10 Practical Ways to Lift Your Business Margin
In small business accounting, small changes can lead to big results. That’s especially true when it comes to improving your business margin. A modest 1% increase in your gross margin on $500,000 in sales adds an extra $5,000 straight to your bottom line – and often, you don’t even need to boost your sales or work extra hours to make it happen.
If you're wondering where to begin, here are 10 practical and actionable ways to increase your margins right now.
1. Negotiate better prices with your suppliers
Don’t accept your supplier's first offer as final. Prices are negotiable, especially if you're a regular customer or buying in bulk. By simply asking for better terms or discounts, you can reduce your cost of goods sold – directly improving your gross margin. Remember, the squeaky wheel gets the oil!
2. Update your pricing model regularly
Are your prices keeping pace with supplier costs and inflation? Many small businesses continue charging outdated prices while their costs have crept up. Reviewing and adjusting your pricing model ensures all costs are factored in – including freight, time, and overheads – so you’re not selling at a loss.
3. Back-cost 2–3 jobs every month
Back-costing involves reviewing actual job costs against your estimates. For example, did that last project really take the expected 10 hours, or was it closer to 15? By analysing 2–3 jobs monthly, you’ll identify where your quoting may be off and where costs are creeping in unnoticed.
4. Cut out low-performing products or services
Carrying slow-moving stock or taking on low-margin jobs can eat into your profits. Even if it feels painful to sell slow inventory at cost, freeing up capital and space for higher-margin products is worth it. Focus on what sells well and delivers a strong return.
5. Set targets and budgets for your team
When your team understands what they’re working toward, they’re more likely to take ownership of performance. Set clear sales, margin, or cost-efficiency goals and celebrate wins along the way. A motivated, focused team can make a huge difference in reducing unnecessary spend.
6. Use cloud-based, real-time reporting
You can’t manage what you don’t measure. Modern accounting tools give you instant insights into sales, margins, and performance. As Nelson accountants experienced with cloud-based systems like Xero and MYOB, we help our clients track KPIs in real-time to stay on top of their numbers.
7. Eliminate wastage and rework
Every hour spent fixing mistakes or redoing work costs money. Identify processes that serve no useful purpose (we call these SNUPs) and streamline your workflows. Whether it’s double handling, unnecessary paperwork, or inefficient systems, small fixes can deliver major savings.
8. Refine your sales process to focus on margin
Are you upselling effectively? Do you offer higher-margin options to your customers, or are you defaulting to the cheapest? Understanding which products or services generate the most profit allows you to tailor your sales conversations accordingly – leading to higher margins without more work.
9. Create a margin improvement plan
Margin improvements don’t happen by accident. Make a list of potential changes, set priorities, and assign owners to each task. Whether it’s reviewing suppliers, pricing, or team processes, a written plan creates clarity and accountability – essential for lasting change.
10. Involve a small business accounting expert
A qualified accountant isn’t just for tax time. Partnering with Nelson accountants who understand small business accounting gives you expert insight into cost structures, pricing strategies, and operational efficiencies. We’ll help you build a plan – and more importantly – stick to it.
“To improve is to change; to be perfect is to change often.” – Winston Churchill