Profit margin is key for your product-based business. Focus on these 5 areas to become profitable

Profit margin is key for your product-based business. Focus on these 5 areas to become profitable

Know your profit margin

You are running or thinking about starting a successful product-based business with healthy profit margins.

There are many moving parts in running a business and sometimes, it’s hard to keep track of all the costs that need to be considered when calculating your profit margin across your range of products.

Profit margin products
Your most profitable products

There are better ways

As chartered accountants, we’re constantly developing new innovative ways to dissect the numbers and help you to clearly see what all the numbers are saying. Like a numerical storyteller.

How valuable would it be to you, to understand every product’s profit margin that you sell? Consider every cost associated with a sale. Once you have nailed down these metrics, you will then be able to plan what this means for the bigger picture of your business.

How many items do you need to sell (the volume), what impact will a discount have on a certain product line? You can tackle all of these questions if you are equipped with the right information.

We have developed a super insightful financial tool to help you with all of this. Introducing one of our newest OutRise tools: 

The Profit Pathfinder

This financial tool delves deep into your product portfolio, revealing one crucial truth: which products are the most profitable!

Why is this information so vital? 

Because you won’t be able to make grounded decisions on your next steps without it. Imagine piloting a ship in the dark – you would feel stressed, frustrated and would likely give up. 

This is what running a business without the knowledge of individual product profitability is like. You pour effort into marketing, invest in production, but which sails are propelling you forward, and which are dragging you down?

Without knowing your profit margins, you might:

  • Overspend on marketing campaigns for lukewarm performers. You can’t afford to spend money on the wrong things for a long time. You need to know what a successful marketing campaign looks like.
  • Invest in expanding the wrong product lines. Utilising resources like this for too long will weigh you down and hinder your growth instead of fueling it.
  • Miss golden opportunities to optimise pricing and promotion strategies. Blindly tweaking prices on gut instinct is not the same as making a commercially savvy decision, backed up by the right foundations. Sometimes you get lucky, but often you just miss the mark.

By knowing your profit margins, you will:

  • Profit margins per product: Know your champions and your losers. Prioritise resources and hone in on the perfect combinations.
  • Cost breakdowns: Where’s the financial leak? Think about and dissect individual product costs, helping you plug the holes and tighten your budget.
  • Pricing sweet spots: Identify the magic number that maximises profit without deterring customers. No more price-setting guesswork, just data-driven decisions.

With this newfound insight, your business transforms

  • Marketing campaigns laser-focused on profit stars. Attract the right customers for the right products, watch your ROI soar!
  • Expansion fueled by intelligent investment. Expand profitable lines, prune the underperformers, and watch your bottom line blossom.
  • Pricing that’s a symphony of profit and customer delight. Strike the perfect chord, maximising revenue while keeping your customers happy.

Our Profit Pathfinder isn’t just a financial tool; it’s your financial compass and navigation. It will help you to shed light on the products that make the most profit, also bringing in other areas that affect your business.

Use it to inform your product and pricing deployment strategies and marketing campaigns.

Think carefully about every product, what all the costs mean and how they are absorbed through every stage of your business cycle. If you found this valuable then you’ll likely find a lot of what we talk about and build the same. If you are interested in a service-based business version then you can access that here.

We hope you find the time to integrate this financial tool into your business planning and growth.

product profitability
Which products make you the most?

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