Any business can be vulnerable to loss. Even businesses that are well-known, old, established brands can find themselves losing money. Rather than simply hope that things will turn around, it is your responsibility to take charge and turn your flagging fortunes around with these steps.
When You’re Operating At a Loss
A business is operating at a loss when the revenue generated by the business does not cover the cost of operation. This can sometimes be acceptable if the loss is temporary, and if your company has enough money in the bank to cover the loss. If your business is frequently operating at a loss, however, you will need to make changes to how your business is operating. Sometimes, this could be as simple as changing the hours of operation. If you notice that there is a significant drop off in your company’s profits past a certain hour, you may need to close your business earlier. This could save on labor costs and electrical bills.
If the greatest expense for your business is labor costs, you may need to get more bang for your buck by hiring new talent, firing employees who consistently have low productivity and by coaching employees, for instance. One way to improve productivity is through gamification. Some stores have incorporated lights that turn green when employees are performing a task that is considered the average speed, and turn red when the employee is lagging behind. This gives the employee a sense of whether he or she is working hard enough. Employees who are close to the average should be coached on ways to streamline their operations.
Adjust Your Prices
Make sure that you are selling your products at an appropriate price. Some businesses strive to keep their prices unrealistically low out of fear that higher prices will drive away customers. However, if your products are not priced in a manner that will cover costs, you will be losing money even if you have the business. If you are unable to sell a product without lowering the price, you may be selling the wrong products.
Charge Extra Fees
Look for services that you offer for free and see if there are ways you can charge a fee. First, consider what the industry standard is. For instance, most businesses offer WI-FI for free rather than charging for the service. However, if it isn’t unusual to charge for a service, use extra fees to generate a profit.
When Losses Are On the Horizon
If you anticipate that your business will suffer a loss, but it is not yet suffering a loss, you may want to pay out dividends in a more profitable year rather than paying a larger salary. If you leave the profits to be taxed as business income and if you pay out dividends rather than a salary, you can carry back all of your profits to recover the taxes you paid that year.
While no one starts a business expecting it to fail, it is always important to have a plan for what to do in case your business does fail. Assume that things will never go smoothly for your business and always have a backup plan for everything. Unfortunately, there is no insurance policy that will guard against business failure, but there are various insurance policies that can reduce the risk that your business will fail. Make sure to speak with a business insurance broker to ensure that your company is adequately covered based on the type of industry you are in.