Reports have shown that 90 percent of business startups fail While most scales through the first two years, more than half of small businesses crash before celebrating the fifth year.

Why does that happen?

A business will eventually collapse when it does not make enough profits. It’s not easy to run a business, unlike some people portray it. As a business owner, one of the most un-motivating situations is when you feel your business isn’t making enough income. You may be doing something that excites you and makes you feel fulfilled, and yet experience market shifts, income fluctuation, and your customers’ needs may change.

If you are not making business profits, it’s not because of bad luck or cruel fate; several reasons could be at play. You don’t only want to know why your business isn’t profitable but also how to stop the bleeding and start making money. The first step is to recognize the problem, and the next is to take action. Below, I will walk you through a few reasons your business isn’t making a profit and then proffer ways to avoid them – and start to get business profits.

So, let’s get started.

1. Zero Product-Market Fit

I’ll start with this reason because it is probably the most difficult one. Many businesses, especially startups, fail because they focus on tackling exciting problems rather than market needs. While existing issues might lead to inspired work, not all solutions are profitable.

About 35% of failed business startups quote “no market need” as the cause of their business crash. You might establish the product-market fit and get the pricing right, but your business won’t make any money if there isn’t enough demand for your offering.

Ask yourself the following questions:

⦁ Who needs my business (goods or services)?

⦁ Will the people appreciate my business?

⦁ Why would they desire to patronize your services or products?

⦁ Are people going to be satisfied with my business?

Way out: Evaluate your product’s market and how helpful your business will be to the people.

⦁ Your business should solve problems, not just satisfy entrepreneurial itches.

⦁ Your message must be understandable and should resonate with your audience.

⦁ Find and market to the audience that needs your offering.

⦁ Ensure your business is the type that will last in demand and get a large customer base.

Note: If you can’t find a market for what you’re offering, you won’t make money.

2. Tough Competition

Have you found a great idea for a business? Well, you’re most likely not the only one. Where there is Money, there is competition. Your expenses and prices may be fine, but you’re facing competition too fierce to keep up with. For instance, you’re in trouble if your competitors have products similarly priced to yours but objectively better and steal the market share. There’s always an approach to competition. But sometimes, it’s pretty fierce.

Way out:

⦁ Find a strategy to set yourself apart from the competition at least in one important area, such as pricing, quality, or experience.
⦁ Promote a unique selling proposition (USP) that none of your competitors have.
⦁ Change your product focus to a different (lower-competitive) market.
⦁ Consider what angle you may use to acquire clients if your competitor is a monolithic firm (such as Amazon or Apple).
⦁ Conduct market research to identify an untapped demand that hasn’t been met yet.

That’s easier said than done. But note that an oversaturated market can make it practically hard to profit as a startup.

3. Pricing Issues

This is arguably the most prevalent reason your business isn’t profitable enough. If your product is more expensive than [those of] your competitors, you risk alienating your whole target market. And if you set your prices too low, you’ll end up spending more on production than you can afford.
Finding the “perfect” price point should be the focal point of every business owner, but it can be difficult to achieve. Some businesses understand they will lose money for a while, but they will be profitable once they reach a certain scale. However, surviving long enough to attain that profitable level is not always feasible.

Way out:

If you are not making enough business profit:
⦁ Evaluate your prices to see if you’re charging enough or less.
⦁ Estimate your operating expenses, costs of goods sold (COGS), and salary.
⦁ Consider your profit margins carefully, and don’t be scared to charge for quality. People will be willing to pay more if you spend more time improving your services or products.
⦁ Find a way to bring additional value to your offering to justify the price increase.

4. Targeting Wrong Customers

When you fail to target and engage with the right audience who needs what you have to offer, you will get zero replies from your campaigns, thereby wasting thousands or millions of dollars on marketing. For example, I have nothing much to do with real estate, so sending me an email or a flier about real estate will be a partial loss to the sender. Even if I received it and read through it, I wouldn’t give a “yes” as a straight answer. However, send me thousands of messages about motivational books, entrepreneurship, entrepreneur conferences, and meetings, and I will make sure to read them all. You probably should understand that targeting the right audience is important to your business’s success. Do you get what I mean?

