Is Your Business Losing Money? These May Be the Reasons.

When your business is losing money, sometimes the reasons are obvious. For example, extreme weather may dissuade shoppers from visiting your brick-and-mortar store. But some underlying problems may not be as easy to identify.

Following are some common reasons businesses lose money:

  • Failure to promote. A roadside sign and word-of-mouth referrals used to be enough to sustain and grow a customer base. Not anymore. Today, businesses must invest money in marketing and promotion. With few exceptions, businesses need a social media presence. And social media offers a big return for very little – if any – investment. Creating a simple Facebook page and sharing updates regularly can help businesses reach a wide audience. One caveat: If you have a Facebook page, make sure you have someone to monitor it and keep it updated, because if customers are trying to interact with you on Facebook, slow replies or a lack of responses can actually be bad for business.
  • Failure to increase prices. At some point, every business has to increase prices for their goods or services. Ideally, that should happen before you notice a dip in profits. Business owners may worry that hiking prices could upset customers, but there are strategies that can minimize tension. Using a restaurant as an example, let’s say you have to increase the price of a popular appetizer by $1. You could also sell that appetizer at its original price one day per week or between certain hours.
  • Failure to maintain appropriate staff levels. Many businesses experience fluctuations in profits through the year, and that’s especially true of seasonal enterprises, such as landscaping services. If you maintain a full staff year-round, you may be essentially paying people who aren’t adding any value to your business. On the other hand, skimping on staff to save a few dollars can backfire – if you don’t have the people you need to serve your customers, you could end up alienating customers. Plan ahead for how to scale staff. Some companies use a mix of full-time employees, temporary workers, and contract workers to handle their business needs.
  • Failure to change. People appreciate consistency, so if you have a product people love, there’s very little reason to change it. But other types of change are often necessary to keep up with customer expectations.

Businesses that have existed for years may fall behind their newly established competitors if they don’t think about technology. A lot of customers expect businesses to have a well designed website; and if you sell merchandise, shoppers may prefer to buy it online, rather than in person. Online shoppers have made Amazon one of the largest companies in the United States, so that should be motivation for small businesses that still haven’t enabled online shopping.

A remodeled interior, a second location, a new service – those are all changes that could help grow your business. But as always, when considering change or expansion, it’s wise to get professional advice about the feasibility of plans, as well as the potential gains or losses you might experience.

Lusk Law, LLC, specializes in assisting business owners to plan and prepare, helping to avoid litigation when possible, and we’re ready to actively represent our clients in court when litigation is necessary. Our experienced attorneys have provided legal counsel and representation to entrepreneurs in Frederick County, Howard County, Baltimore County, Baltimore City, Carroll County, Washington County, Anne Arundel County, and other counties in Maryland. Please call us at 443-535-9715 or fill out our contact form if you need legal guidance for your business.

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