Raise your hand if you’ve ever stopped grinding long enough to ask yourself:
🔹 Where are my best customers actually coming from?
🔹 Am I truly making money, or just making sales?
🔹 Who do I actually want to sell to?
If you’re an entrepreneur, creative business owner, or corporate side hustler, these three questions could be the difference between stagnant sales and higher profit margins.
I learned this lesson the hard way. My sales were increasing, my revenue was growing, but my bank account wasn’t changing. 🤯
So I made some critical shifts—and my business became more profitable than ever, even in the middle of a pandemic. Here’s what worked for improving business profitability (and how you can do it too).
1. Understanding Profit Margins
Before diving into strategies to boost your profit margins, it’s crucial to understand what profit margins are and why they matter.
Simply put, profit margins measure how much money your business makes after accounting for costs.
They are a key indicator of your business’s profitability and financial health.
Customer Type | Revenue | Time Required | Stress Level | Profit Margin |
Low-Paying Custom Client | $100 | 5 hours | 😩 High | ❌ Low |
High-Value Repeat Client | $100 | 1 hour | 😃 Low | ✅ High |
📌 Key Takeaway: Not all customers are created equal! Market to the right people to maximize profits. |
What is a Good Gross Profit Margin?
A good gross profit margin (GPM) can vary significantly depending on the industry. Generally, a higher GPM indicates a more profitable operation.
For most businesses, a GPM of around 25-30% is considered healthy, but this can range from 10-50% based on the industry and business model.
For instance, retail businesses often have lower GPMs due to higher costs of goods sold, while software and digital product companies typically enjoy higher GPMs because their costs of goods sold are lower.
Aim for a gross profit margin of 50% at MINIMUM.
A good gross profit margin is one that not only surpasses the industry average but also allows your business to cover its operating expenses and generate a net profit.
However, it’s important to remember that a high GPM alone doesn’t guarantee profitability.
You pay yourself out of your profit!
Operating expenses and other costs can still eat into your gross profits, so it’s essential to manage these effectively to ensure a good net profit margin.
Focus on What’s Driving Gross Profit Margin (Not Just Any Traffic!)
Most businesses waste time and money on marketing that isn’t actually bringing in high-value leads.
I realized my most profitable leads weren’t coming from random social media posts—they were coming from Pinterest.
✅ 90% of my Pinterest pins were my own product pins.
✅ I pivoted my strategy to focus on Pinterest’s priorities (story pins & video pins).
✅ The result in 2021? 448K monthly viewers & 800+ weekly website visitors—organically.
Today, my Pinterest audience hovers above 1 million+ monthly viewers and thousands of weekly website visitors. I now retarget those visitors with Facebook ads (if they meet income requirements based on my ideal client profile!)
I applied my Pinterest knowledge to search engine optimization and now post on Google Business Profile, Google Merchant Center (via Shopify) and show up in search engine results for multiple search engines.
Simply put, profit margins measure how much money your business makes after accounting for costs.
The average net profit margin, according to an NYU report, is 7.71%, but this figure can vary depending on the type of business and expenses involved.
They are a key indicator of your business’s profitability and financial health.
The average profit margin can vary significantly across different industries, such as industrial banks, manufacturing, and retail, making it crucial to understand these figures for assessing a company's performance.
A good gross profit margin is one that not only surpasses the industry average but also allows your business to cover its operating expenses and generate a net profit, thereby enhancing the business's profitability.
💡 What to do next:
Check your Google Analytics, Shopify, or Etsy stats.
Where are your best leads actually coming from? Double down on those channels instead of spreading yourself too thin.
2. Raise Prices (You’re Probably Charging Too Little!)
Here’s a harsh truth: Higher sales don’t always mean higher profit margins.
In early 2020, I had a reality check.
I was selling more than ever, but my profit margin was so low that I was basically working for free.
Thanks to a tough talk from financial expert and profit strategist Jamie Trull, I realized I had to double my prices overnight.
🚨 The epiphany that still makes me sick to my stomach? I could literally sell ZERO products and my cash flow wouldn’t change—just my ego. 😅
💡 What to do next:
🔹 Recalculate your cost of goods sold (COGS).
🔹 Factor in your time, materials, and overhead.
🔹 Test price increases on your best-selling products or services.
Higher pricing doesn’t just increase profit margins—it also positions you as a premium option, attracts better clients, and reduces stress.
Additionally, it improves your net income, which is crucial for calculating profitability after accounting for all business expenses.
3. Sell More to the Right Customers (Not Just Any Customers!)
Not all customers are created equal.
Some drain your time and energy, while others are high-profit, low-stress dream clients.
For example, in my business:
📸 One photo prop order takes way less time than a custom collage order, but both generate similar revenue.
📈 The smartest move? Shift my marketing to target photographers who need photo props.
💡 What to do next:
🔹 Analyze your customers: Who buys from you most often? Who is the easiest to work with?
🔹 Adjust your messaging & marketing to attract more of those customers.
🔹 Create offers that make it easier for them to buy more, more often.
The more intentional you are about who you sell to, the more profitable your business becomes.
Increasing sales revenue by focusing on high-value customers can significantly improve your profit margins.
5. Cost Reduction and Efficiency
Increasing your profit margins isn’t just about boosting sales; it’s also about cutting costs and improving efficiency. Here are some strategies to help you do just that.
Reduce Operating Costs
Reducing operating costs is a crucial step in increasing your profit margins.
Operating costs include expenses such as rent, utilities, payroll, and marketing.
By cutting these costs, you can significantly improve your operating profit margin and overall profitability.
Here are some practical ways to reduce operating costs:
Renegotiate Contracts: Talk to your suppliers and vendors to negotiate better terms and prices.
Energy Efficiency: Implement energy-efficient practices to lower your utility bills.
Streamline Operations: Look for ways to make your operations more efficient, which can reduce labor costs.
Leverage Technology: Use cost-saving technologies like automation and artificial intelligence to cut down on manual work.
Smart Marketing: Reduce marketing expenses by focusing on low-cost channels like social media and content marketing.
By taking these steps, you can reduce your operating expenses, improve your operating profit margin, and increase your overall profitability.
Improve Inventory Management
Efficient inventory management is another key way to increase your profit margins.
Managing the flow of goods and materials into and out of your business can help you reduce waste, minimize stockouts, and optimize inventory levels.
Here are some strategies to improve inventory management:
Just-in-Time Systems: Implement just-in-time inventory management to reduce excess stock and minimize waste.
Data Analytics: Use data analytics to optimize your inventory levels based on demand forecasts.
Inventory Software: Invest in inventory tracking and management software to keep better track of your stock.
Reduce Turnover: Implement efficient inventory management practices to reduce inventory turnover.
FIFO System: Use a first-in, first-out (FIFO) inventory management system to minimize waste and reduce inventory costs.
By improving your inventory management, you can reduce waste, minimize stockouts, and optimize inventory levels, leading to increased profit margins and improved overall profitability.
By focusing on these strategies, you can increase your profit margins without adding more work or stress to your plate. Remember, the key is to work smarter, not harder.
Want to Increase Your Profit Margins Without Extra Stress?
If you’re ready to scale your business the smart way, I’ve got two options for you:
💡 1-on-1 Coaching (4-8 Weeks): Get a customized plan to increase your profitability.
💡 SEO Squad ($47/month): Learn SEO strategies to get more high-quality, organic traffic—without paid ads.
🔥 Want help implementing these strategies?
Let’s chat! Drop a comment below or DM me on Linkedin!
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