Running a business isn’t just about making sales but keeping more of what you earn. And if you’ve ever looked at your revenue, why am I making all this money but barely seeing any profit? You’re not alone! Profit margins can be frustratingly thin, and most business owners assume the only way to fix that is to sell more. But here’s the truth: higher sales don’t guarantee higher profits. If your costs, pricing, or operations are off, selling more can worsen things. The real key? Making more intelligent financial decisions lets you keep more of every dollar. Let’s talk about five proven strategies that work.
Strategies To Improve Profit Margins
Raise Prices (Without Losing Customers)
Most business owners are scared to raise prices. They worry customers will leave, so they keep their prices too low for too long, and their profit margins suffer.
But here’s the thing: If you haven’t raised prices in a year, inflation already has. Your suppliers are charging more, wages are rising, and your expenses aren’t what they used to be. If your prices don’t keep up, you’re working harder for less.
How to Increase Prices Without Losing Customers?
- Start small: A bakery selling cupcakes at $3.00 each increases the price to $3.15. The cost to make each cupcake is still $1.50, so that 15-cent increase is pure profit. Over 1,000 cupcakes a week, that’s an extra $150, without selling a single extra cupcake.
- Charge based on value, not cost: If your product or service saves customers time or money, they’ll pay for that, so price accordingly.
- Bundle for better perception: Customers are more likely to accept a price increase when it adds value, like extra features or bonuses.
Will you lose some customers?
Maybe. But if a slight price increase drives them away, they aren’t profitable customers. The ones who stay will be worth more, and you won’t have to work as hard to break even.
Cut Costs but Do It Smartly
When profit margins are tight, the first instinct is to cut costs everywhere. But if you cut in the wrong places, you could hurt revenue even more.
The goal isn’t just to spend less, it’s to spend smarter.
Where to cut costs without hurting your business?
- Review your most significant expenses: Are your supplier contracts outdated? Are you paying for software you barely use? Start by cutting what doesn’t help your business grow.
For instance, a marketing agency wants to cut costs. Instead of firing staff or reducing ad spend (which would hurt revenue), they audit their software subscriptions. They find they’re paying $300/month for a tool they rarely use. Cancelling it saves them $3,600 per year without affecting their operations.
- Automate where possible: Manual invoicing, scheduling, or customer follow-ups? If a computer can do it, you shouldn’t pay an employee to do it.
- Optimize your labour costs: Do you have too many staff during slow hours and not enough during peak times? Scheduling smarter can reduce payroll waste without affecting productivity.
For example, a local café noticed staff were overscheduled during slow hours and understaffed during busy ones. By tracking foot traffic, they adjusted shifts, cutting unnecessary labour costs by 10% while improving customer service.
Where NOT to cut costs?
- Marketing and Sales: These bring in revenue. Cutting them is like turning off the oxygen supply to your business.
- Customer Experience: If service quality drops, you’ll lose customers, and that’s a much bigger problem than cutting office snacks.
Cutting costs wisely means improving profit margins without hurting growth.
Sell More to Your Existing Customers
Getting new customers is expensive. You must market to them, convince them to trust you, and hope they stick around. You know what’s way easier? Getting more business from the customers you already have.
How to increase revenue without finding new customers
- Upsell and cross-sell naturally: If someone buys one product with a logical add-on that makes their purchase better, offer it.
- Introduce subscription or retainer models: Turning a one-time purchase into recurring revenue makes cash flow more predictable.
- Reward loyalty without discounting too much: Instead of constant discounts, offer VIP perks, early access, or exclusive products to loyal customers to encourage them to stick around and buy more.
For example, a hair salon introduces a VIP membership where customers pay $50/month for unlimited styling discounts and priority booking. Within six months, 25 customers signed up, generating an extra $15,000 per year without new marketing costs.
Too many businesses focus on finding new customers instead of maximizing the value of the ones they already have. Don’t make that mistake.
Streamline Operations Because Wasted Time = Wasted Money
If its operations are inefficient, a business can grow in revenue but shrink in profit. Every wasted step, redundant process, or unnecessary delay eats into the margins.
How to make a business more efficient and profitable
- Automate repetitive tasks: If you’re still manually handling invoices, emails, or scheduling, you’re wasting time and money.
- Identify bottlenecks: Are specific processes slowing everything down? Fix those before trying to grow further.
Consider this: A landscaping company’s employees spent two hours per day on manual scheduling. Switching to an automated booking system saved 10 hours weekly, reducing payroll costs by $15,000 annually.
- Reduce inventory waste: Holding too much stock ties up cash. If you’re over-ordering or dealing with spoilage, rethink your inventory strategy.
Efficiency isn’t about doing more, it’s about doing better.
Take Control of Cash Flow Because Profit Means Nothing If You’re Not Getting Paid
A business can look profitable on paper but still struggle if cash isn’t flowing. If your money is tied up in unpaid invoices, it doesn’t matter how much revenue you generate—you’re constantly playing catch-up.
How to improve cash flow and get paid faster
- Tighten payment terms: If you’re offering a 30-day payment cycle, consider reducing it to 15 days. The longer you let customers delay, the worse your cash flow will be.
A construction company had clients taking 90+ days to pay invoices. By switching to 30-day payment terms and charging late fees, they reduced overdue payments, freeing up cash flow.
- Automate invoicing and payment reminders: Set up automatic email reminders and late fees so you’re not constantly chasing payments.
- Offer early payment incentives: A 2% discount for paying early can be worth it if it means predictable cash flow.
And if a client keeps paying late? Reevaluate whether they’re worth saving. Late payments can quietly sink an otherwise healthy business.
Now, the question is: Which of these will you start applying today? Because reading advice is one thing, acting on it is what changes your business.
Contact Black and Gill LLP in Etobicoke to Help You Improve Profit Margins
Strong profit margins are the foundation of a sustainable business. A fractional CFO can help you optimize pricing, reduce unnecessary costs, and increase profitability without compromising growth. At Black and Gill LLP, our accountants and CFOs offer expert services, including profit margin analysis, cost management, and cash flow optimization. Contact us us online or call us at 416-477-7681 to start improving your margins.
To learn more about how Black and Gill LLP can provide you with the best CFO expertise, contact us us online or call us at 416-477-7681.