The fifth cause of poor cashflow - Gross profit margins are too low
Your gross profit margin is what is left from your total sales after variable costs are deducted.
For example, if you are a retailer and your sales in a given period are $1,000,000 and the cost of the goods you sell in that period is $650,000, then your gross profit margin is $350,000, or 35%.
In the above example, if you implement some strategies to improve the margin from 35% to 39%, your gross profit will improve from $350,000 to $390,000. That’s an increase in profit of $40,000. You may need to increase your overheads a little to get that increase, however if you get the results, it will be well worth your investment and energy.
There are many ways to lift gross profit. Some will be appropriate for your business, and some won’t.
For example, if you’re a retailer, you could focus on reducing stock shrinkage, theft, avoiding some discounting, and making sure that you minimise stock becoming obsolete.
If you’re a contractor, you might focus on rework and wastage, making sure all work and materials on jobs gets billed, and team member productivity.
We can help you to determine the best strategies to lift your margins. We can then run your figures through our ‘Growth Equation’ calculator, to show you the impact of seemingly small changes and then help you wrap those goals into your annual Business Plan.
Don’t let poor margins destroy your cashflow and working capital. Get some help from us to make a better plan.
Join us at our free seminar about Cashflow Freedom. We’ll show you how much cash you can unlock in your business by
setting some smart goals and putting in place a simple action plan.
Date: Wednesday 19 June
Start time: 4.30pm
Duration: 75 minutes - followed by networking and light refreshments
Venue: PKF Bredin McCormack Rewcastle, Level 7, ASB House, 248 Cumberland Street, Dunedin
Parking: Limited client parking and street parking
The seminar kicks off precisely at the start time, so please arrive 15 minutes earlier. If you have any questions about
this seminar, please don't hesitate to contact us.