory

Reducing product prices can be profit killers; hence, avoid them whenever possible. Inventory management cannot be the only thing that makes a small business successful, but it can be something that can harm you. To know what your customers like is one part. However, understanding how many of each product you need to display and how to price them is where inventory management can go wrong.

A pricing strategy that starts with an understanding of your brand and keeping in mind profitability is one of the critical aspects. Changing the product prices through markdowns can be a brilliant strategy but only if executed correctly. Excessive price reduction can lead to heavy losses as regards missed revenue and a lower margin on your goods.

2. Generation of Prospective Customers

You must run several ad campaigns such as digital marketing in addition to traditional marketing such as putting up banners, hoardings, and newspaper adverts to attract more and more interested prospects to your business.

More prospects visiting your business increase chances of conversion, thus resulting in more business and help to increase the profit margin.

3. Conversion of Prospective Customers To Buying Customers

The process through which you convert prospects who have visited your business into buying customers is also important. It measures the effectiveness of sales and the efforts that you put in for conversion. Increasing your conversion rate will lead to profit margin and sales growth.

Look at every key result area in your sales process and try to improve in each area. A small improvement in each key area can lead to enormous development in overall sales results.

Businessman draw simple graph with descending curve of cost

4. Reduce Operations Cost

One way of increasing profit margin is to reduce operations costs. However, the difficult part about reducing operating costs is to know what to cut as some expenses such as utilities, salaries, and rent vary from business to business. Hence, monitoring every aspect related to your business is essential. Ultimately, when these are audited, you can again see where you can cut down on expenses, thereby quickly increasing the profit margin.

5. Increase Your Brand Value

Improving your brand perception in the consumers’ eyes is another way of increasing the profit margin.

A few businesses, in particular, are adopting new promotional strategies for their brand visibility through marketing digitally, board signage, and attractive packaging. You can study any FMCG company and begin to understand how important it is to distinguish yourself from other brands that offer similar products.

Despite you not being a giant in that business, you can still make the customers view your brand differently by focusing on business aspects that aren’t directly related to sales.

The right solution will vary from one business to the next, but some ideas could be switching up the look of your store, investing in more attractive packaging, or teaming up with influencers to promote your brand.

6. Customer Service

One of the ways to increase your profit is by offering exemplary customer service. Train your staff well and make them an asset to your business. If your customers meet attentive and knowledgeable salespeople every time they walk into your store, they also won’t mind spending a few extra bucks to receive the best service. It will also drive them to become loyal customers.

7. Increase Profit Margin

An increase in the price or decrease in the cost of the product, without hampering the quality can lead to an increase in profits per sale. Profit margin is the gross profit that is made from the sale of each product or service.

Calculating the gross profit margin in your business can sometimes give you incorrect results. Therefore, try and calculate the gross profit margin on each of your products. Moreover, analyse your gross margin keeping in mind different business departments and types of products according to your business. You will become aware of low-margin products, goods that are in losses as well as high-profit products. You can also remove products that are being sold at low margins, thus resulting in low profits for your business. By following the above idea, you can concentrate more on profit-making products, which will help you to grow your business.

8. Vendors and Suppliers

While investigating your supply chain ensure to check if you are paying more on transporting products or supplies to your store or not. If that’s the case then, you should then contact your suppliers to see if you can work out something to reduce costs.

You should try to reduce the number of vendors and combine orders with other retailers in your area to lower transportation costs. There is also an option to buy products in bulk if you have enough storage space.

Building rapport with vendors and suppliers is the key aspect of your business growth. You can ask for vendor discounts and flexible payment options; however, maintaining a close relationship with your supplier will also enable you to set and work toward some common goals to improve profit margins at both businesses.

9. Removing Products With Low-profit Margins

Removing products with the lowest profit margins from your stock or minimising them can help you to focus on your time, energy, and money on products that offer high returns.

Products that have a markup of less than 20% can be considered to have a low-profit margin. If selling these products is not essential to your business, try eliminating them from your next order and see how your customers respond to the change.

house shape cardboard on wooden floor and grey wall

10. Raise Your Prices

Increasing product prices will enable you to earn more money on each sale and improve your margins. However, many businesses leave this idea because they fear losing their customers.

The decision to increase prices depends on each business's products, margins, and customers. The best thing to do is to explore your own business, calculate, and figure out your best price.

While calculating you must examine external factors such as competitors, economy, and the price sensitivity of your customers; consider your target audience as well. Most consumers would pay more for a better customer experience, service after sales rather than just price.

Considering all points, ensure to calculate how to increase product prices, try it on a few products to observe customer reactions and sales from there. If the results are positive, roll out the increase across all your products.


You don’t always have to make major changes in your business to improve your profits. Sometimes small changes and some good strategies can also help you to increase your profit margin. Sometimes a simple tweak in your pricing or a phone call to your vendor can pave the way for wider margins.

Although thinking of increasing profit margins is easy, making it happen is incredibly challenging. Because as a businessperson it is very difficult to decide and understand what is good for your business and what is bad. Therefore, study your industry and track your final expenditure and revenue source first. It is important to understand your profit margin as it can help you determine where to go next; however, it is different for each business. There is no need to always make major changes in your business to significantly increase your profit margin.

Also read:

1) Best Tips for Customer Retention for a Small Business
2) Tips to Understand Your Market while Starting a Small Business
3) Tips for Businesses to Overcome the Covid Blues - Revival Tips for Businesses
4) What are the keys to success when operating a small scale business?

5) OkCredit: All you need to know about OkCredit & how it works.

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Q. How to reduce costs and increase profit?

Ans. Reducing operations costs is a way to increase your profit margin. However, the difficult part about reducing operating costs is to know what needs to be cut as some expenses such as utilities, salaries, and rent vary from business to business.

Q. What are the ways to increase profit?

Ans. Some of the ways of increasing profit are reducing operations costs, improving brand value, and increasing the price of your product.

Q. How to increase profit margin in manufacturing?

Ans. This is the way to increase profit margin in manufacturing:

1. Avoid markdowns and use inventory properly.
2. Showcase your brand and increase brand perception in the eyes of consumers.
3. Streamline and reduce operating expenses.

Q. How to increase profit margin in a service business?

Ans. This is the way to increase profit margin in a service business

1. Remove products and services that have low-margin profits.
2. Generation of new leads.
3. Conversion of new leads into buying customers.