When you’re running a business, cash flow can fluctuate and there may even be periods of time when your business is in the red. But even when your business is losing money, you still have to pay the bills. This is why it’s important to formulate a plan. It will be easier to get your business through a rough patch if you take action at the first sign of trouble.
Here are 5 things you should focus on if your business is currently unprofitable:
1. Reduce costs. If your business is losing money, you should try to cut costs. Review your monthly expenses and look for areas of waste. Eliminate or pull back on unessential expenses or anything that isn’t positively impacting your bottom line. This could include things like office supplies, software subscriptions, or professional services. You should also evaluate whether it makes sense to reduce staffing, which could mean laying off employees or reducing their hours. And while many businesses are quick to cut marketing costs during tough times, you’ll want to be sure you aren’t eliminating any campaigns or programs that were actively bringing in new customers, as doing so will only make your cash flow situation worse.
2. Review inventory. Do you have a lot of cash tied up in unsold inventory? Review how much you’re ordering versus how much you’re selling. You may be able to reduce the volume of future orders or host a sale to eliminate excess inventory while attracting new customers.
3. Renegotiate existing debt. If you have a lot of high-interest credit card debt, consider transferring those balances to a card with an extended interest-free introductory period. Any money you can save on interest will have a positive impact on your business’s bottom line.
4. Review profit margins. If your business is unprofitable, you should determine which products or services are contributing to that. Review the profit margin for each of your offerings. If there are specific products and services that are losing your business money, consider eliminating them, replacing them, or increasing their sales price.
5. Leverage your existing customers. Don’t let your current and previous customers forget about you. Consider an email campaign to reengage past customers. Let them know about any new products or services you might have or extend them promotional offers or discounts to get them shopping with you again. You might even consider implementing a customer rewards or loyalty program if you don’t already have one.
It’s easy to panic when your business starts losing money, but having a plan when cash flow begins to decline can help you turn things around. At BankFive, we’re committed to the success of our small business customers. Learn more about our business credit cards, business loans, and cash management solutions. We’re here to help!