The only way to keep your small business operational is through consistent profit numbers. Although start-up costs might get you off to a rough start, the overall goal should be to reduce expenses and improve revenue.
There are many things that can siphon funds from your bank account, but typically, losing money happens like a slow leak. After a while, you notice the effects, and your company is no longer making money. There are several key reasons while you might be losing money.
1. Inefficient Management
There are so many things that will call for your attention as you operate your business, but you need to know how to prioritize them. If you are scheduling too many workers for the amount of business you are doing, you are slowing draining funds through labor costs.
Using workforce management software helps you keep a more accurate track of the hours being worked and what is being accomplished during the time period. This gives you insight into scheduling adjustments that can make better use of your labor pool.
2. Bad Accounting Practices
When it comes to small business management, you can’t just assume you know what you are doing with the finances. It is not as simple as balancing a checkbook. In addition to using quality accounting software, you need to be accurate and organized with the finances.
If you don’t maintain a clear picture of where the money is going and how much is coming in, your business is doomed for financial failure. If you aren’t logging transactions in quickly, your bird’s eye view of the funds will be incomplete, creating poor decision-making.
3. Dual-Bank Account Practices
Even if your company is small, you should never just operate with one bank account. You need a business account that is separate from your personal one because money can get messy. When it is all combined, it is easy to mix-up and overspend.
If a personal emergency pops up and you use funds from the account, you may potentially sabotage your business success when you have to pass on a business purchase for a lack of funds.
4. Pricing Inaccuracies
This is a two-edged sword that can quickly drain your funds. Your products need to be priced with a middle ground strategy, as both over and underpriced goods will lose you money. Fewer customer will make a purchase if your prices are too high, labeling your entire operations as unaffordable. If your prices are too low, the customer will love you but you can’t cover your overhead and turn a profit.
If you conduct a market analysis, you can learn about the customers you are serving and what is trending in the demographic. You can also learn about your competitors and their prices. Finding the right price point isn’t impossible. It will just take some work.
5. No Online Presence
In the digital age, your business will not grow unless you have an engaging online presence. More and more research is showing that consumers turn first to online websites, reviews, and retail sites to answer their questions about products or services.
Not only does it establish your brand, your website can give potential customers ways to contact you, to find out your location or hours, and even read reviews from satisfied customers. Social media outlets are inexpensive but almost sure-proof advertising options, giving you the ability to enhance your message with photos, personal experiences, and up-to-date pricing. Without this, you are sure to lose money over the long-term.
These five mistakes can leave money on the table when it comes to your business success and turning a profit. There are many resources and organizations that can help you understand how to run a small business, and by taking the time to address these concerns, you may avoid financial troubles down the road.