5. You're not properly tracking your i ncome and expenses.

It’s natural to focus on serving your audience and making money. However, a competent business owner also thinks of administrative and organizational duties. As a business owner, you need to regularly track your expenses and income to have your progress record and identify any areas you may need to make changes. For example, if your income fluctuates and you’re having a slow season, you’ll want to figure out when that is each year and what you can do to boost your income. Similarly, tracking your income and expenses will reveal whether your expenses are on the high side. It’s a normal thing to want to invest in your business. You may be willing to spend money on tools, courses, software, programs, consultants, coaches, etc. It is absolutely fine, but you have to keep an eye on your return. If your investment isn’t paying off, you should get rid of it as soon as possible. Every course or tool you invest in should offer an ROI (return on your investment) that is at least your initial outlay. Allowing expenses to consume your business budget can leave you with little profit at the end of the day.

6. Wrong Timing

It’s not always about your product, pricing, business plan, or market. Sometimes it is about the timing. Like many businesses that launched during the pandemic know, timing is everything. According to LinkedIn founder Reid Hoffman, “If you are not embarrassed by the first version of your product, then it means you have launched too late.” Launching at the wrong time might seriously stymie your business’s growth. If you wait too long to start, you risk missing out on a lucrative market opportunity. And if you launch too soon, you can risk producing a bad first impression. But that doesn’t rule out the possibility of success. Way out: There’s an optimal Goldilocks-approved time to launch your product. You may need to hold on and wait out a storm, or you may need to pivot to better suit the present (and future) circumstances.

7. No Specific Income Goal.

Starting a business without achievable goals is like going to the farm without the necessary equipment – there isn’t going to be much accomplished. It’s vital to structure and strategize your business idea before putting it into action. Create goals for your products, services, income, and your growth. Setting income goals is great since it pushes you to get results and profit in your business. For example, if you’re a business owner looking to break the six-figure mark, you can divide your objective into quarters or months. It’s also a terrific method to hold you accountable, especially if you share your goal with others.

8. Wrong Choice of Business

Tough decisions must be made when starting or trying to start a business.

  • Do I love this business?
  • Can I cope with this business? Can this business improve my career?
  • What is the percentage of disadvantages over advantages in this business?
  • Can I take risks involved in this business?
  • Will my plans go straight as I assume?
  • Do the people want this Kind of business?
  • How Kong will I last in the competition? How strong am I willing to make this business become?

Good luck to you if you could answer those questions with the quickest speed without waiting for a second to think about it. Even if you did ask yourself again, “are my answers correct?”.
Thinking twice or ten times won’t kill you as a business owner. It will only reduce the chance of you making a terrible mistake. The moment you decide what business you’d like to start, that’s when you begin the real journey. However, you should understand that starting the wrong business will get you nowhere.

9. Weak/Wrong Perception

Another potential reason you are not making business profits is your perception. Starting a business with a weak impression will definitely close that business up in less than a year. I understand that every new Startup might lack so many resources required to boost their business. Still, I do not forget that the sole secret to Startup development is packaging alongside doing the right things. Packaging your business and letting people see you are worth more than what they think you’re worth. However, do not ever use deceitful ways to grow your business. You only need to keep building and improving your current strength when you start. At the very least, you need some strength to stand up and walk. Even more, you need more strength to keep walking. When you’re planning to start your business, make sure to start strong – to remain strong.

10. Spending Wrongly

When you spend the wrong way, you put your business at risk. Hence, the business may collapse and go bankrupt anytime soon. Any time you spend, be sure to always get your capital back with returns, and if spending out a particular amount doesn’t yield a good profit, I should return at least the capital. Always think hard before you pursue the next agenda on your list. One right investment can change your business’s financial story as much as one wrong investment could end everything you’ve worked so hard for. Make sure you don’t spend your money just because you’ve found an opportunity to double your investment. I want you to understand that “not every opportunity is golden, but the ones you choose wisely.” Try to minimize spending unnecessarily, and your business will rapidly thrive better than your expectation.

Final thought

It is possible for business owners to want to give up due to dwindling profits as a result of the aforementioned factors. Whether your business stopped making Money or never made it in the first place, you can get to profitability. Walk the path of self-reflection and make the required changes.


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