Is it wise to maintain the same profit margin year after year for my service business?

Moral considerations apart, the true purpose of all businesses is to maximize profits, which may not be stated in the mission statements of most of the firms.

In my opinion choosing profit margin is not a matter of choice, but function of competition in the market. In a monopolistic situation, however, one can leverage his position to maximize profits from captive clientele by increasing the price without value addition. This would generally be termed as immoral by the consumers and, therefore, consumer protection department of the government might come into action.

In a competitive market, on the other hand, the only way to enhance your profit margin is by adopting creative and innovative methods to cut the cost of production without compromising on quality of a product. Value addition without increasing price is yet another way of increasing sales, therefore, total profits. Additionally target clientele does pay the premium for value addition and differentiation.

But the question remains whether it would be morally correct to increase profit margins in case one has the choice to do so, or not? The answer is yes, but no more than the profit percentage originally calculated considering market risk factors specific to the type of business involved.

Originally Published in:

https://www.quora.com/Is-it-wise-to-maintain-the-same-profit-margin-year-after-year-for-my-service-business/answer/Muhammad-Afsar-Malik