A decrease or stagnancy in the cash flow of a business is a major wake-up call for every entrepreneur. Many businesses depend on the revenue obtained from sales of products and services to operate smoothly. However, in many cases, a budding business might experience a period when cash flow starts to depreciate or stall due to a reduction in patronage or total absence of customers.

It is not abnormal for a business, especially a start-up, to experience negative cash flow at some point. However, a negative cash flow for a long period of time is a clear indication that something is wrong and effective changes need to be made in the operations of your business immediately. In today’s article, I am going to be highlighting reasons why your business might not be making money irrespective of how much time and energy you put into it.

Reasons Why Your Business Is Not Making Money

Here are a few reasons why your business might not be making money;

Lack of an online presence: The absence of an online presence for your business can be a major reason why your business is not expanding its customer base hence your reason for not making money. In modern day businesses, social media channels have become the “digital marketplace” for many entrepreneurs to promote their products and services easily. Whether your business is a physical store-front or an online store, having a digital presence gives you an opportunity to grow your business and make your brand appealing to potential customers. As an entrepreneur, a strong online presence for your business provides easy access to a wider reach for customers, an avenue to market your products easily and a platform to interact with existing customers and showcase your products/services. It is also important to note that social media platforms like Facebook provide useful business tools for entrepreneurs that support business growth and increase customer base which automatically yields profits.

Great product, Terrible Marketing: A lot of great products have failed due to poor and ineffective marketing. Marketing your products poorly is another reason why your business might not be bringing in profits. Many business owners are more concerned with making money and do not focus on implementing effective marketing strategies that will be beneficial to the growth of their business. It is important to note that marketing is an essential component of every business because it allows you to create awareness for your product and also provides the platform through which your products are showcased to the general public. If the marketing strategies for your products or services are not planned and implemented properly, it will result in a downturn of customers and revenue.

Bad spending habits : As a business owner, bad spending habits will always have a negative impact on your finances. A major red flag in the operations of any business, especially one that is still in its early stage, is spending excessively on things, people and services. If you are an entrepreneur experiencing a decline in profits, you might want to cut down on unnecessary bills eating into your revenue. Many new businesses tend to spend money on things or services that are not essential in the early stages of a business. For instance, buying fancy equipment that is way too pricey, employing excess staff, online App subscriptions that you keep renewing monthly but your business never uses and a bunch of other pricey services your business pays for but doesn’t necessarily need. If you are a business owner interested in putting your finances back in shape, creating a scale of preference for your business is a great way to prioritize your business needs over wants. You can also manage your finances by creating a budget and sticking to it as this always helps to curb bad spending habits.

You Do not Track your Expenses: Not keeping an eye on your business expenses might be another reason why your business is not making money. Keeping tabs on the money that enters and exits your business is a great way to monitor and analyze your finances. Many business owners do not pay attention to what they spend money on monthly/yearly rather they focus on recording sales and keeping a bunch of receipts only. As a business owner, tracking your expenses is important because it helps you to reveal spending issues that are detrimental to increase in your finances. Tracking your expenses daily also gives you an insight into what your business spends daily to keep it running smoothly and this enables you to make informed decisions on where more or less expenses should be applied to. With the presence of numerous business softwares like Quickbooks, Expensify etc at the disposal of business owners today, tracking your business income and expenses involves less paper work and is much more effective.

Your Pricing is too low or too high: In the world of business, the price of your product plays a major role in determining whether or not customers will buy your product. If your pricing is too high, your customers tend to jump ship by patronizing your competitors who sell similar products at a lesser price and if your pricing is too low, it will hurt your business finances because you will be running at a loss. As a business owner, there are many factors to consider when adding a price tag to your product or service. However, an effective method that will help you to make informed decisions on the selling price of your product or service easily is the Cost-plus pricing method. It is a pricing method that involves adding the total costs of bringing your product to market, setting your profit margin on those expenses and the resulting number ends up being your selling price. With this pricing method, you can be sure of making profit and selling your product at a good rate.

It is important to note that negative cash flow doesn’t necessarily signify the death of a business. However, business owners should keep tabs on every component of their business as each component plays a role in determining increase or decrease in the finances of the business.

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