Reading for High Profit Margins Less Stress: Confessions of the Pricing Man: How Price Affects Everything By Hermann Simon:

http://amzn.to/2fz8K1t

Solve for Happy: Engineer Your Path to Joy by Mo Gawdat:

http://amzn.to/2uNTGPm

To increase profit margins – so that in many cases you can make more with even fewer sales, you need to know a few basics that most people think that they understand and know…but probably don't.

1. 1. what do you sell? List all separate and bundled products/services
2. 2. What are the numbers sold and profit margins on each?
3. 3. What is the cost of acquiring each type of client/customer

In a few minutes we're going to give you a formula and show you some math that is amazing and might change your life. But first, let's break these three factors down a bit more.

These are the five simple factors:

1. 1. Leads: The total number of people who have contacted or who have been contacted by the business--over the course of a year.
2. 2. Conversion rate: The percentage of people who actually make a purchase. For example, if 100 people come to your website )if you're selling there) or your office or store in a week, and thirty (30) people buy something, then your business or store's conversion rate is 30 out of 100, or 30 percent, for that week.
3. 3. Average dollar sale: The average dollar amount per sale, estimated over the course of a year. The average can range from $5 or $10 (say, for a discount retailer) up to tens of thousands of dollars (for a business such as a car dealership or professional practice).
4. 4. Average number of transactions: The number of purchases the average customer will make over the course of a year. Again, it can be an estimate. This number will probably be larger in a retail setting than in companies that operate in a professional services industry.
5. 5. Profit margin: The profit percentage of each and every sale. Simply put, if a business sells something for $100, and profit was $25, the profit margin is 25 percent.

So how does this all relate to top-line revenue and bottom-line profit? Let's see.

Your Company

In your sample company, we use a very simple formula to multiply the factors we've just discussed. Remember, this formula multiplies factors instead of just adding them, so the cumulative impact is massive.

The Profit Booster formula looks like this: Leads x Conversion Rate = Customers Customers x Avg. Value/Dollar Sale x Number of Transactions = Revenue Revenue x Profit Margins = Profit

In your company, let's say you have either estimated or fully determined the following numbers: 6,000 x 25% = 1500 Customers 1500 x $100 x 2 = $300,000 Revenue $300,000 x 25% = $75,000 Profit

What does all of this mean? Simply put, you are running a business that converts one out of four prospects into paying customers. Those customers average two purchases at $100 per purchase each year and your company enjoys a 25 percent profit margin on revenues of $300,000.

It also means your total profit for the year is $75,000.

So what would happen if, over the course of the next year, you increased these results by just 10 percent in each of the five areas?

Let's do it, and then let's take a look at what happens to your bottom line: 6,600 x 27.5% = Customers 1210 x $110 x 2.2 = $292,820 Revenue $292,820 x 27.5% = $80,525.50 Profit

Examine the numbers closely and you'll see the 10 percent increase is incremental, which means you could easily nudge numbers up by that amount over a period of months--or even weeks.

The bottom line is that the new bottom line looks very interesting, doesn't it?

Even though we've increased each factor by just 10 percent (including top-line revenue), we were able to boost bottom-line profit by 61 percent--or a total of $30,525.50.

What could you do with an extra $30,000 in your business this year?

Think 10 percent is impressive? Do some math on your own and see what the numbers look like if you increase each factor by 30 percent, 50 percent or even 100 percent down the line.

The key is that we are multiplying factors--not adding--which has a massive impact on profit. The "5 Ways" isn't a complicated numbers game. It's simply looking at your business in a different way and working with a set of numbers that exist in every company.

While your competitors will be in an endless cycle, trying to increase top-line revenue and cutting expenses to generate more profit, you'll have at least five other factors with which to work. And there are literally hundreds of strategies you can use to boost those numbers immediately and over time.

We'll look at some of those strategies in the future.

For now, work with your numbers and brainstorm ways to increase leads, get more customers coming back, increase the amount they buy, and raise your profit margins--and you'll be miles ahead of the majority of owners successfully operating businesses today.Better yet, you'll be pleasantly surprised at how easy all of this is to do--and you'll be more than happy with your ultimate results.

1. 4.

Here are 13 Ways to Increase Profit Margins

1. 1. Know Your Margins & Increase prices with the client and customer as the focus. You can selectively raise the price of your most popular items to most effectively add to your bottom line. You don't have to increase prices across the board. And remember, no one knows the price you pay but you.

The first step to optimizing your profit is understanding it. It is a good idea to look at your gross profit margin often and break it down by clients and products or services. You can use this simple equation:

Gross Profit Margin = (Revenue – Cost of Goods Sold)/Revenue

For example, if you bought a widget for $50 and sold it for $100, your gross profit margin is 50 percent.

