Business

3 Reasons Your Business Is Losing Money

You opened a business in order to experience all the usual perks of being an entrepreneur. You wanted to be your own boss. You wanted to live on your own terms while selling a product or service that you could believe in.

But there’s just one problem:

The business is losing money. And as the months go by and the company bank accounts continue to empty, you know that you can’t continue like this.

Why do some businesses hit the ground running while others struggle to stay afloat? Why do so many companies with amazing products go down in flames? Read our list of common reasons why businesses lose many to see if anything sounds familiar.

  1. There’s a Flaw in Your Business Model

For most companies that are struggling to turn a profit, business model-related issues will typically come in one of three forms:

  • The product
  • The market
  • The supply

You could have an amazing product, but if it’s not what people want, then your business will have an uphill battle to profitability. Similarly, you could be offering an in-demand product or service. If you’re trying new ideas and you feel like nothing is working, you may have to go back to the basics.

  1. You’ve Got a Pricing Problem

For most businesses, product pricing is a catch-22.

On the one hand, you don’t want a product to be over-priced to the point where people can’t or won’t buy it. But at the same time, if you’re selling the item for less than you’ve bought it for, it won’t matter how much sales volume you have — your company won’t be able to turn a profit.

If you suspect that you’re selling your items at a loss, you may want to revisit your prices. Could you bump up the product by one or two dollars without affecting conversion rates? Are your prices keeping up with inflation?

This scenario can be difficult to address if you’ve built your brand around your affordable prices. But you’d be surprised at what a few small pricing adjustments can do for your profit margins.

  1. Accounting Mistakes

In 2020, the IRS assessed nearly $5 billion in civil penalties to businesses. Even if your company has avoided this in the past, mistakes as relatively minor as simply misstating your income or missing a few receipts can have serious tax implications.

But of course, taxes aren’t the only ways in which inaccurate financial information can hurt your business. Are deductions and disputes messing up your cash flow projections? Are you getting the insight you need from your accounting department?

If you’re not working with a bookkeeper or a certified accountant, it’ll be a lot harder to make informed financial decisions on behalf of your company.

Entrepreneurship Doesn’t Have to Involve Losing Money

If business failure rates tell us nothing else, it’s that losing money is the norm for companies across multiple industries. The good news for struggling business owners, however, is that companies can quickly become profitable if you go back to the basics. All you have to do is be ready to do a thorough internal audit.

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Jonathan Kim
the authorJonathan Kim
Jonathan Kim is the SEO marketing specialist at Trumpia, the most complete SMS solution including mobile engagement, toll-free messaging, Smart Targeting, and advanced Automation.