Improve your business margins

“Many receive advice, only the wise profit from it.”

- Harper lee

As we step into the new year, it’s the perfect time for small business owners to take stock and set growth goals. One of the most effective ways to boost your profitability isn’t necessarily by chasing more sales - it’s by improving your profit margins. When your margins are strong, your business can deliver the profit you need without relying on ever-increasing sales volumes.

And if you do manage to lift sales at the same time, the impact on your bottom line can be substantial.

For business owners, having clarity on your margins is essential. At GoAccounting, we work with many clients in the Nelson region to help them understand exactly where their profits are coming from - and where opportunities exist to improve them. Once you’ve measured your margins accurately, the next step is to take action.

Here are ten strategies that can make a real difference for your business:

1. Set clear targets and budgets
   Assign targets and budgets to individual team members and projects. When everyone knows what is expected, it creates a culture of accountability. Weekly stand-up meetings - even just ten minutes long - can be a powerful way to celebrate achievements, share ideas, and keep everyone aligned on profit goals.

2. Focus on high-margin products or services
   Not all products and services contribute equally to your profitability. Identify those with the highest margins and make sure your team knows how to prioritise and promote them. Training your staff to confidently sell these offerings ensures your business captures maximum value from every transaction.

3. Eliminate or reprice low-margin items
   Products or services with low returns can drain resources. Consider adjusting their pricing or removing them from your offering altogether. The only exception is loss leaders - items priced to attract customers - such as everyday essentials in retail or petrol in service stations. These can be strategically positioned to drive additional sales of higher-margin products.

4. Manage slow-moving stock
   Excess inventory ties up cash that could be used elsewhere. Put slow-moving items on sale to clear them out and set maximum stock levels to prevent over-ordering. Keeping a leaner inventory not only frees up cash but also reduces the risk of obsolescence.

5. Factor in all costs
   Many small businesses underestimate the impact of consumables, administration time, or software charges on profitability. Adding a small charge per job - such as $10 for administrative overheads - can have a significant cumulative effect over a year.

6. Back-cost jobs and projects
   Comparing the actual cost of each project or job to the quoted price helps you understand whether your margins are being met. This practice allows you to adjust pricing, resource allocation, or workflow to ensure future projects are profitable.

7. Keep price lists current
   Regularly review and update your pricing to reflect current supplier costs and market conditions. For businesses using pricing or quoting tools, accuracy is crucial - outdated costs can quickly erode margins without anyone realising.

8. Upsell and offer choices
   Offering options to your customers allows them to choose the level of service they want while increasing your average transaction value. When structured correctly, upselling doesn’t feel pushy; it simply gives customers a choice of “yeses” that benefits both parties.

9. Maintain regular customer contact
   It’s widely acknowledged in business that retaining existing customers is far cheaper than acquiring new ones - sometimes up to six times more cost-effective. Keep in touch, network, and create opportunities for repeat business. Strong relationships naturally drive more frequent purchases and loyalty.

10. Use systems and checklists
    Ensure your team is aware of your full product range, the most profitable items, and when to offer them. Simple checklists for sales staff or service teams - like prompts for add-on offers when scoping a job - can help avoid missed opportunities.

Every business is unique, and there are many more tailored strategies that can support growth and improve margins. For business owners in Nelson, working with experienced accountants who understand the nuances of small business accounting can provide clarity and confidence in developing a growth plan.

Understanding your numbers and actively working to improve margins ensures your business is positioned not just to survive, but to thrive in the year ahead.