Most small business and startups struggle in the beginning to make money. Some barely scrape by and more than three-quarters of startups fail within the first five years.
Two-thirds of small business owners plan to grow their business in the next five years, but there is still a struggle to reap the rewards. Oftentimes, businesses not only forego payments to make ends meet, but they also take on some personal financial responsibilities. For example, 35% use their personal credit cards for expenses and 29% take out personal loans, according to Bank of America.
This kind of financing is risky at best. Making money goes beyond having a good business plan and requires definitive action. When cash flow decreases or slows down, here are some things any business owner can do to turn things around.
1. Facilitate proper communication.Ă‚ Your passion and your business plan may be the heart of your business, but communication is the lifeblood. Without clear routes of communication, you will have bottlenecks, upset customers, failed projects and decreased productivity. By focusing on your communication routes, you can improve all aspects of your business and raise your profits.
There are hundreds of useful communication tools available for businesses. Dialpad is a highly trusted tool for small to mid-size businesses and allows you to connect with both team members and customers, so you can stay on top of any necessary communication.
2. Change marketing plans.Ă‚ A poor or stagnant marketing plan may be the number one reason you are struggling to become profitable. Some changes you might try include:
- Increase your content marketing budget and better allocate the money towards conversions.
- Incorporate a more sales-oriented strategy.
- Use free but effective marketing channels to increase revenue like Buffer, Google Tools and Moz.
- Dedicate a team to your marketing efforts to increase productivity and effectiveness.
Some of these tips can be costly but will be well worth it in the end. Putting your money towards these endeavors significantly increases the effectiveness of your marketing strategy and can mean more money.
3. Seek angel investors. “According to the Global Entrepreneurship Monitor (Babson College and the London Business School), friends and family investing annually accounts for $50 to $75 billion in early stage capital in the United States,” says Brian Cohen, author of 'What Every Angel Investor Wants You to Know.' "This is two to three times the amount of money invested annually by either angel investors or venture capitalists.”
Thousands of companies get started with the help of investors. Getting monetary support from an angel investor lets companies work on growing and expanding their businesses. They are able to improve and add products, making their company a more visible target for shoppers.
4. Change sales strategies. The sales department of your business is vital for success, but it often does not receive the credit or attention it should. Robert Collier once said, “Supply always comes on the heels of demand.”
It all starts with having a sales team that believes in the products and is excited to sell them.
Also make it worth their while to move your products and services. Offer new incentives for every quarter to keep things fresh and interesting. Little things like contests and grand prizes do wonders for getting people more motivated.
5. Adjust prices. "While a growth strategy like driving costs out might bring short-term spikes in margin improvement, it also may come with undue risks, like disruption to day-to-day operations or widespread layoffs," says pricing expert Ryan White. “You need to consider both the safety and sustainability of your preferred growth strategy. That's why, when considering the most appropriate path to profitability, more companies are turning to pricing improvements.”
In some situations, your prices may be too high, which keeps people from making purchases. If you determine that is the case through testing and surveys, lower your prices slightly to something more competitive.
In other cases, your prices may be too low so you are not making a profitable margin from your sales. It does not need to be a huge hike and it probably should not be if you want to retain customers. Even a 1% price increase can raise a company’s prices 11%, according to White.
Closing remarks
Profit stalls are scary for small businesses, but it does not need to indicate failure. Entrepreneurs who look ahead and think critically during the planning stages will come out on top in the end.
Start a free 7-day trial of Premium Membership to GuruFocus.
