If you’re running a business that’s barely breaking even or losing money, something needs to change before you find yourself closed for business.
To get started, you need to first assess your financial situation. The best person for this task is the financial decision maker, which is typically the business owner or bookkeeper. Identifying where money may be slipping through the cracks can be a lengthy process, but it’s necessary to succeed. Let's take a look at five common ways businesses lose money
1. High employee turnover. When hiring a new employee, always consider the time and cost it takes to hire them. If you don’t feel they’re going to stick around for a minimum of one year, it may not be worth your time to train and manage them. Maintaining a consistent team can be a huge asset to your business.
2. Inefficient systems and processes. This covers everything from marketing channels, to advertising costs, and workflow. There should be a highly defined system in place for every task needed to run your business, which is especially important in the event a key employee is out sick or on vacation. Following business systems will eliminate mistakes and allow your business to grow.
3. Unnecessary spending. This is a broad area that can be hard to identify. Start by taking inventory of every single expense. If you aren’t doing this already, do it, like right now. How can you identify where your money is going if you don’t maintain inventory of your monthly and yearly costs? You can’t.
Some common areas that may be hard to identify include memberships, subscriptions, and unused products or services. I once worked for a company that had an account for a program they never used; unfortunately, that service cost them almost $10,000 per year. Make sure that you’re actually using your programs, services or subscriptions, and that they are required to continue generating a profit for the business. And remember, there are tons of free alternatives available that are worth exploring, like email software.
4. Poor customer service. This may not be where you’re technically “losing money,” but it’s still costing you money. Your customers should always come first. If you receive a complaint about your product or service, don’t ignore them or take too long to respond. Customers want to feel valued and if you treat them right, they could become your cheapest marketing channel (word of mouth). Make sure that your customer service staff are timely, kind and following company protocols. Besides documentation reasons, customer support calls are recorded and chat transcript files are saved so companies can review and assess them to make improvements. It’s a great way to identify a poor employee that may be losing their cool with your customers.
5. Poor online presence. Everyone uses their tablet, computer or smartphone to look up a business or product. If your website or marketing campaigns and graphics are outdated –or worse, nonexistent- you’re probably losing customers on a regular basis. Every single company should have a website and a social presence at the bare minimum. Both of these are free and take just a little bit of time and patience, so there’s really no excuse. If you’re company is hard to find in SERPs, you’re hurting your ROI.
Commit to Change
Finances affect everything in business. Decisions are made based on incomes and debts, which impact your personal life as well. After you’ve assessed your finances and have taken inventory or every single item that’s costing your business money, it’s time to commit to change. Eliminate optional expenses, find more efficient ways to perform job functions, and take advantage of discounts from suppliers and vendors.