Some entrepreneurs are very patient with their businesses. This means that they can go years without making a profit. As long as they are doing what they love, they are okay with pursuing their business interests. But even though their focus is not on profit, they still need to make money to keep the doors open. While they can wait for a return on investment (ROI), their employees need their salaries to arrive on time.
Even businesses founded on strong ideals, models, and strategies can fail miserably when it comes to generating profit. There are a lot of factors that go into making a profit. It’s not just about how great your products and services are. It’s about how you manage and reinvest the money and how you keep customers happy.
The idea of many entrepreneurs is not to set the price too high (and set it below their competitors), so as not to turn off their market. While this is a great strategy, you are banking on the idea of selling a lot of quantities of your product to get a profit. This doesn’t always work unless you are in the business of selling products in bulk.
The problem with setting prices too low is you will end up spending more in creating the products without getting that money back. Do not be afraid to charge for quality. Customers are willing to pay for quality materials as long as they know it is worth their money.
If your business got into legal problems in the past, then that’s the reason you seem to be profiting less. You might have to pay a business attorney to get you off the hook. If it’s a tax problem, you will need to hire an accountant and bookkeeper to review your books and manage your inventory. There are a lot of legal problems facing small businesses that do not follow the rules of the book. Make sure your policies are in place and are in accordance with the rules.
There are many things that your business needs to survive. During the pandemic last year, have you taken a look at what your business is spending on? It could be that you’re spending on unnecessary items. How do you take them out of the equation? For example, do you really need a large office space when there are only five of you regularly working there? How about paying for a co-working space instead? That might save you more money. How about the number of hours the heating and air conditioning run? Can you cut those hours down, so you don’t have to shell out much for your energy bills?
While there are necessary and unnecessary costs, there are also emergency expenses. These are the things that you haven’t prepared for such as a broken-down computer or machine. If you do not have an emergency fund for that, you will end up using what little profit you’ve made from the business. Or, you’ll dip your hands in the remaining capital or your personal savings. Both options are just bad.
The reason people aren’t going to your store or office is because they are in your competitors’. If your competitors have similar products that are priced more objectively, then your business stands to lose to them. Consider your own point of view. If you are a customer, which of the two businesses are you going to patronize—the one selling the product for a higher price or the one with a more competitive price tag? The answer is pretty obvious, right?
Find out why customers are choosing the competition over you. Whether it’s about the price or customer service, make sure to address the problem immediately. Go back to the drawing board and strategize on how to “steal” their customers away.
Offices and stores should be open at the exact time every day. If your market isn’t sure when they can reach you, they won’t even bother with it. But that is not the only inconsistent thing businesses are doing. Some businesses, for example, have different expenses every month or the sales team is unpredictable. These are causes for concern. You should know what to expect from your team in terms of sales and expenses. If you are not careful, there might be more months in a year when you’re spending more than you are earning. That will cause your business to crash and burn.
If your business is currently struggling to make a profit, know that there’s a way around it. You don’t always have to give up and close your doors. Identify the problems. Think of solutions. Apply those solutions. Whether your business will eventually succeed comes from a combination of factors, but what’s important is trying out everything you can.