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Salt Lake City Bookkeeping Blog

Business Is Unprofitable? Proceed With Confidence

Posted by Matt Roberge on Sep 26, 2016 9:00:00 AM

Business_Is_Unprofitable_Proceed_With_Confidence.jpgAt some point, your small business may become unprofitable. Maybe not overall, but during a month or a small period of time, you will most likely post a loss.

That can be a stressful situation for a small business owner. When your business is unprofitable, you have a decision to make: give up or proceed. Passion and the desire to succeed will push most business owners to proceed, but they often do so with hesitation.

When your business is unprofitable, here is how you can proceed with confidence.

Believe In Your Business Investment

I hate clichéd business sayings, but as the old saying goes, it takes money to make money. It’s true that you can bootstrap your business (as I did), but even a really small venture will take some sort of capital investment.

As your business grows, it will require more and more money to operate, but hopefully you will have some profits to invest.

You will most likely hit a crossroads where you will need to invest money into your business and take a loss in order to proceed. That is scary!

However, you need to make yourself okay with the fact that you will lose money for a short period of time in order to move forward. When I face this challenge, I often think to myself: one step backward in order to take two steps forward.

You need to believe in yourself and your business in order to make an investment in it. Investing in your business with confidence is crucial.

Hesitation Hurts Execution

Once you decide on a plan and feel confident in your strategy, don’t hesitate. Any hesitation on your part can hurt the execution of your plan. You can second-guess yourself and your plan all day, and all that leads to is delays — and, most likely, failure.

Make a plan, execute with confidence and iterate as needed.

Forecast and Monitor

Creating a forecast can help a business owner with doubts about their plan and the financial future of the business. A forecast can give you a glimpse into the future of your business — otherwise, you’re just making a plan and hoping for the best.

A forecast and budget can help validate or disprove the plan you’ve come up with. Let me give you a real-life example:

Let’s say, for instance, that you decide the answer to all of your business problems is to hire two sales reps. If you develop a good financial forecast, you should be able to predict how much those sales reps will produce in income and how much they will cost. This will also show you the capital investment needed from you.

Lastly, and most importantly your forecast should give you a snapshot of income, expenses and net income for several months down the road.

What if you go through this process and realize that the net income produced isn’t worth the required capital investment from you? Wouldn’t that be time well-spent? I would say that it absolutely would be a good use of your time.

Don’t ever put a plan into action with forecasting the results to see if the outcome is desirable and worth the investment.

Make Calculated Decisions

Good CEOs use the information that their CFOs provide to make calculated business decisions to move the business forward in the right direction. You should act like a good CEO.

The real key to moving an unprofitable business forward is to make a good plan, execute on it and monitor it closely.

You can monitor the results of your action plan before comparing your actual performance to your expectations. This is also known as a forecast vs. actual. If you notice things not going as planned, (Believe me — they rarely do!) you will have the opportunity to pivot and get back on track.

In order for your plan to succeed, you will need to monitor your performance closely and make key strategic decisions to stay on track with your goals.

Have you ever had to move an unprofitable business forward? Did you succeed or fail? What advice do you have?

Topics: Financial Forecasting, Small Business, forecasting, business venture, business investment