18 December 2018

5 ways to boost your margins ahead of Brexit

Many British businesses remain confident that they will succeed in the current trading environment, even considering the uncertainty around the outcome of Brexit1.

Yet, there’s no denying that some Brexit factors could dent profits – from a depreciation in sterling to the prospect of trade tariffs with EU countries. With these considerations in mind, here are five ways to make your business more resistant to possible future Brexit effects, by boosting your margins now.

1 Understand and cut your costs

The first step to increasing profits is regular monitoring. When turnover is healthy, it’s easy to assume that profits are rising by the same degree. Your costs, though, may be stealthily eating away at margins.

Tackle excess costs in a way that won’t damage your business. For example, weigh up whether using a lower-cost component would bring benefits or simply alienate customers.

Equally, don’t put the pressure on your employees by making them struggle with fewer resources. Ensure they understand the risks to the business, and actively seek their ideas on cost-cutting.

2 Change your price structure

After cutting costs, raising prices is the most obvious way to increase margins. However, when household spending is squeezed, you may want to be wary about taking this step.

Bear in mind that people buy with an eye on value, rather than price alone. Add value to your products or services, taking account of customer feedback and desires. Then release them with an updated price structure.

3 Get close to your supply chain

Building closer relationships with your major customers and suppliers can only help your business.

Regular conversations with your biggest buyers could help you become better informed about their own Brexit-related concerns and plans, as well as opening the door to renegotiation.

Sell yourself to your suppliers, too. Meet them and help them understand the story behind your business, and its growth plans. With confidence in your prospects, they’re more likely to be open to discussion about discounts.

4 Cut your currency risks

Currency volatility seems to be the new stable. If you trade internationally, you’re exposed to currency markets, which could hit your margins without warning.

Foreign exchange services can allow you to trade with greater confidence, by locking in exchange rates for future transactions. Talk to us about understanding your foreign currency exposure and about putting a strategy in place to manage the risks.

5 Categorise your products

Take a close look at your products or services. Those that offer both high sales and high margins are clearly the ones to cherish and develop, but the others could use your attention too.

Consider a price increase for products that sell well, but with lower margins. Focus your sales efforts on any products that offer high margins but low sales.

You might decide to jettison your low-sale, low-margin products – but consider using them as a loss leader first.

For more guidance and context about Brexit, visit our Brexit hub at: www.business.hsbc.uk/brexit 

Revise your products or services with added value that takes account of customer feedback and desires.

You are leaving the HSBC Commercial Banking website.

Please be aware that the external site policies will differ from our website terms and conditions and privacy policy. The next site will open in a new browser window or tab.

You are leaving the HSBC Commercial Banking website.

Please be aware that the external site policies will differ from our website terms and conditions and privacy policy. The next site will open in a new browser window or tab.