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How You Can Increase Your Profit Margins This Year

Profit margins are a tricky game, yet one that carries a great deal of weight when it comes to the success of your business. In theory, we all understand that our overall revenue needs to be greater than our expenses for our companies to turn a profit. In practice, however, it’s not as easy as it sounds.

If you find that your profit margins are suffering or even if you’d simply like to increase an already-stable bottom line, there are a number of ways you can address it. Sure, you can cut costs — but you still need to ensure that your end product is created with the same high-quality components your clients have come to expect.

On the other hand, you could always increase your pricing — however, you need to consider whether higher prices will take you out of the competition within your market. Here are a few things to consider as you seek a happy balance between revenue and expenses that lead to stronger profit margins in 2020.

Evaluate your current pricing structure

While you shouldn’t aim to overcharge clients, you also should avoid undercharging for the sake of your business. Raising prices can really just be a step to earning your true potential and can make a big difference if you are constantly in the red or even just breaking even.

Start by determining the cost of goods (food, beverages, rentals, etc.) and use that number as your baseline. Then, consider the additional expenses — the pay rate of your chefs and servers, the complexity of the recipes, the difficulty in sourcing ingredients, and the quality of your service.

All of these factors (and others) justify price markups, but make sure you are raising prices for sustainability as opposed to taking advantage of clients. Mark it up too high and you’ll find yourself priced out of competition and, soon, operating at a loss.

Focus on your menu stars

It’s easy to get into the weeds when menu planning, including the most elaborate dressings, sauces, grains, garnishes and the like. Yet, if the stars of your show are a beautifully seared prime rib or a delicately baked salmon, guests will focus on the protein and overlook all the hard work and premium ingredients you put into a complicated sauce.

To scale back on costs, prioritize the star of each dish and minimize expenses on the rest of the components. If you’re serving a salad, a show-stopping dressing may very well be the answer. On the other hand, if you’re preparing a filet mignon over a bed of risotto, it will make little difference whether the rice is organic or not. Keep your priorities straight and invest in the areas that will make a difference in the end result.

Shop smartly

We live in an age of convenience where we can source any ingredient from any place in the world at any time of the year. Food accessibility is at an all-time high, but that doesn’t come for free. You can certainly serve a papaya dish in the dead of winter, but you will pay the price for transportation and storage. Thus, a strategic approach to menu planning and food sourcing can make all the difference in your bottom line.

Start shopping seasonal ingredients from local vendors — the less your food has to travel, the lower the end cost will be. Not only does this approach save you on transportation costs, but you also get the opportunity to build relationships with regional food suppliers. This can be quite beneficial, as you may get notified of flash sales, new stock, and even special discounts.

Another effective strategy is to plan your menus to use similar ingredients, even if the dishes themselves differ. Purchasing food in bulk is generally the most cost-effective option; if you can source russet potatoes in bulk to make several different meals, you’ll get the benefit of bulk pricing without sacrificing the integrity of your dishes.

There are many factors that go into finding the sweet spot in profit margins, so be prepared to keep an eye on your bottom line and tweak as needed. Don’t be afraid to connect with your chefs, kitchen staff, and sales team members to see if there are any inefficiencies that can be addressed to save on costs or earn more revenue.


Clint Elkins is the VP of Sales at SB Value, a group purchasing program designed to reduce catering, kitchen and food-service costs by leveraging the collective buying power of thousands of companies.


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