Skip to content
Blog Articles

Maintaining and Boosting Profit Margin During Growth

Publish date 09 Nov 2022

Table of Content

    Our Fractional CFO Services
    Learn More
    Maintaining and Boosting Profit Margin During Growth

    Maintaining and Boosting Profit

    Despite the economic challenges that the past couple of years have brought, the economy is recovering. Two years ago, many businesses found themselves needing to pivot in order to stay afloat during the rise of the COVID-19 pandemic, but now, many find themselves in positions of unprecedented growth. Unemployment is at an all-time low, and businesses have maintained a high level of activity and spending. If your company finds itself in a position of growth, first congratulate yourself for reaping the benefits of a great deal of hard work! Then, you may want to consider revisiting your profit margin to ensure your business is able to support its growth. A good profit margin is key to sustaining the total cost of long-term objectives. Here, we’ll suggest some checkpoints to review, especially as you head into 2023 and create new goals for your organization.  

    Understanding Profit Margin 

    First things first—what is your profit margin, and why is it so important? Profit margin informs the profitability of a product or service. It’s calculated by dividing profit by revenue, meaning it’s expressed as a percentage. The higher the percentage, the more profit a business makes relative to its costs. Profit margin is one measure to determine an organization’s financial health. If, for example, a company has high revenue but a low profit margin, they may not be able to sustain growth or reinvest their profits into company initiatives. A profit margin that’s considered ideal will vary based on your business’ industry. For instance, it’s typical for restaurants to have lower profit margins, and pharmaceutical companies to have very high margins.  

    Closely monitoring profit margins can both help you to fund projects that support organizational objectives as well as to identify red flags within your pricing. Many companies put all of their effort into increasing sales, not realizing that focusing on improving profit margin can cause the business to make more from every dollar of gross revenue. 

    Improving your Profit Margin 

    Again, the ideal profit margin will vary from industry to industry. Below are general tips to keep in mind while monitoring and trying to impact profit margins. If you’re unsure of where to begin, haven’t evaluated profit margins or pricing models, or don’t know where to focus your efforts, hiring someone from a fractional consulting group is a good place to start. A fractional consultant can evaluate your margin and make tailored recommendations based on your business size, type, and industry. This is especially useful if you don’t have a full-time accounting staff or someone in an advising position to help make decisions based on financials. A fractional consulting group can provide valuable insight without needing to invest in a full-time hire. With that being said, we recommend the following general guidelines. 

    Take a Deep Dive into your Strategies  

    To be able to increase profit margin, you have to adapt and optimize your business’ processes. And, of course, you can’t do that unless you know exactly what those processes are and the impact they have on your business. Set aside time to take a comprehensive look at how your money is being spent, how your product is being made, and what your hiring and retention strategies are. Similarly, identify any other factors that impact your revenue generation or production costs. From there, you can move forward to make a plan with increased visibility. 

    Create a Budget for your Cost of Sales 

    Within your deep dive, pay especially close attention to your business’ cost of sales, be it for a product or service. The cost of sales entails every expense that goes into making your product or providing your service. By looking at your cost of sale over the last several months, you can create a budget to use for a guideline as to what typical spending levels should be. As your business grows, be sure to not exceed the budget for your cost of sales, as this could lower your margin. On the other hand, be mindful of not lowering your cost of sales too much either, as this could compromise the quality you provide to your clients. 

    Identify Areas to Reduce Operating Costs 

    There are a few different profit margins you can use to evaluate your business’ financial health, one of them being an operating profit margin. (The other two are gross and net profit margin.) Your operating profit margin looks specifically at the effects of indirect costs that impact the bottom line and evaluates how well you manage those costs. These can include marketing costs, administrative expenses, depreciation, research and development, and more.  

    One effective way to improve profit margins is to streamline these indirect costs. This could mean outsourcing or using fractional services for positions that don’t require full-time staff, switching to a remote workforce to save on office space costs, tightening budgets for departments, and limiting unnecessary or unmonitored spending. (When, for example, was the last time you checked to ensure you weren’t paying for an old subscription?)  

    Strategically Increase Prices 

    Increasing prices is a seemingly simple way to also boost profit margin. However, you have to do so strategically as to not alienate your customer base or put your sales at risk. Niche services and products don’t run as much of a risk of being undercut by competitors, but this isn’t often the case for business owners.  

