One of the most disheartening experiences a business owner can have is putting her heart and soul into her business and not seeing any financial rewards. If you’re doing business, you deserve to be making a profit. But, being financially savvy doesn’t come naturally to everyone. I don’t consider myself a numbers person and at times have struggled to understand the finer details of business numbers. But, I have learned that it’s a skill that can be taught.
Here are 10 reasons why your business may not be producing the profit you want!
- Your cash flow is bumpy at best, and non-existent at other times. It’s not always easy to predict cash flow. But, with the right tools, you’ll know what’s coming in, when and be able to plan ahead.
- You don’t know how to do a budget that is right for your business. Ok, budgets can be boring. However, they can also be empowering and allow you to focus your efforts and stay on track. I didn’t do a budget for my business for the first two years. These days, I can’t go without one. And, at any point in time I can check and reorder my activities to meet budgets.
- You want to use a bookkeeper, but you don’t know what questions to ask. Unless you’re financially savvy (and have a lot of time on your hands), I recommend you hire a bookkeeper to take care of your numbers. A good bookkeeper is an invaluable team member who can help educate you. You just need to know the questions to ask to get the answers you seek.
- You aren’t sure if you’re charging enough for your products and services. If your idea of pricing research is looking at what competitors are doing, you could be pricing yourself too low. An expert can help you get the right price to ensure you’re matching what the market will pay and getting the best return on your time.
- You use your bank balance to measure your success (this one mistake could lead to going broke). A look at the bank balance is a really bad way to know how your business is doing. It’s also amateur. If you want to be pro, you need to know what’s coming in, what’s going out, and what it takes to run your business AND pay you a decent salary.
- You’re more a creative type than a numbers type, but you know you need to learn. That excuse might fly, or it could be that it’s standing in the way of you feeling more powerful and in control of your business. You don’t have to become a numbers geek to understand numbers. (One of my ‘snapshot’ reports is coded with RED highlighting areas that need my attention and GREEN highlighting areas working well.)
- You’re not being paid on time and this is causing a cash crisis. I’ve heard a few businesswomen say that they are struggling to be paid on time AND they don’t have time to chase their money. You did the work and you earned the pay. Now, go get it.
- You’re not sure what it costs you to open the doors to your business. Unless you know what it costs you to open your doors each day, how will you know if you’ve got enough revenue coming in? And, neglecting to include your time (even when you’re starting out) gives you a false sense of security.
- You don’t know the difference between Cost of Sales and Expenses. I didn’t do a finance degree and you probably didn’t either. However, knowing the basics of financial vocabulary and the difference between what it costs to produce a product or service, vs the expenses in your business, is crucial.
- You just want reports that give you the big picture (and don’t swamp you in detail). Each month, I sit with our bookkeeper and review the business numbers. The reports that I look at show me in succinct terms what is working and what is not. I can then adjust business activities to work on the areas (revenue, expenses) that need the most attention.
