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Negative Profit - why this is bad, and what to do about it?

 

What is negative profit?

Imagine your business has ten thousand dollars a week coming in.

A negative fifteen percent profit means that you are actually spending eleven thousand five hundred dollars.

One thousand five hundred more, than you should actually be spending.

One thousand five hundred dollars more than you have.

That's what a negative profit percentage looks like.

 

Why is negative profit bad?

That’s one thousand five hundred dollars, because it is not coming from the business income, needs to come from outside sources.

  • A loan from a friend
  • A loan from family
  • A personal loan from the bank
  • A credit cards
  • Your own personal savings
  • Your own business savings

Why the negative profit percentage is so bad is because it actually means that you have set amount of days, or set amount of weeks that you can keep functioning before everything runs out.

 

 

Your days are numbered…

Let’s say you had access to $15,000 in reserves (savings, credit cards and loans etc)

And you’re spending fifteen hundred dollars a week more is coming in.

This means you only have ten weeks in business remaining before it's game over.

 

How to turn a negative profit percentage, into a positive...

If you have a negative profit percentage chances are, you are spending more money on your operational expenses than you should be.

The way to fix a negative profit percentage is to start cutting expenses.

 

Got a burning question about cash flow and profit?

Book in to TEST DRIVE AN ACCOUNTANT - a 15 min rapid fire Q & A session with an Inspirational Accountant.