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How Well Do You Know Your Profit Margins?

Is it time for a price increase?

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In my blog post a couple of weeks ago, I talked about the powerful '5 ways to increase your profits'. The first of the 5 areas that I suggested existing businesses look at, is profit margins as they are critical to business success and profitability ...

Could a price increase be the key to dramatically improving profitability in your business?

Could a price increase be the key to dramatically improving profitability in your business?

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You can have a fast-growing business, but without acceptable profit margins, all of your growth efforts will be for nothing. It is important that you know your overall margins, but you must know them by product or service type.

That way you can ensure you are promoting and selling your highest margin products and services wherever possible, allowing you to both cover your costs and re-invest in your business!

When it comes to improving your profit margins there are 2 main options. Either raise your prices or reduce your expenses! Many business owners are fearful of raising their prices and worry about losing customers, but if you have differentiated yourself right from your competition, it is usually a viable (and sensible!) option.

Many studies have shown that loyal customers are not doing business with a company based on price alone. If that were the case, supermarkets like Waitrose and car manufacturers like Mercedes would be out of business!

The important thing to note is that before you go increasing prices in your business, you need to know your numbers! Without detailed knowledge of what you sell and how much it costs you, you could end up increasing prices in the wrong area of your business.

But as an example of the impact price increase can have:

  • If a company making a gross profit of 30% increased its prices by 10%, it would have to lose 25% of its customers to be financially worse off.

  • Raise its prices by 30% and they could afford to lose 50% of their clients. On average, the loss of customers from a price rise is only 1-2%, which means in many cases profitability can be significantly increased almost overnight.

The added bonus that comes from raising your prices, is that the 1-2% of customers that do leave are often the worst ones; those that are high maintenance and take your time and energy away from your top customers.

Depending on your business, an across the board price increase may not be appropriate, but a strategic approach can be taken to work out which products and services to increase and which to leave alone.

"Would you like to know more?"

If you'd like to find out more about your profit margins and how to effectively raise your prices, do give me a call on 07590 584642 or click here to ping me an email and let's see how I can help you.

Until next time ...



If you're looking for a specialist business coach in the Bedford area, you can find out more about me by visiting . Let's see how I can help you achieve your goals!

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More about Paul Brooksbank ...

Are you a motivated business owner working far more hours than you would like in an average week? Do you feel frustrated that despite the hours you work, your business isn’t growing as fast as you’d like and profits aren’t at the level you think they should be? Is a lot of your working week spent fire-fighting and do you think that your time spent in the business could be more productive?

Do you feel like there’s untapped potential in your business but you are so bogged down working ‘IN’ your business, that you lack the time, energy and resources to work ‘ON’ your business and take it to the next level? Would you like to know how you can both reduce the hours you’re working and grow your business faster? And yes, it is possible.

If so, business coaching could be right for you!


07590 584642

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