This can be a sticking point for small-business owners. If you have a service business, raising prices can feel personal and scary. But at the end of the day, pricing is one more piece of information about your business. Price is one way to convey the message that what your offerings are of higher quality or greater value than your competitors'.

Raising prices may cause you to lose a few customers, but your profit margins grow even if your revenue stays flat – and that means more money in your pocket.

1. 2. Sell More at better margins – Marketing, Systems and Sales as Leverage
2. 3. Bundle and Add Margin Sell added value by bundling products and services. Best Buy's Geek Squad promises it can Fix any computer problem-anytime, anywhere. Of course it leaves off For a price. People don't want the hassle of figuring things out or screwing things up. Customers value their time and will pay for worthwhile services related to the products you carry. Selling added value is the way to a very profitable future.
3. 4. Be happy Yourself – Solve for Happy Mo Gawdat
4. 5. Better Communications Skills – The Coaching Habit
5. 6. Narrow your Marketing focus. You can't be all things to all people. It's the difference between a restaurant with a menu of 200 mediocre items and one with twelve items that are outstanding. Consider how much profit you are making on your slower-moving items. Could that shelf space be devoted to quicker-moving, more profitable items? Yes!

Heed the 80-20 Rule

This tidbit of economic wisdom that says 80 percent of your business income will come from 20 percent of your products or services. This is where keeping a close eye on your gross profit margin is essential. Calculate your gross profit margin on each individual product or service your company offers. It's likely that some of them are dead weight and can be eliminated, while others pull more than their share of the weight. Streamline your offerings to include just the most profitable and you can use the energy that frees up to create something new and wonderful to wow your customers.

The 80-20 rule, Part 2

The rule applies to customers as well: Twenty percent of your customers probably account for 80 percent of your business income. Calculate your gross profit margins by client or customer type. The Clients who require a dozen phone calls before they will commit to the project and another dozen before they pay a deposit are eating into your profit margin. Don't be afraid to detach from unprofitable clients. Identifying your best clients or customers and working on attracting more just like them is one of the best ways to beef up your bottom line.

1. 7. Limit the discounting. Without a plan, you'll do anything to get money in the bank. I know one toy store owner who, when she had to pay bills, turned to Twitter to tell her followers they'd get 30 percent off if they came in that day. She thought she was brilliant. What she didn't realize was that she was robbing herself of profit to pay her bills. She was teaching customers to simply wait for the next tweet. She needed a quarterly promotions schedule, and so do you.

Find new ways…we will buy you this. Youll get this extra premium

1. 8. Cut Costs and waste. You want to get more done with who you have. Are there jobs you're hiring others to do that you could possibly complete with staff? Do you really need to pay a window washer, for example?

Talk to your vendors about pricing and find out if they have any special offers. There may be better pricing available for those who simply inquire. Be the squeaky wheel. When you buy new equipment, look not only at the purchase price but at the operating costs for competing models.

1. 9. Award extra hours based on merit. Grant employee requests for more hours based only on their average sale or number of units sold per customer, not simply on their request or need.
2. 10. Personally hand out all paychecks. When you personally see how much each staff member takes home, it makes costs real for you.
3. 11. Cut vendors. When you buy more from fewer vendors, you'll often get a better deal on pricing, shipping, and dating. Ordering only a few items from a number of different vendors requires more bookkeeping and tracking, and you often pay top-dollar to try to meet each one's minimum orders. No one's items are that special.
4. 12. Combine your orders and JV with other dealers to get freight and larger order discounts. Just be sure to decide ahead of time which of you will do what, and pay before delivery to avoid problems.
5. 13. Fire unprofitable customers. Those who need a lot of hand-holding, always beat you up on price, or constantly call you with some problem take up a lot of time. If your company is large enough to evaluate this, ask your order desk or sales reps to provide their top 10 complainers and match them to the amount of profitable orders they generate. Even if they deliver large volume, if they don't pass, tell them that while you appreciate their business, the costs to manage the account outweigh the profitability and you therefore must implement a price increase.

Resources:

Confessions of A Pricing Man: How Price Affects Everything – Herman Simon Affiliate Link: http://amzn.to/2fz8K1t

Getting Every Thing You Can From What You've Already Got – Jay Abraham Affiliate link: http://amzn.to/2uOh8Mx

Solve For Happy – Mo Gawdat Affiliate link: http://amzn.to/2uNTGPm

The Coaching Habit –Michael Bungay Stanier Affiliate link: http://amzn.to/2vtICJn