This article is contributed by Jason Dirkham.
When entrepreneurs set up a business, they only ever envisage it making money for them. But, if you’ve ever owned your own company before, you will know that it is extremely difficult for a business to be a success right from the get-go. In actual fact, the majority of business owners will find that their company starts to operate at a loss for a few periods of time. These periods can occur at any point during the company’s lifespan. Sometimes the losses can be fairly minor while there are be times when it may seem like your business is hemorrhaging cash.
If you ever find that your business is losing money, you might be inclined to start panicking. But there is no need for that just yet. If you can quickly figure out why you are operating at a loss, then you should be able to understand how you can stop it and turn the situation around as soon as possible. Here are some of the most common reasons why some companies do end up losing cash.
You Didn’t Get Enough Startup Capital In The Beginning
Before you can even start thinking about setting up a company, you need to know that you will be able to get enough initial investment to cover all of the usual startup costs. When businesses aren’t able to find enough investment at the start of their endeavor, this can cost them dearly later on. Even though they might be able to fund the company’s launch on a bootstrap budget, it could leave their finances a bit too stretched later down the line, and they might find that they have to scrimp in some areas that could do with some extra cash. As a result, all your early profits might be eaten up by these expenses. So, be sure to have enough startup capital in the first place, and then this shouldn’t affect your early profits.
There’s No Ongoing Investment
Even if you do get enough investment in the early days, you will need a fresh injection of cash if you ever want to grow your company. This is why you need to source ongoing investment. If you aren’t able to get enough ongoing investment, then there is no way your business will be able to achieve its financial potential, and it will start running at a loss. It can be quite easy for small businesses to find investment opportunities, though. To keep things simple, you could look for payday lenders that offer short-term loans. These are useful if you just need a bit of extra money to get a new project off the ground. For any longer loans, then your bank is probably the best bet. It’s also worth attending local business networking events as you will be able to brush shoulders with a lot of potential investors.
You’re Wasting Time
Another really big reason why some companies run at a loss is because the business just isn’t as productive as what the CEO and managers think. So, it’s always worth considering if there are any ways that you and your team are actually wasting time that could be better spent on working on important processes and operations. Do you know what is actually the biggest waste of time for most companies? It’s meetings. Even though you might think that it is necessary to arrange a meeting for you and some of your employees, it’s worth considering whether it would be better to just email the information to them instead. That way, they don’t have to take an hour out of their day listen to you tell them something that could have been easily communicated in an email or quick phone call.
There’s Too Much Paperwork
Paperwork requires a lot of your employees attention, and you will also need to make sure that you have adequate storage and filing solutions for it in your office. Both of these factors can make it very expensive. An employee could end up spending an hour or so on their paperwork and filing, and they then might not have time to take care of their usual tasks. This could result in them losing some productivity. Constantly copying, printing, and scanning can also prove to be costly for a business. It’s best to try to go completely digital and store your important contracts and documents online on cloud platforms. Not only are these very secure, but they will also save your office a lot of time and space.
You Need A New Accountant
Tax errors and bookkeeping mistakes end up costing companies across the company thousands each year. You need to make sure that this doesn’t happen to you! If you don’t already have an accountant and are trying to do all of your accounting yourself, then it’s time to change that and find someone who can help you. Ideally, it’s best to review how your accountant is working out for your business every six months. If you find that your bookkeeping is still wasting your money, then you will need to find a better accountant. If anything, your accountant should be saving you money, not costing the business even more.
You Haven’t Priced Up Your Products Correctly
Are you sure that you are charging your customers enough for your products? If you have priced your products too low, then there is no way you will be able to make a sizeable profit. However, you need to think carefully before you simply increase their cost. After all, you shouldn’t increase them by too much or else you will probably put off customers. If you do increase prices, make sure it is only by a small amount.
The Company’s Marketing Strategy Isn’t Working
You need to make sure that your marketing is constantly strong so that it helps you bring in new customers. If it isn’t, you could see sales dry up. Worried about your marketing? It could be wise to outsource it to a marketing agency.
Has this blog post helped you figure out why your business is losing money?
This article is contributed by Jason Dirkham.
