Why is my business not making money?

Why is my business not making money?

This question may have several answers which depend, in part, on you business. However, there are some common, generic reasons for a business not making money. The three main areas to consider are Product, Placement and Sales technique. You can use the following as a checklist to ensure you are considering all the possible issues that may be causing financial problems:

1. No Business Plan:

Without a business plan it is hard to know where the company is heading. A Business Plan will give you a strong insight into:

a. where the pitfalls for your company are,

b. what your true overheads are,

c. when the bad months and good months are likely to be, and therefore when to launch certain products or services ,and how to budget effectively to cover the leaner periods.

These points will assist you in predicting highs and lows in your cash flow, as well as planning how to deal with them.

2. No Market Research:

Without Market Research it is impossible to estimate how profitable the business will be in the first place. Market Research will allow you to establish:

a. Who your core customers are

b. Where they are and therefore the best ways to reach them

c. Why they will buy from you rather than your competitors

d. Who your competitors are

e. What your Unique Sales Point (USP) is

f. Your pricing policy

Use the information you find to develop you marketing strategy.

3. Poor Financial Record Keeping:

Many new business owners think they will save time by simply placing all their financial paperwork in a bag and giving to their accountant once a month, or in really bad cases, once a year! This does not allow you to keep your finger on the pulse as to where the finances of the business are really going and therefore you cannot make informed decisions about your business. There is no way of avoiding financial paperwork - it has to be done. You cannot predict trends if you do not have the data at your fingertips - therefore you cannot save for the lean times or schedule investment for the good times. Perhaps most crucially of all, you cannot spot when things are going wrong and therefore when to take action. Gut feelings are not enough - good solid paperwork takes the guess work out of running a business and in the long run actually saves you time and certainly saves you anxiety. Consider:

a. Setting some time aside every week to put your paperwork in order. You will also need to review finances on a monthly and quarterly basis

b. Learning to use spread sheets to manage your accounts

c. Employing a book-keeper to do this for you once a week, if you really cannot face it or do not have the time

d. Undertaking training to learn basic accounting skills. Creativebias can help you with this.

4. Advertising & Promotion:

Even the best business in the world, selling the best product or service, will not thrive if no one knows about it. You need to make sure that you are promoting the company at every opportunity. Are you:

a. Ensuring that every document relating to your company has the company name (and No. if appropriate), a contact name, a telephone number & email address and a website? And remember - a website ALSO needs promoting - it is NOT an advert until people know it is there

b. Setting aside a budget for advertising? You need to be sure how much you can spend on advertising

c. Evaluating your advertising budget? You need to make sure that every penny you spend counts. Ask people where they found out about you, and use this information to decide if the results are worth the expenditure. For instance if you pay £100 for several newspaper adverts and only get £50 work from it, it was obviously not worth it - but you need to know.

d. Aware of all the places that your potential customers are likely to seek you - i.e. are you advertising in the right places

e. Certain who your potential customers are? - See Marketing Strategy above

f. Seeking FREE marketing opportunities? Press Releases only cost your time and can be very effective. They help to build up your relationship with the press. Over time, journalists may even come to YOU for stories. Also consider raising your profile by tying your name in with local and relevant events - like festivals and trade fairs

g. Networking? This is a great way to raise the company's profile. Consider working in partnership, rather than in competition, with other similar companies. It is possible that you have complementary skills and can pass work on to each other

h. Offering enticing incentves? Are you giving people a positive reason for buying from you? Are you pushing the benefits of them buying your product or service? Consider discount vouchers and/or repeat customer incentives.

5. Poor Sales Technique:

It is possible that you are getting your product or service in front of potential clients, but not actually securing a sale. No business can survive without sales and there can be many reasons for this, including:

a. Poor product knowledge. Do you really know everything about your service or product? Can you answer all the clients' questions and if not, have you developed a good 'patter' to stall the client until you can get back to them with a clear response?

b. Lack of confidence and skill. Be honest with yourself. You may be a very creative person, but have you got the confidence to face people and sell to them? If not, you might need to consider employing a sales person or attending a workshop to enhance your skills.

c. A saturated market. Are there just too many people doing what you do? In which case, go back to the Market Research stage and develop a USP, and then redefine your market and promotions plan. This will help you concentrate your sales on people who are genuinely interested in your product.

In a nutshell, if your business is not performing well, the reasons are generally to do with potential client's lack of awareness, or sometimes the wrong product in the wrong place. By being honest about your attitude and skills as well as regularly updating your market research, financial recording and business plan, it is possible to develop techniques to improve poor sales.

Tania M C Lewis

22nd November 06