Protecting Profit Margins as Costs Rise
Monday, November 02, 2026
If your sales increased last year, but your bank account didn't, you may not have a sales problem.
You may have a profit problem.
Business owners continue to face rising costs. Labor, insurance, supplies, utilities, transportation, and employee benefits are all putting pressure on the bottom line. At the same time, customers are watching their own budgets and may resist another price increase.
It's easy to blame inflation, the economy, or rising costs. Those challenges are real. But as business owners, we have to focus on what we can control.
And it starts with something I tell business owners all the time:
Know your numbers.
Revenue may get the attention, but profit keeps you in business.
You can have record sales and still have a struggling company if your margins are moving in the wrong direction.
Here are three strategies to help protect your profitability.
1. Know Where You Actually Make Money
Don't stop at looking at total revenue and expenses.
Know your:
- Gross profit margin
- Net profit margin
- Labor costs
- Overhead
- Cash flow
Then go one level deeper:
Which customers are most profitable?
Which products or services generate your best margins?
Which ones consume time and resources without producing enough profit?
I've seen business owners celebrate landing a large customer only to discover later that the account wasn't very profitable.
Not all revenue is good revenue.
Once you understand where your profits are coming from, you can make better decisions about where to invest your time, people, and resources.
2. Attack Waste Before Cutting Value
When margins get squeezed, the natural reaction is to start cutting expenses.
Be careful.
You can't cost-cut your way to long-term success. Instead, look for waste.
Ask your team:
- What are we doing that doesn't add value?
- Where are we wasting time?
- What processes could be simplified?
- What could technology or AI help us automate?
- Where are mistakes and rework costing us money?
Small improvements multiplied across an organization can have a significant impact.
In Positive Culture Wins, I talk about the importance of involving your people in improving the organization. Your employees often see inefficiencies that leadership doesn't.
Ask them.
You might be surprised by what you discover.
3. Focus on Value Before Raising Prices
But raising prices shouldn't automatically be your first solution.
First ask: How can we create more value for our customers?
Maybe it's better service.
Faster delivery.
Improved communication.
Bundled services.
A better customer experience.
Or eliminating offerings that no longer make financial sense.
When customers clearly understand the value you provide, price becomes only one part of their buying decision.
And when you do need to increase prices, you can do it confidently because you understand both your costs and the value you deliver.
The Bottom Line
Business owners can't control inflation, insurance rates, utility costs, or every change in the economy.
But you can control how you respond.
Start by knowing your numbers.
Understand where you make money. Eliminate waste. Improve value. Measure your margins. And get your team involved in finding better ways to operate.
Here's the question I would challenge you to answer:
If your revenue increased 10% next year, would your profit increase too?
If you don't know the answer, it's time to dig deeper into your numbers.
Because building a successful business isn't just about how much money comes through the front door.
It's about how much you keep—and what you're able to do with it.
Make it a GREAT day!
Gary Wilbers
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Hi, I Am Gary Wilbers
Gary Wilbers is a seasoned entrepreneur, motivational speaker, and leadership expert known for his dynamic approach to personal and professional development. With a career spanning several decades, Gary has amassed a wealth of experience in the fields of business, leadership, and self- improvement.
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