Margins don’t usually vanish all at once. They erode slowly while your focus is on getting orders out the door. These five issues are quietly draining profits from businesses like yours. Here’s how to spot them—and fix them—before they eat away your bottom line any further.
Let’s be real: it’s hard enough running a manufacturing business without constantly worrying about profit margins. But too often, margins slip for reasons that don’t show up on a spreadsheet—at least not right away. The good news? Once you know what to look for, you can make changes that actually stick. No massive transformation required—just smart tweaks that get your business back on track.
1. Quoting Jobs Too Low Just to Win Work
This is one of the most common traps manufacturers fall into—quoting tight just to win the job. It might seem like the right move when you’re trying to keep machines running or land a new customer. But quoting below your real cost structure is like borrowing against your own future. It fills capacity in the short term, but starves your margins long term. You end up working harder, not smarter—and with less to show for it.
Every time a quote goes out the door without factoring in a real margin floor, you’re gambling. Are you covering overhead? What about setup time, material fluctuation, or unplanned rework? Most of the time, that gamble doesn’t pay off. Instead of protecting your business, you’re unintentionally subsidizing your customers’ savings.
A 20-person job shop ran a six-month review of their quoting and discovered that 40% of their jobs were actually under water after final delivery. The root cause? Pricing that was based on outdated labor rates and best-case assumptions on run time. They started adding just 5–10% margin buffer into quotes and shifted their sales conversations toward value—not just price. Within one quarter, they were winning fewer bids—but every one they won was profitable.
If you’re not tracking the actual cost vs. quoted cost on each job, start now. That one step alone can help you stop the slow leak that quoting errors create. And don’t be afraid to say no to bad-fit work. You’re not in business to stay busy—you’re in business to stay profitable.
2. Hidden Production Inefficiencies No One’s Paying Attention To
Most shop floors are full of activity, but activity doesn’t always equal productivity. The real margin damage happens in the small, unnoticed delays that happen dozens of times a day—excessive changeover time, machine downtime, unclear work instructions, or waiting on materials. These aren’t always obvious unless you’re measuring them, and many businesses simply don’t.
The key isn’t buying expensive software. Start simple. Track actual machine run time per shift. Time how long changeovers take. Watch how long operators wait for the next job or how often material shortages pause production. Once you know where time is being lost, you can fix it—fast.
One plastics fabricator realized they were losing almost 10 hours per week in a single cell due to tool changes that required a supervisor to sign off every time. By empowering trained operators to approve basic swaps, they cut downtime in half. It didn’t require new hires or new machines—just a smarter process. Those hours went straight back into productive output, increasing revenue without touching labor costs.
You don’t need to overhaul your plant. But if you can claw back even 30 minutes per shift of lost time, that’s hundreds of hours a year. That’s where margin lives.
3. Rising Material Costs That You’re Quietly Absorbing
When steel, aluminum, or plastic prices jump, it hurts—but too many businesses eat the difference instead of addressing it. Why? Because they’re afraid of losing a customer. But if you’re not passing at least some of that cost on, you’re essentially donating part of your margin to every order.
Instead of absorbing it quietly, update your quoting strategy to include pricing clauses that allow for adjustments when material prices shift significantly. Be upfront and confident. Most customers—especially repeat or B2B buyers—understand that input costs move. What they don’t appreciate is last-minute surprises or suddenly poor service caused by financial strain on your side.
A regional sheet metal shop we looked at began adding a material adjustment clause to all new quotes that kicked in when steel prices moved more than 5% over 60 days. The first few customers hesitated, but once they explained how it allowed them to maintain service levels and quality, they agreed. The business stopped bleeding cash on volatile jobs and stabilized their margins across the board.
If material costs are hurting you today, go look at your most recent quotes. What happens to your margin if prices increase another 5%? If it puts you in the red, you’re already too exposed.
4. Serving the Wrong Customers Without Realizing It
Not every customer is worth keeping. Some slow-pay. Some request quote after quote and never buy. Some only call when they need a rush job—and they always expect the same price. Others grind you down on margin every time but treat you as replaceable. These customers don’t just make less money—they drain resources, frustrate your team, and block better opportunities.
It’s not about being selective just for the sake of it. It’s about matching your capacity, capability, and ideal margin to the right type of work. Start tracking profitability by customer, not just revenue. You’ll probably be surprised which ones are dragging you down.
One fabrication business made a list of their top 15 customers by sales—then matched each one to actual profit delivered over the last 12 months. Five of the top revenue clients were either break-even or negative on profit. After raising pricing on those accounts and streamlining the scope of work, three of them walked—but the team recovered that revenue with more profitable work in less than two months.
Your best-fit customers are usually the ones you don’t have to chase. They value your quality, pay fairly, and don’t panic every time they get an invoice. Spend more time finding them.
5. Underused People and Machines That Still Cost You Full Price
If your machines or your people are underutilized during standard operating hours, that’s a silent cost you’re paying every single day. It’s not just overtime or weekend work that hurts margins—it’s paying for capacity that doesn’t get used fully from 8 to 4.
You might have a 5-person team running one shift, but if actual productive time is only 60–70%, that means you’re losing the equivalent of one or two employees’ worth of output—every week. Same goes for machines. If setups take too long or batch sizes are too small to be efficient, the machine sits idle more than it should.
A small tool-and-die shop dug into daily utilization numbers and realized their milling machines were sitting idle for 90 minutes every morning while operators waited for work instructions. They reworked their job packet system to be ready the night before. Output jumped 15%, and no one had to work harder—just smarter.
You’re already paying for the people and the machines. Getting more value out of them during regular hours is often the fastest way to lift margins without hiring, investing in new equipment, or chasing more orders.
3 Takeaways You Can Act On Immediately
Quote smarter, not cheaper. Stop winning low-margin jobs just to stay busy. Add buffer, track actuals, and price with purpose.
Fix the leaks you’re not seeing. Start measuring downtime, setup, and utilization. Even one small change can unlock surprising margin gains.
Re-evaluate your customers. Profit, not revenue, should guide who you serve. Don’t let your worst accounts block your best ones.
Top 5 FAQs on Improving Profit Margins in Manufacturing
How can I raise prices without losing my customers?
Start by communicating clearly. Explain that it’s about maintaining quality and service. Many customers will accept a modest increase if the value is there. You don’t have to raise prices on everyone—just where margin is too tight.
What’s the simplest way to track job profitability?
Use a spreadsheet. Log quoted hours and materials, then compare with actuals after each job. It doesn’t need to be perfect—just consistent enough to spot patterns.
Do I need software to measure downtime and efficiency?
Not at first. A whiteboard, stopwatch, or simple Google Sheet works fine to get started. Track one machine or one process for a week—you’ll be amazed what you learn.
How do I know if a customer is hurting my business?
Look at profit per job and time spent servicing them. If the numbers are weak and the account is high-maintenance, it’s likely dragging you down.
What if I can’t afford to lose any work right now?
You can still improve margins by fixing inefficiencies and increasing internal productivity. You don’t have to walk away from business—but you can stop taking on work that actually costs you money.
Ready to Stop Margin Erosion for Good?
Start small, start today. Fix one inefficiency. Raise one quote. Say no to one bad job. Profit doesn’t come from working harder—it comes from running smarter. If you want help thinking through it, grab a notebook, walk the floor, and look at your next three quotes. The answers are probably already in front of you.