In this video I’m going to address 5 ways your business may be losing money and you may find you are struggling.
So let’s be honest, the only way you as an entrepreneur can have a sustainable business and avoid anxiety, exhaustion and burn out, is if you have a healthy cashflow and predictable profits to allow for that.
But truth is small little things, cause money to leak out of your business and can eat into both cashflow and profits, causing you to run on the self perpetuating hamster wheel of feast and famine.
Leaving you feeling burnout, exhausted, frustrating and in some cases ready to give up!
However, these leaks can be easily fixed because working with small business owners, there are generally 4 common reasons your business may be leaking money.
1.Using a combined bank account – When it comes to our business and personal finances they need to be separated and compartmentalised. Have 1 big account leads to confusion between what money is yours and what is the businesses and this is where business owners begin to treat the business as their own personal bank account. You need to have at least 1 account solely for your business.
I actually recommend at least 3 business accounts to all my clients but that’s a discussion for another day.
- No pricing strategy – Where do I even begin with this.
There are a lot of businesses that break even or run at a loss simply because they have no clear pricing strategy. Their pricing comes about by sticking their finger in the air or looking to the nearest competitor to get a benchmark for what their prices should be.
I’m hear to tell you…your business is your benchmark.
You need to have a clear line of sight on your financials and understand what are your operating costs each and every month. What is your monthly salary? Have you made provisions for tax? And do you have a margin for profit? If the answer is no to any of these you most certainly need to reassess.
- Non existent marketing – We live in the era of modern day technology so that means most things are done online. When someone wants something the first thing they do is do a search online.
What are you currently doing to market your business every.single.day? You might have an amazing product or service but how do people know that? Are you running ads? Are you networking? Do you have a referral or an affiliate system in place? If you’re not maximising your exposure online you need to be.
- No Profit Margins – I touched on this before but to be able to leverage your business to accumulate wealth you have to invest in it. Most accounting practices say revenue minus expenses equals profit but this is back to front thinking. Implementing margins for profit first, mean reinvesting that money back into the business and allowing the business to leverage in the areas most need to allow for growth and scale therefore increasing future revenue and profit margins.
- Bad accounting– As the CEO, owner of your business you have a financial responsibility to ensure you are on top of your numbers. 80% of businesses that fail in the first 5 years are as a result of money mismanagement. To ensure success you need to have a clear line of sight of what is coming and what is going out to understand real time and through projected forecasting where your business is financially so that means ensuring your books are up to date.
If you don’t want to do them yourself, bring on a book keep but as a business owner you MUST have an accountant. That is a non negotiable for serious business owners and should be factored into your monthly expenses.
The ramifications of a costly tax bill can be catastrophic for a business with limited cash flow so you need to be proactive in your approach to your accounting practices.