So...how profitable is your business?We hope you are making a success of your operation, but if you are barely making a profit, or if (dare we say it) making more losses than financial gains, then there might be some very good reasons why.
In this article, we will take a look at some of the reasons why some businesses do struggle to make a profit. If you relate to anything said below, you will be able to turn things around by making the necessary changes in your business.
#1: You are pricing your product or service too low
You need to beat your business rivals and attract more customers, so to do this, you might have reduced your prices to ensure more sales. This is perfectly acceptable if you are making a profit at the end of the day, but you might encounter two problems with this approach. Firstly, your customers might assume the quality of your product or service directly relates to your low price, so they might hesitate before buying from you in case what you offer them is second-best. Secondly, if you aren't making savings across your business to account for your low pricing, then you will end up making more of a loss than a profit at the end of the day.Here's the thing. It's okay to offer customers a discount once in a while, but make it a habit, and you might run into problems. There are other ways to win customers to your side that don't involve potentially bankrupting yourself, so check out the linked article for some good ideas. Then take a look at the prices your competitors are offering. You need to be competitive so lowering your price tag a little is acceptable, but you might also want to try strategies that your rivals aren't using instead of reducing your costs too much, such as offering free shipping to your customers or giving them a better refund policy.
#2: You are using dated marketing methods
Now, we aren't suggesting traditional marketing methods are dead, but you do need to be mindful. Placing an ad in the classifieds section of your local newspaper or doing flyer drops around your neighborhood are acceptable ways to market your business, but not only are these methods expensive but in some cases, they might not bring you the required results. After all, how many people pick up a newspaper these days? Most people rely on the internet for local and national news updates. And when it comes to flyer drops, many people are tired of finding junk mail in their mailbox, partly for environmental reasons, so they might not give your flyer a second glance.To succeed with your marketing efforts, you need to get your head in the 21st Century. Digital marketing is the way to go; using the internet to reach new customers. We are assuming you already have a website up and running, but you need to do more to market your business online, such as using social media to reach and communicate with your customers, and adding your company to business listing sites, such as Bing, Yelp, and Google My Business. To further up your game, you might want to seek assistance from a social media marketing agency or a professional web designer, as they will have the time and experience to help you promote your business effectively. So, do your research online and look at the many digital marketing methods available to you. They are both cost-effective and relevant to today's customers, so you would be remiss to avoid them.
#3: You are working too hard
We aren't suggesting working hard is a bad thing; far from it. You need to put the effort in if you want to see results. However, you need to be mindful of entrepreneurial burnout, which, as you can see from the linked article, has become a real problem in today's business world. Burnout is usually a result of the business owner working too hard, either because they are passionate about what they do or because they fear business failure. They then do more than they should, and consequently, this has an impact on their business profits. They might suffer from low moods and tiredness, and this will reduce their productivity, or they might become too ill to work, and so their business is placed in jeopardy if they have nobody else to step in and manage the work that needs to be done.Business burnout can be avoided, so don't despair if this is something that could potentially affect you. You could automate time-consuming elements of your business, as this way, you won't be forced to work overtime in an effort to get everything done. You could delegate to your employees more too, provided you aren't putting them at risk of burnout. And you could also outsource more, using the experience of a professional agency to carry out some of those tasks that don't directly fall under your remit. Taking a holiday once a year and finding ways to relax over the weekend are two other ways to avoid mental exhaustion and burnout. Your business will profit if you do, and so will your overall health!
#4: You aren't controlling your spending
Are you buying things that aren't a priority for your business? Do you know where your money is going each month? Are you paying too much on your business essentials? If you don't control your spending, you are going to face financial difficulties, and that could be problematic in both the short and the long-term.To control your spending, you need to assess what is and what isn't a priority for your business. Sure, it would be nice to have a new coffee machine for the break room, but is it essential? No matter what your employees would have you believe, no, it isn't! Think before you buy then, and only buy non-essentials when you have enough of a profit to do so. You need to budget your money too, so use a budgeting app and/or hire an accountant to help you manage this part of your business. By getting a handle on your income and expenditure, you will be able to make sensible spending decisions. And look for ways to make savings in your business, as you should be able to cut costs across the board if you take the time to put the research in. You might want to switch to a cheaper utility provider, for example, or buy certain items second-hand rather than brand new if quality isn't at risk of being compromised. Think about your spending then, and take steps to manage your money in better ways to give you more opportunities to make a profit.
Thanks for reading!