Growing a Healthy Margin:
 How to Focus on Your Business
and Personal Bottom Line!

Has your mind ever wandered in church? Mine has. Sometimes I focus on the person's hair in front of me and other times I critique people's outfits or their children's behavior.

However, recently I was riveted to my pastor's message which started off with this quote; "When you get more than you can handle, you can't handle anymore". His sermon was based on the book, "Margin; Restoring Emotional, Physical, Financial, and Time Reserves to Overloaded Lives" by Richard A. Swenson, MD.

He got my attention when he said, "overloaded lives". My guess is that those two words describe you as well. Statistics show that 4 out of 5 Americans report a need to reduce stress in their lives. The American Institute of Stress states that stress related illnesses cost the American economy $100 Billion dollars annually. That adds up to a ton of antacids!

You may be wondering, what does all of this have to do with business? I believe there needs to be sufficient "margin" to allow for both business and personal success.

The "Margin" of Business Success

The first time I heard the word "margin", I was as a sportswear buyer. I learned quickly that it was the difference between the cost of the merchandise and the retail price. The larger the margin the better the chance for bottom line profit. To maintain a profitable business it is imperative to focus on each part of the process that affects the bottom line and what to do when the "margin" is looking thin. Let's look at an elementary profit and loss example.

Cost:
This is the price you pay for an item from a vendor.

The question most buyers have in the back of their mind is, "Can I do better"? We see the big players like Wal-Mart or Target work out prices that are far lower than anyone else can get purely because of the quantity they are buying. But the question may not be how cheap can I get the item at but more over, what is the final price my customer is willing to pay?

Retail:
This is the price you want to sell your item at.

I believe that unless you sell items that have a set price from the vendor, your job is to evaluate each and every item and analyze how much of a "markup" or "margin" you are willing to place on the item. Could you purchase something at $5 and price it at $100? The answer is yes you could. The question is would it sell for $100. How well do you know your customer and their buying habits? Do your clients or customers pay "sticker price" or do they expect a deal?

Each business should have what I call, bread and butter items. Those are items that sell every day and they are the core of the business. Your customer expects you to have the item and you can be assured of making the "margin" on that item each time you sell it.

Margin:
I think new business owners fall in love with this term!

Wow, if I buy it at $10 and sell it for $100, I will make $90! And if I sell 1,000 of them I will be rich! Margin is not money in your pocket. It is the starting point that you must subtract all of your expenses from. Margins can and should vary within classifications and departments within the business. The more margin that can be created the less stress you will feel when there are unexpected expenses.

What margin do you operate on? Do you re-evaluate all of your product lines to see if you can increase your margins by either buying smarter or pricing more effectively? What is your comfort "margin"? Have you listened to your customers and their comments concerning pricing or selection or services? They are your lifeline to creating a more comfortable margin. Have you engaged their help? I promise it will help your bottom line.

The "Margin" of Personal Success

The financial margin you create within your business is what gets you through each and every month as well as the unexpected crisis. At least it should. When times get tough in business and the margins are lean, we see staffing cuts, increased layoffs, reduced spending, expenses reduced, hiring curtailed and a multitude of stressful procedures to protect a shrinking margin.

I believe the same thing happens in our personal lives. Whether you are a CEO or a frontline manager, a cashier or a maintenance person, most of us are living on thinner and thinner margins. Dr. Swenson says that our stressors range from ringing cell phones, fighting children, traffic jams, overdue bills, loss of a job, divorce, and the infirmities of aging. We have little time for relaxation. If we have an extra fee minutes, we fill it with another activity.

Let me ask a question. Have you had an employee fly of the handle for no reason recently? Has a receptionist barked at a customer? Have you found yourself becoming defensive over a trivial comment? My guess is that you are running on a depleted margin and looking "overload" in the face.

If we want to run a healthy business we need to be aware of the challenges that affect all of our employees. When we make unhealthy expectations of our employees what affect does it have on them physically and emotionally? Can you work a second shift? Can you stay a couple of extra hours? Can you do this extra task along with the ones you are currently doing? Are you adding or taking away from your employee's margins?

According to Dr. Swenson, researchers have made the following suggestions for decompressing stress-filled lives and I think many of these can be practiced at work or encouraged to do outside of work.

• Practice gratitude
• Generate goodwill
• Do volunteer work
• Set realistic expectations
• Laugh
• Play
• Meditate
• Accept what cannot be changed
• Avoid frustration
• Exercise
• Reconcile conflict in relationships
• Above all, avoid anger and the desire for revenge.

Margin is not a hole to be plugged. Margin is a gap to be increased. Margin is the unseen area of our life that sustains us when the crisis hits. Having a financial margin in business is a given. You can't be successful without it. Most CEO's will risk almost anything to keep the margin large enough to sustain a profit.

My question is, is it to the detriment of the employees? When your employees are on "overload" there is a good chance your customers will be on the receiving end. Do you know how much margin they are running on? Are you willing to help improve their "margins". Can you look at the list above and incorporate some of those stress busters within your company? My guess is if you look in the mirror, the margin surrounding you might just look like a mere shadow? I want a "mega-margin", don't you?

About this contributor:

Anne M. Obarski is a professional speaker and trainer. For more information, visit her web site at http://www.merchandiseconcepts.com/speaking.html or email Anne at anne@merchandiseconcepts.com. She can also be reached via telephone 724-941-4149 or fax 724-941-4304.

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