    Take a look at your pricing model and conduct a market analysis of similar product and service offerings. Pricing models can be tricky to navigate, but taking a comparative approach and seeking out additional guidance can help.  

    Boost Brand Loyalty 

    Finally, one of the best ways to take care of your profit margins particularly in times of growth, is to focus your effort on client retention. It’s no secret that retention is far less expensive that acquisition. By providing excellent service, a unique product, or offering optimal buyer experience from start to end, you can retain your client base. Happy clients are not only willing to pay slightly more for a good product or service, but are also willing to refer others to your business.  

    Take time now to create a strategic plan for your business’ profit margins, and reap the benefits in the new year!  

    Get Your Free Consultation

    Gain Financial Visibility Into Your Business

    We provide outsourced CFO, fractional CFO, and temporary CFO, Controller, Audit Preparation and operational Accounting services that suit the needs of your business.

    • Hourly Rates
    • No Hidden Fees
    • No Long Term Requirements

    NOW CFO provides the highest level of expertise in finance and operational accounting to accelerate results and achieve strategic objectives for sustainable growth and success.

    After completing the form, a NOW CFO Account Executive will reach out and learn more about your needs so that we can pair you with the right Partner.


    Learn More: Revenue vs Profit


    Share this post

    Recent Articles

    View All Articles
    5 Reasons Outsourced CFOs Are More Affordable Than In-House CFOs Cover
    Articles 4 min read

    5 Reasons Outsourced CFOs Are More Affordable Than In-House CFOs

    Read More
    How Outsourced accounting support business?
    Articles 10 min read

    How Outsourced Accounting Services Support Business Growth

    Read More
    When Does a Business Need Outsourced Accounting Service Cover
    Articles 11 min read

    When Does A Business Need Outsourced Accounting Services?

    Read More

    Don’t Just Take Our Word for It…
    Client Success, In Their Own Words

    The speed and efficiency in which NOW CFO stepped in and got us back on track was amazing and took a load of work off me. Their professionalism and responsiveness are first class, and I cannot recommend them highly enough. They are top notch across the board.

    alan-hill
    Alan Hill

    Director at Habitat for Humanity

    We have been overjoyed with the talent NOW CFO brought us. We did not have the staff bandwidth and they have been the perfect fit for our growing company. We were able to find the skillsets we were looking for, and NOW CFO was able to find our unicorn.

    Heath-McMillan
    Heath McMillan

    COO at CKR Financial Services

    NOW CFO was professional, knowledgeable, and courteous. They identified payroll fraud within our company, set up controls to make sure that time stealing did not continue and was instrumental in training our new admin.

    evelyn
    Evelyn Gorman

    President & CEO at GNS Electric Inc.

    NOW CFO has become an integral part of our management team. Since everything is cleaned up, we can move forward and look to the future instead of being stuck in the present. Would recommend them for any type of business.

    doug-martin
    Doug Martin

    CEO at Houston Country Community Hospital

    Because of the current economic climate, it is hard for us to retain staff who are capable of the accounting and CFO work that is needed. We would highly recommend using NOW CFO because of their superior service, value, and business acumen.

    kelcey-alison
    Kelcey Alison

    CEO at Gaming Specialized Logistics

    From the beginning of our relationship, NOW CFO has made us feel like we are in good hands. Our former bookkeepers had created a mess and NOW CFO stepped right in and learned our software and cleaned up the mess rapidly.

    Kevin-Gilbert
    Kevin Gilbert

    Office Administrator at Johnson May Law

    Over my 25-year entrepreneurial journey I have worked with many consultants, but they always felt like outsiders. NOW CFO is different and felt like part of our team. They rolled up their sleeves and pitched in wherever it was needed. PRICELESS!

    Lief-Larson
    Lief Larson

    Co-Founder & COO at JennyLife

    I am so glad we chose NOW CFO to help us with our accounting needs. Our controller level support has been phenomenal with the expertise, insights and commitment to our company. If we need anything, they are there and ready to jump in and help.

    Tiffany-Moore
    Tiffany Lacolucci

    Business Performance VP at Moore Fire Protection

    READY FOR YOUR FREE CONSULTATION?

    We provide outsourced, fractional, and temporary CFO, Controller, and operational accounting services that suit the needs of your business.

    For Faster Service 801-938-4764
    • Hourly Rates
    • No Hidden Fees
    • No Long-Term Requirements