5 Reasons Your Business Is Losing Money

Written by: Kevin Gardner

Have you wanted to run your own business for a while? If your business isn't succeeding, you may think you should quit and go back to a job. But before you do that, read on to learn why your business is losing money and what you can do about it.

1. You're Spending Too Much

One of the biggest reasons your business is losing money is because you're spending too much money. Now, some business expenses are required to run a successful company. In your first year, you may need to spend more money than you earn from sales.

However, it can be easy to spend way too much money on things. So you should look for cheaper alternatives to keep costs low. Then, you may start to see a profit earlier than you would otherwise. This is particularly important if your business has been open for a while.

2. You're Underpricing

Maybe you're spending as little as possible but are still losing money. The problem could be that you aren't charging enough for your products or services. If you offer products, you have to consider the cost to manufacture the items and to ship them to stores or customers.

When selling a service, you have to think about how much you want to make per hour. Then, add on the cost of any software or other tools you have to use to complete the project. Add on a bit extra for your profits so that you don't just break even.

3. You Aren't Investing Strategically

Sometimes, you need to spend more money to help your business grow. The right investments can fuel growth for a new business. But it can also be easy to invest in things that won't do anything for your business or success.

Maybe you're spending money on a coworking space, but you never actually go and work there. You'd be better off saving that money and spending it on a faster internet plan for your home office, for example. Be sure you invest in stuff that will help you make more money, and don't be afraid to think it over before making a big purchase.

4. You Don't Track Your Assets

Asset tracking can help you figure out what assets your business owns. While assets may not keep you from losing money, they can help mitigate the problem. For example, you may track your assets and realize that you have stuff you never use.

Maybe you have an old computer that doesn't suit your needs. Or perhaps you always drive your personal vehicle instead of the car you bought for business use. If you never tracked your assets, you may not remember that you own certain things. And if you own a lot of things you don't use, you can sell them to get your business closer to being profitable.

5. You Chose the Wrong Business Model

Some business models can be more profitable than others. A good example is an online business, such as a social media management agency or a consulting firm. Those businesses are easy to run from home, and you just need a laptop, internet, and a few pieces of software.

On the other hand, it takes a lot of money to start and run a restaurant. You have to pay for the commercial space, cooking equipment, appliances, and employees. All of that takes money, so your business could be losing money for a lot longer than a smaller, digital business.

Final Thoughts

Starting a business can be exciting, but it's also a risk. Before you continue the same spending habits, consider if your business is losing money. Then, you can determine what to do to get your finances back on track.

Related: 7 Helpful Tips for New Business Owners