Coastal News

Discover

5 Simple Ideas To Supercharge A Startup’s Profit Margins

  • Written by News Co


Many startup and small company owners ask themselves “What is the best way to supercharge the company’s profit margins?”. A startup’s way to success is not always easy and all new business owners must face various challenges before seeing their company grow and expand.  


There are two types of profit margins: (1) gross profit margins and (2) net profit margins. Most startups and small businesses use the gross profit margins to measure the profitability of a single product (for example, if a company sells a product for $100 and it costs $60 to make it, then the gross profit margin is 40%), while the net profit margin is used to calculate the percentage of profit the company produces from its total revenue (for example, if a company sells a total of $100 and and the costs of goods sold were $60, $10 in marketing, $10 in sales and $10 administration, then the net profit margin is 10%).


Therefore, any business owner should bear in mind that the gross profit margin is the best choice for measuring the profitability of a specific item, while net profit margins should be used to calculate overall profitability of their company. 


5 Strategies To Increase A Startup’s Profit Margins


  • Reduce operating costs

Reducing operating costs is a quick and efficient way to supercharge a startup’s profit margins. Operating costs involve a wide range of costs, such as labour costs, office space and utilities costs, employee benefits, equipment and maintenance fees, insurance, etc. Usually, the costs required by a physical office (as well as the costs for the employees who travel/commute to work) can be extremely high for a small business. As an example, the most affordable solution for startups could be to use a virtual office that involves a much lower price and offers the same benefits as a brick and mortar office without managers and employees needing to be present in a specific location. Alternatively, a small company can use any other type of office that does not request the business owner to buy or rent the office premises (eg a serviced office). There are other examples for reducing labour costs, maintenance, etc as the above is just an example.


  • Raising prices

Many new entrepreneurs and business owners might be worried that they could lose customers if they raise prices. However, this strategy can help a business increase significantly profit margins as long as a company does it in the right way. Any minor increase in prices (that doesn’t need to have a detrimental effect on customers) can bring a massive increase in profits. Raising prices doesn’t necessarily mean that regular customers will leave a specific company for the competitors. In addition, most companies that increase their prices find that the quality of their customers improves as well. 


  • Enhance the company’s reputation 

A company must stay visible and connected (especially at the beginning of the startup journey) in order to establish a good relationship and communication with customers and increase its reputation. The online presence of a business (by answering to both positive and negative reviews) plays a fundamental role in strengthening its image. A company’s reputation is extremely important because it helps to attract and retain customers (and therefore to increase the profit margins). Also, a virtual address or virtual headquarters can help enhance a business reputation as well for new business owners that cannot afford to rent a traditional office (because it provides a business address, a personal business landline, and other significant services).  


  • Create a customer loyalty program

Customer loyalty programs are a quick way to increase a small company’s profit margins and improve profitability. Moreover, loyalty programs are not that expensive as someone may think at first glance. The costs involved by a loyalty program can easily be overshadowed by the profitable business generated as a result. Loyalty programs can be successful and effective marketing tools. For example, the customers of many companies that offer loyalty programs declared they would keep on working with that company rather than choosing a new one that offers the same type of products or services.  


  • Increase the average order value 

The average order value (AOV) measures the total amount each customer spends per transaction in a store. The simplest way to calculate the average order value is to apply the following formula: "total revenue/number of orders = average order value”. AOV is an effective eCommerce measure that can help with strategies concerning pricing, visibility of products, and presentation of these products to the customers. AOV provides an overall view of what the marketing and advertising budget should be. There are many ways a company can increase AOV, such as: providing a personalised shopping experience, adding product recommendations to products, providing order minimum incentives (for example, offering a discount on orders over a specific amount, etc.)


To sum up, reducing operating costs, raising prices, enhancing a business's reputation, creating a customer loyalty program, and increasing the average order value (AOV) can be a few successful strategies for a startup or a small company to supercharge profit margins (and therefore to grow and expand). 

Discover

Planning For Your School Ball

What are your best memories from your school ball? Of course, the school ball is one of the most unforgettable rites of pass...

Why You Need AWS Solution Architect, Associate SAA-C02 Exam to Get your Desired Job in 2020

AWS confirmations show the aptitudes to plan and oversee programming arrangements on Amazon's ultra-famous cloud stage.   ...

How To Find The Right Trailer To Suit Your Needs

So you are in the market for a new utility trailer. It could be that you are setting up your own landscape gardening busines...

Coastal News Magazine

Why Buy A House and Land

House and Land Package 101 The process of acquiring a house and land could be a stressful experience. You have to deal wi...

Travel Essentials For Men

There are several things that you need to carry when traveling. These are essential things that you are going to need when you...

Choosing the Right Builder for Your Home

So, you’ve finally decided to take the plunge and build a home for yourself and your family. Good for you! But have you st...

Why You Need Business Mentors

When you start your own business, there is so much to cover at once, and it can get quite overwhelming. Since you're your bo...

Cosmetic dentistry- A Revolution in the World of Dentistry

Your smile is something that tells others about your positive attitude and gives some indication of the overall health of your b...

Top 3 House Painting Color Guide for Your Kitchen Renovation Project during COVID-19 Pandemic

How to choose the right color for your kitchen renovation project? Here are the top 3 ingenious kitchen painting color secre...

A Guide to Australia’s Household Bugs and the Effective Way of Insect Pest Management

Do you need to know what kind of insect or bug that keeps on crawling around your home? Finding out what particular pest has...

Types of Shoulder Exercisers and Benefits for Health

Bad posture, long working hours, and strength of muscle will decrease energy levels of the body and worsen the mood, and it ...

Renovating your home to your dream home with JDL become worry free

Home is where we spend our most of the time. If your home is not beautiful enough at the end of the day you won't feel satis...


Writers Wanted



News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion