Profit Margins

As time goes by, competition becomes fiercer. Your customers demand higher quality and lower prices on one side and on the other side your costs are increasing. All the costs have risen such as chemicals, dyes, water, electricity, coal, steam, and labour.

Many people do not realise the impact even a small cost reduction can have on the bottom line.

Take for a example a company the has a net margin of 10%. That means for every 100 sold, it costs them 90 to produce with a profit of 10.

If you were to reduce the cost by just 2.5% it would improve your profitability by 25%!

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Put in other words, that to achieve the same profit level with out the savings you would have to produce 25% more.

So the impact depends on the margin your company has and the amount of savings they can achieve. It can be 5% or it can be 25% increase in profits.