When a franchisee is looking to increase their profit margin (the percentage of your turnover or revenue that is yours to keep as profit), the first thing they think to do is to cut all costs. Sometimes they go so far that they are actually decreasing the chance of completing a sale or not servicing their customer because they have gone a step too far in cutting costs.
A quicker and more efficient way to increase your profit margin is to increase your sales. The reason being is that once you are beyond break even – that is all of your expenses are paid for such as your lease, phone, insurance, etc – then every sale you make over that is pure profit after the cost of the sale or the cost of the product. You have already covered your fixed expenses that do not alter no matter how many or how few sales you make.
I’d actually suggest you work on both – decreasing your costs AND increasing your sales. It is amazing how even some of your expenses will go down as you make more sales especially in the area of purchasing products because you can start to get a bulk purchase price that can save you a lot of money in expenses and therefore make you even more profit.
If you have loved this tip and want more, then check out the book ‘101 Tips for Franchisees’. Available now from Amazon in paperback or Kindle formats. CLICK HERE to get it today!
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