People lose money, and businesses lose money. When people lose money they go broke, and businesses crash when they lose money.
The problem, however, is that many entrepreneurs do not know where or how their business is leaking or losing money. If you are aware that your business is losing money without knowing exactly how. The following areas may be the cause of your loss.
1. Overpaying for office space
Many entrepreneurs pay for large office spaces they are not really using, creating unnecessary overhead for a business that generates very little income. If you have to pay $1,000 monthly for office space that generates only $600 per month, then your business is losing money.
There are other properties such as cars and trucks that consume thousands of diesel fuel every month but that are actually used for very little work.
2. Hiring unqualified staff
If you hire the wrong people, then you will not only lose money through them, you will also spend weeks and months retraining them on how to get things right – time that could have been used on more productive things. Unqualified staff does not bring quality service to the company, yet they have to be paid on time at the end of the month.
An experienced and professional employee is worth three that know little to nothing about the job. Unqualified people make the company lose money from product sales, pitching, and other related deals.
3. Selling yourself short
If you sell yourself short as a startup, you could find it difficult to get your business off the ground. If clients do not pay you what you’re worth, then it is certain you will lose money. It is just like paying less for a product or service that costs more to produce. While it is good to remain balanced with others in the competitive market, it is best to charge more if you are really good at what you do.
4. Bad accounting
If you or your staff do not know how to keep track of expenditures and incomes, then you are on your way out of business.
Your book-keeping must be accurate and your accounting must be top-notch. If you do not know how to log transactions and keep abreast of the inventories, then you better hire a professional accountant to take care of things or you might continue to lose money in the process.
5. Merged business and personal bank accounts
Merging your personal and business bank accounts is not the best way to do business. While you might be tempted to use the same account for all personal and business purposes as a sole proprietor, it is not the best way to go.
Muddling accounts together means muddling money together, and it is the fastest way to lose track of personal and company funds. When you mix all the money together, you will not know when you begin to embezzle business resources.
6. Lack of online presence
You will surely be losing money if you remain a brick-and-mortar business in your local area. You stand to generate more revenue if you take your business online where customers from all over the country and the world can contact you for business.
Internet presence gives you better leverage to reach a wider customer base than just selling to people in your locality. So you may sure be losing money if you have no online presence.
7. Poor investing
If you think that your startup will get off the ground and running on the first funding, then you are deceiving yourself. You must continue to pump funds into your business until it is well able to stand on its feet.
If you cease raising necessary funds for your business, then your startup will start to lose steam and money will begin to flow out. So you must raise more funds for your business for it not to lose your initial investments.