It’s safe to say that the future for many small businesses looks tenuous at best. Consumer confidence is low, tensions are high, and your employees are all grappling the logistical, psychological and emotional implications of the new status quo. Whether that’s working from home in the company of shrieking kids and a stressed spouse, or not being able to shake hands with their colleagues and having to communicate through a mask.
Over the past few months, you’ve likely had to make tremendous operational changes to the way you run your business simply to stay afloat and maintain some semblance of profitability. Now, more than ever, you need to focus on doing all that you can to remain profitable. But that doesn’t just mean saving money. While there are usually extraneous expenses that should be mitigated, history has proven time and again that you cannot cut your way to growth. Instead, you need to focus on improving your profit margin through judicious investment and operational savvy. But before you can improve your margin, you need to be able to see it. Which brings us to…
Big data, a little clue
In the era of big data, businesses have access to more data than they know what to do with. It’s one thing being able to collect vast swathes of data from different departments, and it’s another thing to be able to mine it for actionable insights. What is your data telling you about customers’ changing habits? What does it suggest for the future? Is there anything you’re doing operationally that could be impinging on your profitability?
Without investing in Business Intelligence (BI) software, you’ll be reliant on guesswork. And where there’s guesswork there’s the propensity for human error. Which is one thing your business can’t afford right now?
Is your lack of inventory management eroding your margin?
Your inventory is the profit that’s waiting to happen. And when even small items go missing or fail to be accounted for in your inventory, it can slowly start to erode your profit margin. That said, manual inventory management can be a hugely time consuming, effort-intensive and frankly boring waste of time and man-hours. Which is why you should invest in an automated inventory management system. Not only does it make it easier to account for inventory, but automated features also make your daily operations more time efficient so that your team can be more productive. And that can only ever be good for your profitability.
Do your individual departments know about margin?
It’s all well and good having a clear grasp of margin from the safety of your office. But what about your individual departments. Do they understand the importance of margin? Do they know how their daily actions contribute to your business’ profitability. All too often, individual departments can become so focused on their own KPIs that they become miopic. They lose sight of the big picture and fail to see how their efforts help to steer the ship in the right direction. This is another reason why BI is so important. It allows you to communicate data clearly and effectively to department managers so they can relay it to their teams. So everyone knows how their efforts bring you one step closer to your goals.
Are you sacrificing your margin at the altar of liquidity?
When sales start to flag, it’s very tempting to throw a flash sale to reignite consumer interest and convert some of the inventory on your shelf into liquid cash. But while liquidity is definitely important, you need to think carefully before sacrificing your margin for the sake of cash flow. Because that capital won’t last forever. And when your bills are paid, you may find that you’re skating on thinner ice than ever.
Do you know how to add value while maintaining your margin?
In an era of low consumer confidence, the art of building value into every transaction is of paramount importance. You can’t afford to throw your margins away by giving discounts out like candy. But you can build value into transactions. Whether it’s by delivering outstanding customer service, making customers feel safe, secure and well looked after on-site, or delivering targeted offers that are just for them there are all kinds of ways in which you can do this. Upselling is also a fantastic way to help customers get value for money, while also shifting items of inventory that are gathering dust.
Whatever the future brings your business, it’s important to remember the importance of margin. Now, more than ever, it is the one metric to rule them all!