How to consistently increase gross margins in your business

Executive overview

Many businesses stagnate because they focus on cutting overhead while ignoring the two levers that move gross margin most: price and supplier costs. Gross margin — revenue minus cost of goods sold — is what funds everything else. Leave it thin, and no amount of hustle compensates.

Raise prices regularly. Renegotiate supplier costs every six to twelve months. Kill low-margin product lines. If you carry inventory, optimise for the 240 rule.

The fastest path to profitability is widening gross margin, not trimming overhead.

Raising prices

• Raise prices at minimum 2–3% per year to keep pace with inflation.
• Aim higher if your current pricing leaves margins too thin to cover labour and fixed costs.
• Positioning matters: premium pricing is sustainable if you deliver a premium experience.
• Customers in most markets will pay more — they often just haven't been asked.

Renegotiating supplier costs

• Revisit supplier agreements every six to twelve months.
• Everything is negotiable — including credit card processing fees.
• In tougher economic periods, suppliers are more willing to offer discounts.
• Simply asking is often enough to get cuts you'd never receive otherwise.

Cutting low-margin lines

• Identify products or services where gross margin is low relative to the effort they demand.
• The "pain in the ass factor" of a low-margin line often outweighs its revenue contribution.
• Cutting those lines frees capacity for higher-margin work.

The 240 rule for inventory businesses

• Gross margin % × inventory turns per year must equal 240 or more for an optimal business.
• 40% gross margin requires turning inventory at least 6 times per year.
• 80% gross margin only requires 3 turns per year.
• Low-margin businesses like Walmart compensate with very high turn rates (12+).
• Below 240, you are likely losing money or moving sideways regardless of revenue.