Strategic games, or how to stop losing money in business.
Running a business involves many challenges, from developing new products or services to attracting and retaining customers. However, making a profit is often the biggest challenge.
Growing companies often operate at a loss. Today, we talked about this topic with Oleksandr Sivak, an Odesa businessman, the founder of the Strategist company and the publisher of the "Shipping" magazine. The entrepreneur shared his vision of running a business and told how to stop losing money in business.
Losing money is Stress
Losing money does not mean the end of business. You just need to slow down and reevaluate your business operations. Negative cash flow creates stress that often forces business owners to make impulsive decisions. The best thing you can do for yourself is to keep your cool.
Cost-income ratio
Sivak stresses that you should first look closely at how much money is coming in versus how much you're spending each month. Many small businesses operate with an expense ratio of 90%, which means: 90% of their income goes to expenses and only 10% remains from profit.
Small businesses with high overhead costs, such as restaurants and retail stores, typically have the highest costs compared to profits. Accountants, solicitors and real estate agents often incur fewer running costs.
Cost reduction
Oleksandr Sivak suggests creating a complete list of your monthly expenses, and then a list of your average income. You can quickly see your biggest expenses and most profitable income streams.
Identify potential spending areas. Try to reduce the amount of paper products, which account for 70% of the total waste volume in the average office. Oleksandr Sivak, for example, instead of printing reports and official notes, gave up paper. You can also cut costs on office supplies and equipment where possible.
Analysis and Testing is your best friend in business
Sivak recommends adjusting prices for products or services. If you set your prices too high, fewer people will buy your products. However, setting prices that are too low can be bad for your business. Underpricing can create the impression that you are offering a low-quality product.
Increase your online marketing by setting new prices and reducing your product list. Attract more customers using social media marketing, email marketing and contextual advertising. Make sure you provide excellent customer service and manage your online reputation to retain more customers.
Keep track of your finances and set 90-day goals to grow your wealth. If these steps don't work, scale back your business or find an investor. Whatever you do, do not use your personal funds to fuel a loss-making business, emphasizes Oleksandr Sivak.
