6 Tips for Improving Your Company’s Return on Investment

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The average profit margin across all industries in the United States is just over 7%. Of course, there is a lot of variance in that average with some businesses netting .35% while others net 72%+.

If you’re sitting at around 7% margins for your business, or worse, your company is losing money, you must find ways to boost your return on investment by reducing expenses and increasing revenue.

But how do companies do that? Below, our team breaks down 6 outstanding answers to that question.

Slash Payroll

Most business owner’s number one expense is payroll. This is particularly true for companies that have full-time employees that require medical benefits, vacation time, and other fringe perks.

Given the burden payroll has on business owners, this is the first place we recommend looking when it comes to dialing back expenses and improving their return on investment.

Slashing payroll can come in the way of redoing hours to make full-time employees part-time, letting team members go, and/or outsourcing portions of your labor.

Focus on Winning products

Every product that’s taking up space on your shelves and isn’t selling is costing you money in more ways than one. To reduce that effect, look over your sales and see which products your consumers truly love. Then, consider which products represent the highest returns when you sell them.

Take those two products, amplify their presence in your business and downsize the rest. If you’re having trouble identifying winning and losing products, take in more information here on how technology can help make clearer where ROI opportunities lie.

Less inventory means fewer distractions for customers, reduced leasing needs, and larger profits.

Negotiate Better Vendor Rates

From the person who brings you printer paper to the team that cleans your floors, by speaking with vendors to negotiate better rates, you can save yourself thousands of dollars per year.

Sometimes, getting better rates is as simple as shooting off an email. Other times, you’ll have to find a new vendor.

Whatever effort the task of getting a better deal asks of you, if the savings are great enough, the endeavor will be worthwhile.

Look Into Your Lease

For those of you that are working out of brick-and-mortar locations, ask yourself if you have to. Many companies transitioned to operating remote-based during the pandemic and never looked back.

If you do need to have a leased building for a storefront or other purposes, talk to your landlord to see what you can do to bring your monthly rent down.

Raise Prices

Not every market can bear higher prices. If yours can, upping rates by as little as a few cents could mean huge returns at the end of the year.

Consider what your customers might be willing to pay and test their limits by making a couple of items more expensive.

Reward Loyalty

If you don’t have a loyalty program yet, roll one out. It’s one of the best ways to keep your customers from shopping around.

Less shopping around means more return business and revenue.

Your Return on Investment Could Be an Adjustment Away From Skyrocketing

Getting a good return on investment in business can seem like a challenge. Believe us when we say though that by making a tweak or two, just about any company can boost their returns.

We hope our suggestions have helped you with understanding ROI and other business metrics like revenue and expenses. If you need additional guidance, feel free to go beyond our ROI guide and into other helpful business topics discussed on our blog.