Is your business losing money?
If the answer is ‘yes’ you need to start making changes fast. The problem is determining where you’re making those mistakes and what you can do about them.
It may not be immediately apparent why you don’t have enough money to pay your bills. Before you start to take out loans and start sending remotely created checks to your creditors, consider the changes you can make to your business.
Poor Cash Flow Management
This is in fact the number one reason why small businesses fail. It’s estimated that 82% of small businesses fail due to poor cash flow management. This is your flow of money that allows you to pay your bills and your regular expenses. Otherwise profitable businesses have failed simply due to negative cash flow.
For example, let’s say you have a check by fax or a check by phone for a substantial amount. You have 90 days to pay another business for their services.
But if you send that check this month you wouldn’t be able to pay the rent for your office. Using remotely created checks is an excellent way of legally delaying payment so you can manage your cash flow better.
Practically every major business in the world uses checks for this reason. It gives them control over when the money leaves their accounts.
A Lack of Payment Methods
You could be leaving money on the table by not diversifying your payment methods. Keep in mind that payment methods differ across the world.
For example, let’s say you were doing business with a UK client or a Dutch client and you wanted to establish a method of payment. In the US you may reasonably expect to receive a check by phone or a check by fax. With these clients that would be invalid because in much of the European Union (EU) checks have already been phased out.
The point is you must adapt your payment methods to the market you’re targeting. Find out what the most popular payment method is for individuals and businesses in each market and make sure you accept it.
Incorrect Price Points
Pricing science is a real thing. It measures price increases and decreases against demand. For every business this can only be managed by extensive testing. If you’re lacking revenue, it’s wise to begin changing your prices to see whether it makes a difference.
In most cases, a price increase means a decrease in demand, but if the price increase covers the drop in demand it’s a good decision. For example, with luxury goods or a market bubble you may find that a 50% increase in price leads to a 100% increase in demand.
Really you can only figure out what the best price point is by testing. If you’ve yet to try this, it could make an incredible difference to your business.
Your Marketing isn’t Working Out
Do you know what SEO is? Have you ever launched a social media campaign? Is your content marketing campaign meeting the needs of your customers?
These are all important questions you need to answer. The answer should be ‘yes’ to every single question. Examine your marketing strategy carefully and consider whether you’re maximizing each channel available to you and whether you’re targeting the right people.
Investing in All the Wrong Areas
Did you know that, so many failed businesses wasted all their money on creating their big product?
It’s true and it happens because businesspeople often fall victim to perfectionism. They load their product development department with funds and find they have nothing left for marketing and other business functions.
You must spread your funds intelligently. It all goes back to cash flow. Establish that and anything left over can go towards areas of need.
It’s all about prioritizing what ensures the survival of your company.
Last Word – Don’t Become a Statistic
The next time you receive a check by phone it should be to grow your business not to carry it over to the next month. By avoiding these five major mistakes you’ll avoid becoming a statistic and your business will thrive for years to come.
Do you have any other tips for ensuring that your small business flourishes?