In Episode 28 of the Business 360 Podcast, we dive into the quickest ways you can lose money in your business. I've identified 7 key areas that can negatively impact your bottom line fast if you don't prepare in advance.
For more information, please visit www.thinkbusiness360.com
[00:00:00] Welcome to the business. 360 podcast where we will take a 360-degree view of all things business. In under 15 minutes, I'm Rushab Kamdar a serial entrepreneur consultant, speaker and business strategist. I help entrepreneurs and businesses get profitable while also saving them time, money and headaches.
[00:00:28] How's it going business heroes. Welcome to episode 28. Today's episode is an interesting one because we're going to talk about the quickest ways your business can lose. And I find this topic relevant because as entrepreneurs, yes, we don't want to lose money, but there's just some times that money rushes out the door and then you're in a real bind.
[00:00:49] I'm sure you may have heard this popular phrase about money. And that phrase goes like this money flows in and out like water. So in the business world, you want to look at your capital position. And that basically means how much money you have. And as you look at your capital position, You want to look at it as a dam where you can control the outflow of water and have enough space for the inflow of water.
[00:01:12] Unfortunately, too many times in business, it feels like the dam has burst because the water just comes gushing out. So depending on the situation that you're in, you can either repair the dam or ensure the structural integrity of the dam. That basically means you want to prevent it from. I'm going to state the obvious here, the primary goal of business should be to grow and maximize your profit.
[00:01:38] And that means it's important to stop the outflow of money. So it'll make it easier for all of you. I broken down seven ways in which your business can lose money real quickly. Take note of them because you never know if you're making any of these mistakes. And if you aren't, you can at least prepare it in advance and avoid being in any unfortunate financial.
[00:02:00] So, what are those quickest ways to lose money in busy? Well, first it has to do with poor financial management and the lack of financial knowledge. There's no easy way to say it, but if you aren't on top of your numbers or you don't have any financial knowledge, then it's a high possibility that you will be bleeding money, usually somewhere in your business.
[00:02:22] That you're unaware of. I can't stress the importance of having an organized and accurate system for accounting. So you know exactly how much money is coming in. Versus how much money is going out. Why do you think in movies, the big boss gets a report and then unrealistically makes a rash decision that saves the company.
[00:02:42] The only truth behind those scenes is having a high-level view on your numbers. The frequency and getting reports is also important, whether it's daily, weekly, monthly, or even quarterly. And that's because, without eyes on your financial act, You might not realize that you were spending too much on resources while having the assumption that you still have a lot of money in the bank when in fact you don't.
[00:03:04] And the last point I'll make on this is that you want to avoid being a poor financial manager. What does that mean? Well, basically you don't want to be in a position where money is being spent without the awareness to the why and the, how it's being spent. It's easy to get lost in the weeds financially, but much more difficult to find your way out.
[00:03:26] Now, the second point I'd like to make is the lack of awareness that many entrepreneurs have. And I have to say this, don't let your title of CEO and founder. Trick your mind into thinking that you are now a rich billionaire celebrity, like mark Cuban or Jeff Bezos. You don't need to fly first class. You don't need to have a corner office in a skyscraper.
[00:03:48] You don't need a game room. You don't need a theater in the office. You don't need to provide free breakfast and lunch, and you don't need to do many of the things that are perceived. Cool. Otherwise, you're going to bleed money. Just be aware of yourself and your current situation, whatever funds you have should go towards the growth of the business.
[00:04:09] Moving on to the third point is to avoid having a mismanaged or unqualified team. If your staff isn't trained well, or if they are not the best available talent in the market, then you can guarantee that you will be losing money. Think about it, weeks can go by very fast. And that means salaries begin to add up all the while productivity continues to decline.
[00:04:33] That's a compounding effect on your capital position and can be catastrophic to your business's bottom line. Your team deserves to be. That means creating standard operating procedures and implementing proper training programs that will help them do their job properly while also helping you weed out the qualified and unqualified team members.
