My Business is Losing Money! What Can I Do!?

Starting a business can be overwhelming and difficult – knowing and following local and federal regulation, market research, writing a business plan, creating a customer service and marketing strategy, or having a growth plan, starting a business is hard work! The biggest challenge, however, is becoming profitable and ensuring your company is creating enough revenue. 

It can be very disheartening to experience negative cash flow at the end of the month, quarter or year. You may think you need to shut down your business when this happens. However, this may not be the case– part of being a successful entrepreneur is knowing when to persevere and when to step back.

One of the most common mistakes new business owners make is giving up too early. Advice from your business mentors as well as an honest assessment of where your company stands will help you make a wise decision on if you should press on despite the negative profit.

So, if after speaking with your mentors you determine that closing your business would in fact mean giving up too early, you may now be wondering what you can do to help your business become profitable. Lots of new businesses or growing businesses often operate at a loss for a season and are able to recover well. The goal is to understand what your business is experiencing, why, and what you need to do about it. 

Here are five important things you should do if your business is losing money….

#1: Track Your Finances and Make Adjustments

When experiencing negative cash flow or a financial loss, the first thing you need to do is limit your expenses and increase revenue. We know this is a lot easier said than done, however, there are some steps you can take that will help you get your finances under control. 

To make sure that your costs are as low as possible and to increase your revenues, you must review your finances to determine where your money is going. You won’t be able to do this unless you are organized! Disorganization, especially regarding your finances, is something that most business owners can do better, and becoming more organized will certainly save you time and money!. Inadequate and disorganized financial management may be one of the reasons that your business is losing money. Tracking your finances will help you identify potential areas of waste, such as unnecessary overhead costs, that will help you reduce your costs.

This article on budgeting –>>   or this post on profitability –>>  may help you gain more control of your finances. 

#2: Meet With Your Mentor or Coach

If you are losing money or struggling financially, you should meet with your business mentor or coach as soon as possible. You will need to be very honest about how you and your business is doing, but with that knowledge and their personal experience and knowledge, they will hopefully provide you with valuable input, advice, and may have a similar experience to share with you. Besides the tangible business advice that mentors can give, they can also become a supportive friend as you navigate uncertain times. Experiencing negative cash flow produces stress and negative emotional consequences, which can lead to making business and personal decisions that are not well-informed. Meeting with your business mentor would bring in an outside perspective that could help you keep a cool head during these stressful times. 

#3: Analyze Competitors

If your company is losing money, you need to take the time and effort to better understand your competition. By knowing your competitors, you will understand what is and is not working for them and it should give you insight and direction regarding the changes your company should make. By understanding and considering your competitors, you may find ways to decrease costs and increase revenue. For example, after analyzing your competitors, you may find that your price point is way too low or way too high. A simple price adjustment may generate more purchases or a higher profit margin per sale. 

#4: Develop A Plan!

Recognizing your business is losing money is a big step, and if you want to implement changes, you must have a plan! In creating a plan, it is important to avoid making impulsive decisions or major changes to your business without thinking through the consequences. If possible, stop incurring debt and pause any growth strategies that require significant financial investments. Again, just because your business is losing money does not signal the end of your business! In many cases, reevaluating your business operations and making a plan to recover will set you on a good track. It may be helpful to create a 60 or 90 day business plan that focuses on getting your company to be profitable within that time frame. This allows you to focus your efforts on addressing your  pain points  with tangible deadlines, benchmarks, and goals.

#5: Grow Your Presence

Once you have reassessed your business, analyzed your competitors, and met with your business mentor, you may find that a lack of presence is contributing to your negative cash flow. Growing your presence– both online and in your community– can be an effective way to increase your revenue within a certain timeframe. Evaluating your promotional activities and marketing strategy is a great way to start growing your presence. If you want people to purchase from your business, they must know about you!

Starting and running a business can feel overwhelming, and it is important to make sure you have the knowledge and skills necessary for business ownership. 

If you need hep learning more about business, our Business StartUp course may be the right fit for you!  

You will learn how to identify your personal values and strengths and resources, how to choose a solid business idea, how to do market research by using our step by step market research guide, and even how to write a strong business plan. But that’s not it, you will also learn about life/work balance, marketing, brand strategy, time management, goal setting, leadership and financial management. Don’t miss this opportunity! Start today!