3 Reasons Why Your Small Business Could Make A Loss

How to Increase Your Business Return on Investment

Should you be a small business owner, you will understand the importance of making a profit. The bigger your net profit, the more money you will have to spend on growing your business, the more you will have to save for emergency situations, and the more likely it is that your business will survive in the long term and not face a small business loss.

However, there is every chance that your business could make a loss. While these losses might seem insignificant at first, they can quickly worsen if you don’t get to the root of the problems that could be causing them. We are thinking of problems such as these.

#1: Mistakes with your accounting

There is no room for error in your accounting. If you miscalculate your income and expenditure, you will never know how much is coming in and how much is going out. You might then spend more than you should, as you might wrongly assume your account is healthier than it actually is. As a business owner, you need to mark down every transaction, from the biggest to the smallest, and you need to look at your bank statements on a monthly basis to keep track of your finances. 

If you aren’t great at crunching the numbers, outsource your accounting to an accountant or bookkeeper. Alternatively, use accounting software, as you will then be able to keep tabs on your finances in a clear and simple way. Think about both options, and be diligent in this aspect of your business.

#2: A lack of customers

After spending money on getting your business off the ground, you understandably need a steady flow of customers to ensure you don’t then run to a loss. But if you don’t have as many customers as expected, you are going to face this financial problem. As a business owner, you need to turn things around with your marketing. Spend time promoting your business online and off, and use the talents of marketing agencies such as ignitedigital.com to ensure you find success in this area. 

You should also return to your initial business idea and ask yourself if it’s still viable in the consumer market. If the product or service you provide is no longer of interest to others, you might need to go back to the drawing board or, at the very least, make a few tweaks to improve what you’re offering to the consumer. 

#3: Errors in your pricing

When it comes to pricing your product or service, you need to find the middle ground. If the prices you set are too high, your customers are unlikely to buy from you if they can find a cheaper alternative elsewhere. And if the prices you set are too low, you might make a loss because a) your customers might equate your low price with poor quality, and b) you won’t be seeing a positive return on the costs that went into manufacturing and marketing your product. 

It can be hard to find a balance, we know. However, to find the middle ground, you should study your competitors and then price your product competitively. You might also survey existing and previous customers to find out what kind of pricing they think is fair. And you might use the advice on pricing strategies here to give you a better understanding of the best practices in business.

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