[00:04:54] And don't forget, be sure to foster a thriving culture in your organization because that plays a big role on your teams effective. Make sure you're providing desirable, working conditions that you're empathetic towards their needs, that you're empowering your team, that you're incorporating diversity and inclusion and that you're offering appropriate compensation and benefit.
[00:05:17] The fourth area, the results in businesses losing money quickly is the lack of strategies. And if you're following me, you've probably heard me say many times that you shouldn't just create strategies, but sound strategies. See many entrepreneurs will throw out a goal and they'll call it a strategy.
[00:05:34] Unfortunately, that leaves them, uh, running around, making rash decisions on the fly and basically putting out fires. Sounds strategies will help you lay out a plan of action. I previously talked about how you should flush out the second, third, and fourth implication of your original strategy so that when you have to react in real-time, your decisions will already have been thought out and won't be dangerous to the bottom line.
[00:06:00] A real quick story here. I was in a scenario where I had a business partner who never wanted to discuss strategy and that's because they believed it was pointless suffice to say that business didn't do that. You know, actually speaking about this, it reminds me that in a few weeks, I'm going to be doing an episode on how you can find the right partner, because I can speak directly from experience.
[00:06:20] The point is that if you don't have a plan of action, one that could be implemented and executed, then you're going to be losing money quickly in your business because you're essentially just wasting time moving on to the fifth area that can result in your business. Bleeding money is compiling of. An analogy that I like to use is that debt is like having a delicious, greasy, loaded nachos at 11:00 PM at night, without thinking of the consequences of what may transpire throughout the rest of the night.
[00:06:49] If you don't take some acid before you go to sleep to mitigate the impending doom that will sure follow, then you are in for a lot of trouble. And that's what. If you remember the first point I made earlier in this episode is that a lack of financial knowledge and financial management can impact how quickly you can lose money while compiling debt is a direct correlation to that point.
[00:07:12] Many entrepreneurs believe that debt is free money. Obviously not only does the debt have to be repaid, but it also accrues in. The repayment of debt becomes a drag on a business, many times, leaving owners in a bind because owners can't put the money that they want towards the business or the growth of their business, but they have to keep putting it towards paying the monthly premiums of their debt.
[00:07:36] So do your best to avoid debt. The sixth way that your business can lose money. Fast is poor pricing strategies. If you price your product or services too steep, or too low, you are likely losing money. A low price point results in a volume game where you have to sell a lot more of your product or service to make money.
[00:07:55] And a high price point can turn off customers, leading them to find other competitors selling alternative products at a lower price. Pricing is a little bit of a trial and error, but just don't go too far off the reservation, or you're going to have a difficult time finding your way back. Finally, the seventh way your business can lose money.
[00:08:12] Fast is by you increasing your lifestyle. And I've said this before in past episodes. Many times a business begins to make more money and the entrepreneur tends to increase their lifestyle versus reinvesting that money back into the business while it's perfectly understandable for you to enjoy the benefits of your hard work.
[00:08:30] You should think about the timing of when to reap the rewards during your entrepreneurial journey. If you're still in growth mode and your business has not stabilized, but consistent revenue, your focus should be keeping all profits in the business until it's self-sustaining. By taking money out of the business to fund a lavish lifestyle.
[00:08:48] You're essentially guaranteeing that you will lose money quickly in your business. What I'd like you to take away from this episode is that there are many ways to lose money in business. Some of those take a while and others, well, you can lose money very quickly. The good news is that many of those ways can be prevented.
[00:09:06] Just follow the seven points laid out in this episode, and you will increase the chances of your business becoming profitable. Finally, remember money flows in and out like. Just do your best to keep the dam from bursting. That will just about do it for this episode. Looking forward to seeing you in the next one.
[00:09:25] Thanks for listening. And you stay classy. Business heroes.