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Honing in on the Perfect Profit Margin

By: Brittany Engelmann-- 2016-08-12 7:00 am --

Business owners need to possess multifaceted skill sets. Not only is it imperative to possess exceptional work ethic and business management skills, but you need to be an excellent writer, a mathematician, and a creative thinker as well. When it comes to finding the ideal profit margin, it requires both excellent mathematical skills and innovative thinking. Here is a guide to help you hone in on that ideal profit margin, without zapping your mental energy in the process.

 

Determine What an Appropriate Profit Margin Looks Like

Small to mid-sized businesses (SMBs) can anticipate lower profit margins than their big-box competitors, due to operating on a much smaller scale. Before honing in a perfect profit margin, you need to determine what an appropriate profit margin will look like based on the size of your business, the number of years in operation, and the industry you’re operating in.

While profit margins will vary by industry, Butler Consultants reports that, for retailers, the average profit margin is around 48.46 percent. By striving for an unrealistically high profit margin, you’ll be driving customers away with unreasonable prices. However, settling for a low profit margin could increase your risk of business failure.

Maintain Low Overhead Expenses

When striving to achieve healthy profit margins, businesses often turn to their pricing to see how they can squeeze more money out of each sale. However, overhead and operational expenses can actually have a tremendous impact on profit margins. So, before raising your price tags, examine your business model to see how much you’re spending and how you can reduce costs.

Take office supplies, for example. According to Gartner, the amount of paper produced by companies has been growing by a shocking 25 percent each year. It’s estimated that businesses spend about $200 per year per employee on office supplies. By finding lower prices on office supplies of the same quality, and you can reduce this cost on an ongoing basis, you're enabling your business to increase its gross profit margin. Compare the cost of office supplies among a variety of suppliers to ensure you’re getting the best price available.

Partner with Top Wholesale Suppliers

When choosing a wholesale supplier, price should certainly be a primary concern. However, you need to consider other factors that will influence business performance and productivity, ultimately shaping your overall profit margin. How easy is the supplier to work with? Can they accommodate your needs? Are they able to scale their offerings to fit your demands? Do their shipments arrive on time and in excellent condition? All of these will partially contribute to the gross profit margin of your business, so it’s important to take all of it into account when choosing the right supplier.

DollarDays Puts Customers First, Encouraging Business Growth

At DollarDays, our primary concern is customer satisfaction. We understand that, in order for your business to thrive, it depends largely on the performance of the suppliers you partner with. We take our commitment to customer satisfaction seriously by offering the lowest prices possible on all of our merchandise and ensuring we are well-stocked to accommodate orders of varying sizes. Contact us today, and talk to us about your needs from a wholesale supplier.