Every entrepreneur has their reasons for starting a business. However, the goal is more or less the same: to make enough money for a living. Whether you call it financial freedom, economic stability, or to get rich, it can be quite a problem if you’re not getting the outcome you desired from your business.
Being stuck in a financial rut can be frustrating, especially if you feel like you should be making decent money. It should reflect on the figures. Well, not necessarily. If you have been struggling to make ends meet, or having trouble covering all your business’s basic needs, something is wrong. It could be that you are overspending, you are not taking home enough money from your company, or worse, a combination of both.
How do you know if your business isn’t making enough profit?
You rely on your credit cards monthly.
Every financial advisor out there will tell you that if you are using your credit cards towards the end of the month to cover all your expenses, you are not earning enough. Using your credit cards to make ends meet until the next payout can be a big problem. For one, your credit card bill incurs interest. Also, it’s an unproductive loop of working towards nothing.
Unless you can maximize the benefits of using a credit card, switch to paying your business expenses with cash on hand.
You can’t cover all your bills
If you are choosing between which bills to pay every month, then you have an income crisis. Your income should fit your budget, which should cover all the necessities. If you find yourself choosing between which bills to pay for the month, you should double on efforts to grow your business.
In the meantime, look for ways to reduce your bills. Involve the whole team in cutting back on operational costs, and do the same for your personal life. Move to a cheaper apartment, or sell your car. It can be as simple as turning off electrical appliances that are not in use. Maybe you have too many subscriptions that you don’t really need or use as often. If so, cancel those subscriptions. Look for unnecessary expenses in your business and your lifestyle that are unnecessary, and cut back on them.
You run out of money early in the month
Everybody has a bad month, now and then. However, if you’ve had a lousy month every month for at least six months already, things might have gotten out of hand. Running out of money early in the month is a clear indicator that overspending isn’t the problem–the income you are getting is. If you feel like your paycheck is already spent before you receive it, you need to find ways to increase your income.
For your business, check if your pricing is appropriate, or if your expenses on materials, equipment, and services are too high. Make the necessary adjustments if that is the case.
There’s nothing else to cut
When you look at your budget and your lifestyle is already at the barest minimum, but still can’t put money towards savings and emergency fund, you have a severe income issue. A bare-bones budget can be an excellent short-term remedy to get you back on your feet until you can find a solution to improve your situation.
You can’t handle an emergency
Having a stretched budget every month can mean not being able to set aside money for an emergency fund. However, to the best of your abilities, you must do this. If you are not able to handle an emergency, it will have a knock-on effect on your finances, as you will be forced to take on loans that can cripple you more financially. Setting up an emergency fund is like installing a safety net on which you can fall safely.
You are not reaching your financial goals
It is a must for every entrepreneur to set their financial goals as a benchmark for the success of their business endeavours. Because it is not as grave as say, not being able to make ends meet, entrepreneurs are prone to neglect the need to set higher financial goals. More than the need to keep your business afloat, the desire to further your company should prompt you to set financial goals to work towards. Doing this also avoids more significant financial problems along the road.
You are always worried about money
According to The Balance, “There is a difference between worrying about how to pay for an unexpected car repair and getting a sick knot in your stomach whenever you think about paying for groceries or covering the rent.” If you are constantly worrying about money, you are most likely not earning enough. Listen to your mind’s worries and take necessary steps, such as setting a stricter budget for both your personal and business finance. Work with an expert to identify which aspects can be improved on in terms of cutting back and boosting.