8 Steps to Increase Margin for C-Suite Business Leaders
October 3rd, 2022 (Updated 03/09/2023) | 11 min. read
The past couple of years have been characterized by a global pandemic, increased political and economic uncertainties, fluctuating commodity prices, rampant inflation, supply chain disruptions, labor shortages and falls in corporate profits. With market volatility at a high, business leaders of enterprise-level organizations are under immense pressure to scrutinize and secure acceptable margins and eke out extra profit wherever they can stay at the top of their game. Many organizations seek to simply cut costs and institute austerity measures to give their margins a bump. However, that approach could arguably be framed as an oversimplification when potentially more complex steps to protect and even increase your margin might be more appropriate. In that light, we will look at 8 Steps to Increase Margin for the C-Suite in the current environment.
Over the last decade at Pricefx, we have been working together with large-scale enterprise business organizations just like yours to realize their unique pricing niches with the use of innovative pricing software technology through good economic times and bad.
As such, Pricefx is perfectly positioned to assist in managing all those pricing pressure points through periods of less-than-ideal economic conditions. So, without further ado, let’s get started by briefly outlining the 8 steps to increase margin for the C-Suite, before we dive into a more in-depth explanation of each.
The 8 Methods of Increasing Margin for C-Suite Business Leaders
With unpredictability becoming the predictable new normal, business leaders accumulated a virtual lifetime of experience in coping with the extraordinary challenges COVID-19 threw at them. Suddenly, before C-Suite leaders worldwide could draw a collective breath, regional conflict and associated supply chain breakdown and 50-year high inflation levels made the decision for them to draw on those experiences immediately. As a result, C-Suite leadership teams globally are arguably better prepared than ever to handle what is thrown at them in terms of disruptions and global economic downturns.
But that does not mean you should rest on your laurels when it comes to doubling down on what you do well, in addition to getting creative when it comes to finding ways to increase your profit margins. And while some of the 8 margin increasing steps in the list below might appear to be pricing slam-dunks, there are always new methodologies to consider.
Consider these 8 methods to increase margins and even prevent profit margin erosion in your business;
- Increase Awareness of Growth Drivers Companywide
- Create a Sole Source of Company Truth – Define What ‘Margin’ Means in Your Business
- Focus On Margins
- Get Granular in Your Analysis of How to Increase Margin
- Make your Data Work for You & Discover Margin Boosters You Never Knew You Had
- Ensure Data Cleanliness for the Best Possible Margin Outcomes
- Give Your Client-Facing Staff Better Tools for Quality Business Judgements
- Forward Load Your Costs to Protect Your Margins
1. Increase Awareness of Growth Drivers Companywide
As a rule of thumb, raising margins drives growth. C-Suite business leaders must create certainty and communicate across their businesses about what drives their growth in their organizations by gathering and interpreting data to challenge assumptions and guesswork.
To ensure growth for their business and lay the groundwork for increased margins over the oncoming period of the ‘next normal,’ C-Suite business leaders should be considering further investment in digital transformation, developing new lines of business across different customer and product segments and apply targeted marketing across those segments, upskilling and retraining existing employees, strengthening their unique corporate cultures, and continuing to promote productivity by offering new hybrid work models.
2. Create a Sole Source of Company Truth – Define What ‘Margin’ Means in Your Business
Large-scale business organizations may have multiple definitions of what ‘margin’ in their company across different departments, sectors and geographies.
If your company has half a dozen or more different definitions of what ‘margin’ means, it is time to set up a companywide clarification of what the term entails. C-Suite business leaders must clarify the state of confusion about margin in their boardroom and having done so, develop a shared understanding across the entire organization to finally make margin a meaningful lever for profit.
3. Focus on Your Margins
Okay, so it may seem like simply stating the obvious but focusing on margins will deliver your business the best possible opportunities to increase them.
For yourself, as a successful C-Suite business leader you can set the focus with your team and calibrate the priorities. As a role model, ensure the team are focused on maintaining or increasing margin.
But what does that look like on an everyday level? Instead of outdated revenue-based or sales-volume bonus structures, institute commission structures that reward and celebrate sales at the highest margins. That kind of mentality switch flicked can be a profit margin deal breaker for your business and the difference between finishing the quarter with a glass of champagne in the black, or something far less enjoyable in red ink.
For example, leverage the power of modern pricing software to identify where your margin leaks are, and once identified, do everything in your power to plug them.
Your pricing team must be able to monitor what your approved price levels are and your customers need to be notified of price changes in time to avoid margin leakage.
Given the current rate of raw material price fluctuation, this can mean tracking results at a customer-item level on a weekly or even daily basis to gain an understanding of where to increase focus.
If your organization is still updating your price lists manually in Excel spreadsheets, there can be a 2-to-3-month delay in your price list management. You can risk your profit margin slipping out between the cracks as the prices of raw materials in your production keep on rising.
At Pricefx, by switching from Excel to pricing software, we’ve seen some of our clients’ price list update time decrease from 2 months to as little as 20 minutes!
