Firtst Brexit, then Covid 19, and now the rise in the cost of living. As if being self-employed and running a business isn’t hard enough, our business lives face turbulent times from price hikes and limited cash flow, how can our trading survive? Setting up a new business is an achievement for anyone and, naturally, it’s common for new entrepreneurs to face the challenges of everything it entails. If you feel like you’re treading water and your small business is losing money, then read on to find out where you can start generating, not losing cash.
1. Lack of organisation
Seems obvious, doesn’t it? But, in truth, small business owners have to wear so many different hats, that it’s hard to keep track of everything involved in running a tight ship. Add to this the lack of time management skills and suddenly you feel like you’re drowning with all the things you have to do. Running a legal business can be exhausting, but you can learn to pace yourself with some careful planning, tools, and prioritising.
- If you don’t already have one, create a Business Plan outlining your goals and strategies for business success.
- Organise all your business records, such as receipts, invoices, expenses, etc
- Take advantage of online tools, for example, Xero, to help you stay on top of all your paperwork.
2. Poor Money Management
If you don’t already know how much money is going in and out of your business, then how can you take control of your finances and prevent your business from losing money? Many startups begin their journey by buying a lot of supplies and equipment. Consequently, the initial set-up costs are likely to create a negative cash flow until you have built a customer base. In addition, you also cannot afford to be behind with taxes, VAT, bills, insurance and HMRC. It’s one of the major reasons small businesses fold, so you should start implementing accounting skills to combat negative money management.
- Set financial goals, and either weekly or monthly, adapt them according to how your business changes over time.
- Be consistent in tracking your income and expenses in order to continually assess your business accounts.
- Use a bookkeeping spreadsheet and start tracking all the vital numbers in your business.
3. Ineffective Marketing
There’s no avoiding having a presence on Social Media. If potential customers don’t know you exist, how will you sell your product or service? Building a following online can also open doors to new opportunities and a larger customer base, which ultimately can create loyalty to your brand. Spending any of your budget on ineffective advertising or having a website that isn’t optimsed for a mobile version, for example, all indicate your business is not on trend and can even turn clients off.
- Track your website and social media data to keep a firm eye on trends that directly affect your own business. These figures will tell you where you can make improvements.
- Use marketing tactics, such as social media promotions, email marketing and maximising your social media presence.
- Start networking and reach out to influencers, other entrepreneurs and local business owners to help catapult your business into the people’s minds.
4. Pricing products/services
Whether your products or services are over or under-priced, the result is not too dissimilar: either you’ll push customers away or your business will lose out. Not having a pricing strategy will undeniably affect your gross profit. For example, if your selling price is less than your cost price, then you are probably under-selling your services or products. Alternatively, you can end up alienating your customers by charging too much which will most certainly contribute to your business losing money.
- Never guess the price of your product or service. Work out your cost price and include overheads to find a middle ground percentage to sell.
- Study who your competitors are and find out what the market price is of what you’re selling. You can then use this information to build a pricing framework.
- Always review your pricing strategy regularly to help with your business’ financial stability. For example, when materials or shipping costs increase.
5. Poor Customer Services
‘The customer is always right’ is a well-known business adage, and without retaining a loyal customer base, your business won’t survive for long. While this is not always easy to achieve, losing clients because of poor service can be avoided and will help reduce financial stress. Not taking notice of what customers are saying about your business, or being unaware of your target group, highlights how much your business falls short of positive customer relationships.
- Define your unique selling point and communicate it to your customers through loyalty/rewards programs, discounts for new launches and, depending on your business set up, VIP offers.
- Ask your customers for feedback to get an idea of what they feel about your services, and where improvements can be made.
- Take notice of reviews, especially the negative ones. Learning from your mistakes is a big part of running a self-employed business.