We’ve been seeing huge increases in everything from gas to groceries to raw costs of goods.
We’ve been seeing delays in shipments coming in from overseas.
We’ve been seeing consumers and business buyers pulling back on some purchases.
We’ve been seeing inflation making virtually everything more expensive over the last few months.
And now, with all of the concern about what is going on in Ukraine and how that may ultimately trigger higher inflation, as Fed Chair Jerome Powell says, we need to pay even closer attention to our margins and pricing in our businesses to avoid being on the losing end of a transaction.
So how do you watch your pricing and margins to ensure you don’t lose?
- You need to keep a close eye on all of your services and goods that you pay for and see how you can cut down on the costs associated with that service/product
- You need to look at your desired profit margin – if you were looking at making a 15% overall profit margin, you cannot simply say that you’ll add 15% to your costs. You need to divide your gross profit by the revenue you’re making to get your true profit margin.
In other words, if you pay $50 for a service/good and add a 15% markup, you’re charging $57.50 for that same service/good. But, if you want to make 15% profit, that’s not 15%! It is only 13.04%.
15% profit margin would be $58.82 or $1.32 more than the markup rate.
Paying attention to your profit margin is one of the five key areas that you need to pay attention to in your business as these five areas generate roughly 80% of your overall revenue! This is part of what I show my clients what to do regularly in my coaching/consulting practice.
Now, how many of you learned something new or were reminded of something you already knew?
What are you going to do now?
Feel free to reach out and schedule a brief introductory strategy session to see how we may help you keep your business afloat and growing!