Why Isn't My Business Making Any Money?

Why Isn’t My Business Making Any Money? 7 Things to Consider
You’re making sales. You have customers. You’re working hard. So why doesn’t it feel like there’s any money left at the end of the month? It’s a frustrating question, and one that many small business owners eventually find themselves asking.

The answer isn’t always as simple as “you need more customers.” A business can have strong sales and still struggle to make a profit. Pricing, expenses, cash flow, margins, inventory, and even the way you’re tracking your finances can all play a role.

The good news is that not making enough money doesn’t necessarily mean your business is failing. It may mean there’s an opportunity to better understand what’s happening financially and make some adjustments.
Here are seven areas worth looking at if your business isn’t making the money you expected:

1. Are You Charging Enough?
One of the first questions to consider is whether your prices are actually supporting a profitable business.

It can be tempting to base your prices on what competitors charge or what you think customers are willing to pay. But your business has its own costs—and your pricing needs to account for them.

Consider everything that goes into delivering your product or service: materials, labor, equipment, overhead, marketing, technology, and your own time.

If your prices don't leave enough money after those costs are covered, increasing sales may not solve the problem. You could simply be working harder for very little additional profit.

An SBDC advisor can help you take a closer look at your pricing, costs, and profit margins so you can make informed decisions about what you're charging.

2. Are Your Expenses Too High?
Sometimes the problem isn't how much money your business brings in. It's how much money goes back out.

Rent, payroll, insurance, inventory, software subscriptions, advertising, professional services, loan payments, and other expenses can add up quickly. Some expenses are essential to operating your business. Others may have made sense when you first started but deserve another look as your business has changed.

The important question isn't simply, “What can I cut?” It's “Are my expenses appropriate for the revenue my business is generating?”

3. Are You Looking at Sales Instead of Profit?
It's easy to feel encouraged when sales are increasing. But revenue is only part of the picture.

Imagine that your business had its best sales month ever. That sounds like great news—but if the costs associated with those sales also increased significantly, you may not have actually improved your bottom line.

This is why understanding your profit margins matters.

You may also discover that some products or services are much more profitable than others. Knowing that can influence decisions about what you sell, how you price it, and where you focus your marketing efforts.

4. Do You Know Your Break-Even Point?
Every business has a point where its revenue covers its costs. Before reaching that point, the business is losing money. After reaching it, additional sales can begin contributing to profit.

This is known as your break-even point.

Knowing your break-even point can help answer important questions:

• How much do I need to sell each month?
• Are my current sales goals realistic?
• How much would I need to increase sales to become profitable?
• Would changing my prices make a difference?
• How might hiring an employee or taking on a new expense affect my business?

5. Is Cash Flow the Real Problem?
Profit and cash flow aren't the same thing.

A business can be profitable and still experience periods when there isn't enough cash available to pay its bills. For example, you might make a sale today but not receive payment for several weeks, while your expenses are due now.
Cash-flow challenges can become especially important when a business is growing, purchasing inventory, hiring employees, expanding its space, or taking on debt. If you regularly find yourself wondering where the money went—or worrying about whether you'll have enough cash to cover upcoming expenses—it may be worth taking a closer look at your cash flow.

6. Are You Growing Without a Plan?
Growth is exciting. But growth can also be expensive.

Hiring an employee, buying equipment, increasing inventory, moving into a larger space, or spending more on marketing may all be necessary to grow—but they also require money. Sometimes a business owner sees increasing demand and assumes the answer is simply to grow faster. But growth needs to be financially sustainable.

Before making a major investment, it's worth asking:
Can my business afford this growth, and what will it take for that investment to pay off?

7. Do You Understand What Your Numbers Are Telling You?
You don't have to be an accountant to be a successful business owner, but you do need to have enough information to make good decisions.

Many small business owners are excellent at what they do. They're also busy running the day-to-day operation of their business. Finding the time to step back and analyze financial statements, margins, cash flow, and projections can be difficult.

Sometimes the challenge isn't having the numbers. It's knowing what questions to ask about them. If you aren't sure why your business isn't making money, that's a good reason to get another perspective.

So, Why Isn't Your Business Making Money?
The answer could be one of these issues—or several of them working together.

Maybe your prices aren't high enough. Maybe your expenses have grown too quickly. Maybe your most popular products aren't your most profitable. Maybe your business needs more sales. Or maybe you're dealing with a cash-flow problem rather than a profitability problem.

The important thing is to understand what's actually happening before deciding what to change.

You Don't Have to Figure It Out Alone
At the Finger Lakes SBDC at SUNY Brockport, our advisors work one-on-one with small business owners to help them better understand their businesses and make informed decisions. Whether you're an established business struggling with profitability or a growing business trying to figure out how to become more financially sustainable, you don't need to have everything figured out before you reach out.
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An advisor can help you look at the bigger picture, ask the right questions, and identify areas that may need attention. If you've been wondering, “Why isn't my business making any money?”—let's take a closer look together.
Connect with the Finger Lakes SBDC at SUNY Brockport to schedule a confidential, no-cost appointment with an advisor and take the next step toward a more profitable business.