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Industry Updates

3 Common-Sense Ways to Maximize Your Profits


Opportunities for goods-based businesses continue to grow as more service-based businesses emerge and fewer companies make tangible products. For those who can find a way to grow their manufacturing profit margin, the sky is truly the limit.

The average gross profit for manufacturers hovers around 25 to 35 percent. While this isn’t too dismal, there are some things you can do to achieve even better results. If you’re a manufacturing business owner, you’ve heard plenty about lean manufacturing, but how do you get there? Lean conversations often come down to a hard numbers game — cut costs here, layoffs there — but there are also some more basic, common-sense things you can do to help your business run more efficiently. Here are three key areas to focus on in order to expand your manufacturing profit margin:

1. Do your homework.

Success in manufacturing begins with having an accurate picture of the market. Assessing the competition is critical. If you’ve acquired your manufacturing business, it will be easier to assess based on insights from the previous owner. But if you’ve started a new manufacturing business, you will need to do some research on your particular industry.

Knowing your market includes finding out about any incentives that might be available to you. Many city and state governments offer aid and economic development incentives that can work to your advantage. Do your homework to see if state funding is available and, if so, how to go about applying for it. This can relieve some of your financial burdens and make a positive impact on your bottom line.

Industry knowledge also includes identifying which suppliers and service providers to partner with. We all know cheaper isn’t always better — especially in manufacturing — but competition does pave the way for negotiation. Make sure you’re getting different bids from as many suppliers and service providers as possible, and negotiating the deals that align with your manufacturing operation’s budget and goals.

2. Focus on your team.

You need to work on the part of the business where you can make the most impact. That means being realistic about what you can and can’t do. Hiring the employees that can bring in the skills you lack is one of the best ways to keep your operation running as efficiently as possible.

This includes finding the right people to handle the financial and legal details of your business. Remember those contract negotiations mentioned above? If you aren’t the best person to handle those things, hiring someone who can successfully negotiate the best prices for you will save you money in the long run.

The same goes for marketing. This is a critical aspect of your business. Remember, it doesn’t matter what you’re making if no one’s buying. Having marketing expertise on your side will ensure that you achieve results faster and cheaper than you’d be able to on your own.

3. Set goals.

This is where numbers come in. Identify the numbers you need to hit in order to maximize your profit, and review your business data often to determine what’s working and what isn’t. These numbers also will enable you to identify opportunities for savings, as well as where you should be investing more for the greater good of your profitability.

Tracking data about specific manufacturing processes is key. Doing so will ultimately help you identify which ones are successful and should be repeated, and which ones should be changed or eliminated completely. This information is essential in helping you to streamline your operation and reduce your overall expenses.

Sticking to these key guidelines will not only help to put money in your pocket now, but it will also enable you to fetch a higher asking price should the time come to sell your manufacturing business. By running leaner and maximizing your profit, your business will rise above the competition, and you’ll be doing yourself a service now and in the future.

Bruce Hakutizwi is the North American Director for Dynamis, which is the parent of BusinessesForSale.com.