Signs Your Small Business is Losing Money or Going Backwards
Your small business exists for one reason: It’s profitable. As soon as a business no longer produces a profit, it will (eventually) cease to be operational. Starting any business is no small task. You’ve made quite an accomplishment by even nurturing your dream into its magical existence. However, not all small business with a successful beginning continue growing in the same fashion and is probably losing money.
If you’re running a small business, this probably isn’t the news you want to hear. However, it’s still important news. One major reason many businesses fail is the owner’s inability to acknowledge the signs. Knowing your business is in danger of failure could create the opportunity you need to make a change.
Warning Signs Your Small Business Is Losing Money
There are reasons your small business could be losing money without you realizing it, which is a dangerous situation often caused by oversight or lack of planning. Ignoring problems as they crop up won’t make them go away. They’ll continue to get worse until you’re forced to sit up and take notice. Unfortunately, by then it could be too late. If you’re concerned about the future of your small business, watch for these signs your business is on a fast track to failure.
1. You’re Juggling Employees
A business with a high employee turnover rate is not a business where workers are confident of the future. Sometimes, employees can see prospective warning signs of a failing business long before the CEO or the owner. These employees are likely to jump ship before they’re forced to compromise their own best interests. The situation only gets worse when you can’t afford to recruit new employees. Your loyal employees end up juggling the responsibilities of multiple workers, and morale quickly drops.
2. You Can’t Pay the Bills on Time
If your bills are getting paid late, or not at all, you have a serious cash-flow problem. One late payment isn’t going to make your business crash and burn, but only cash flow issues that result in late payments will eventually lead to escalating problems. The situation is a key concern if your creditors either appoint a collection agency on their behalf to collect or even lodge a statement of claim against your business which then gets lodged with the credit agencies. This could have dire effects on your business.
3. No One Is Talking About Your Business
When customers are excited about your business, they’re leaving positive reviews and chattering on social media. When the chatter stops, it’s a red flag that you haven’t retained customer interest. Silent customers, or worse negative ones, are a signal that you are lacking in the area of product quality or customer service. It is very important to attend to this as soon as possible.
4. Nothing Is Changing
Businesses are either growing, or they’re shrinking. If there has been no positive movement in your business within the last year, it’s time to take a deeper look at why. You need your sales to increase for your business to be profitable. If revenue is not growing it is almost guaranteed that your bottom line is shrinking, and that’s because unfortunately, costs do increase year on year, no matter what. A vital reason business succeeds is the ability to retain customers while obtaining new ones and all this requires constant change; constant customer contact and the best possible customer service you can provide.
How to Find and Stop the Leaks
At this point, you may have realized your business has some frightening warning signals going on. However, it’s possible you still haven’t uncovered the problem. If you’re aware you’ve been losing money or your profitability has shrunk to a point where you are no longer cash-flow positive, but haven’t found the source of the leak, consider some common traps that cause small business to fail each year.
- Lousy customer service – Customer retention is more valuable than gaining new customers. A big reason that customers keep coming back is quality customer service.
- Combination bank accounts – When you open a business, it is vital to open a separate bank account for the business. It is impossible to keep your personal and business finances separate within the same bank account.
- Lazy Accounting – To run a business, you must keep up with every transaction in real-time. Every business no matter how small should have an accounting package, on a daily basis one can track the flow of funds in and out of the bank account and against your invoices to monitor when you expect your customers (those on account) to pay versus paying your creditors.
- Ignoring Technology – A quality website is a necessity for a successful business. When potential customers hear about you, they need to be able to find you quickly. A website will show customers you’re serious.
You’ve put a lot of work into your small business, and you shouldn’t have to watch it fail. If your small business isn’t thriving, it’s time to act and breathe life back into the company. Taking the time to find the money bleeds that are diminishing your business will allow you the opportunity to create a plan to turn things around.
With all this in mind, sometimes one has to spend more on marketing and other operational expenses upfront for a period of time before the increase in revenues begin to flow. For most businesses, this is the case, therefore it’s vital that all business owners ensure that they have sufficiently capitalized their business with enough money to last them through the hard times. Such funds can come from various sources: of course the first is your own savings; but from there it can spread far and wide, examples of which include: family and friends; venture capital; bank loan; non-bank loan; overdraft; invoice finance and if you are an importer, trade finance. Having sufficient capital for slow months is key to the success and sustainability of any business, one can never predict the future therefore having cash in the bank for rainy days is never a foolish thing.