What’s more, price-setting and price optimization tools work together allowing you to make the most of your pricing strategy. All while minimizing margin leakage and increasing bottom-line profit.
With those kind of time savings, pricing teams can be repurposed to go and discover additional pockets of value. Instead of preparing price lists for 2–to–3 months, your pricing team can spend the time more effectively on strategic discovery of other points of value on a pathway to increasing margins.
Learning from the example above, more time and resources need to be devoted to managing margins, otherwise lower levels in the organization may try, but fail in helping your business focus on success.
4. Get Granular in Your Analysis of How to Increase Margin
Many companies that lag behind market expectations do not have the technological know-how to increase margin. Don’t be one of them. Make a point of acquiring strategic capabilities and increasing how margin-aware your employees are.
Systematically seize the margin-increase opportunities that your own internal business data presents. Address your company’s needs to interpret what your data means using quality price optimization and management software, and having done so, identify the key levers to manage your margins more effectively to drive increase.
5. Make your Data Work for You & Discover Margin Boosters You Never Knew You Had
The best pricing metrics are data driven. Making use of the market intelligence that rests within your own customer, sales and transaction and product data is the key to discovering the boosters to increase your margins that you never knew you had. You can use that data to unlock three pricing insight priorities that hold true for most companies:
How to Get Your Data Ready for Pricing Software
By eradicating lag time with real-time cost inputs, calculating and minimizing lead times, leveraging willingness to pay to maximize profitability on every deal, employing price-supportive competitive tactics, understanding true cost-to-serve figures, and being able to test new prices and strategies with accurate what-if simulations, you’ll be winning during this highly unpredictable time.
Of all the changes we’ve seen in recent years, perhaps the biggest you’ll face on the way to increasing your margins will be in how your business uses it data and frames it to set how it prices.
6. Ensure Data Cleanliness for the Best Possible Margin Outcomes
Using large volumes of data to fuel powerful pricing insights can make for great margin increases, however, data quality and relevance are paramount.
The happiness of employees with big data, data analytics and the margin management made possible by pricing software solutions depends on the quality of the data.
Ensure that your employees receive the data quality they need to make more incisive insights, better pricing decisions in real-time and the vision they need to broaden margins.
7. Give Your Client-Facing Staff Better Tools for Quality Business Judgements
To widen your margins as much as possible, it is essential to bring information and intuition together. Enhance your teams’ hard and soft skills; help them to rely on their intuition with even greater success by supporting it with quality technology.
For example, empower your sales team with a CPQ (configure, price, quote) solution.
CPQ software is often an extension of, or integration with your Customer Relationship Management platform (CRM) to create a standardized sales process for your business. CPQ makes the overall sales process easier, faster, and more organized while working efficiently hand-in-glove with a pricing software solution.
As a powerful, user-friendly sales tool, CPQ shortens the sales process while reducing the time spent by your sales team on performing administrative tasks.
It will allow your business to improve your quote response times for your customers, thereby increasing sales win rates, broadening margins and driving overall business growth.
8. Forward Load Your Costs to Protect Your Margins
As we mentioned above, protecting your existing margins can be part of the recipe to leave your business in a more favorable position to increase them in the future.
In the business environment, if you have not changed your prices due to rising production costs at least once (or even more often) this quarter to date, the chances are your margins are razor thin and you may be leaving plenty of profit on the table.
Focusing on changing price levels of raw materials and fuel, businesses are being required to maximize their profits by making tweaks as often as every day, or even every hour. Do you fancy trying to predict what your costs will be next month in an Excel spreadsheet? Of course not.
Modern pricing software and their Price Setting functions (where available) allow you to forward load what your costs will be next month and allow you to project margin maintenance.
For example, if you are a manufacturing company and your costs are growing monthly with all the raw material increases, a quality pricing software solution allows you to proactively forward load your costs, so it can give you a range of ‘what-if’ price insights into next month, taking predicted raw material price rises into account. That means you can forward load those costs increases and undertake price modeling before they hit.
In other words, you can get ahead of the game with any price changes.
Imagine you did not have the pricing software technology to forward your future costs for your $500 million revenue business, and you are losing 2% per month in lost margin due to raw material price rises that you are not covering.
Sure, 2% sounds like peanuts, but do the math.
Over a year, that is $10 million in lost margin!
Driving Margin with Pricing Software
Now you know 8 steps to share with your colleagues and proactively lead with your team members to help both increase margins and limit margin leakage.
In these times in business when nothing is certain except uncertainty itself, there could be any number of disruptions to your business. It is smart business to be able to protect yourself in some way so that you protect potential profit that may help your organization grow and avoid margin erosion.
It pays to be proactive, so you are never in a position where you must report losses because you were not ready to act. With the latest in pricing technology like Pricefx, you can react at speed, respond in real time, and realize the best margins possible.
If your business is looking to explore your pricing software options, this article below can help get you started;
However, if you would like to continue the learning journey with pricing and gather some handy tips on doing business in a rough-and-tumble economic climate, see Tim Shorter’s recent article;