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Is Your Profit Margin Struggling? 6 Small Business Tips to Keep Overhead Low

By: Brittany Engelmann-- 2016-06-01 6:00 am --

When operating a small business, the greatest drivers of success are healthy profit margins and loyal customers. No matter how many customers you drive to your store, if you aren’t creating excellent profit margins, your return on investment will struggle. There are a variety of factors that impact a profit margin, and you can increase your profit margin without increasing the cost of your products.

  1. Pay attention to velocity. The cost per item is impacted by both time and labor. You need to keep the time from order to delivery as short as possible in order to maintain lower overhead costs. You can achieve this by finding a wholesaler that not only offers incredible prices, but also emphasizes efficiency and excellent customer service.
  2. Reduce waste. The overhead costs of your business will drive profit margins down, particularly if you’re spending more than needed. Find ways to reduce overhead spending wherever possible. Optimize work schedules to eliminate wasted time, perfect your order times so you never how too much or too little on hand, and use energy-efficient appliances to keep energy costs at a minimum. Identify any wasteful aspects of your business model and ask yourself how you can reduce or eliminate that waste to improve both the economic efficiency of your company.
  3. Eliminate low-margin products. Assess all of your products and services and identify any weak links that are holding your company back. If there are specific products and services that are experiencing much lower profit margins than the rest, consider eliminating them and focus your energy on the profit-producing aspects of your business.
  4. Retain more customers. Customer retention can also influence profit margins. By improving customer retention, you can reduce the cost of marketing, allowing you to lower your business expenses and increase your gross profit margin. Focus your marketing strategy on providing added value to existing customers, and offer exceptional products and services that will keep them engaged with your company.
  5. Buy in quantity. When buying products from a wholesale supplier, quantity means everything. You can save more money by purchasing larger quantities upfront. For nonperishable items that sell quickly, place orders less frequently and for larger quantities, so you can access the lowest cost per item.
  6. Don’t sell on price. Many businesses think that, in order to compete with neighboring companies, they need to be offering the lowest prices in town. However, according to Nielsen’s 2011 Global Online Survey, 61 percent of respondents said they prefer the overall value of a product or service rather than its price. Rather than striving to have the lowest prices in town, strive to offer the best products, the most enjoyable shopping experience, and the most attentive customer service. In turn, you’ll vanquish the competition without having to compromise your profit margins for sales.

To run a profitable business model, you need to be maintaining great profit margins. A healthy profit margin starts with the right wholesale supplier. With a supplier that not only offers competitive pricing on the products you need, but also offers fast deliveries and outstanding customer service, you can keep your overhead costs low and profit margins high. Contact us today to learn how DollarDays can promote the goals of your small business.