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Business Unplugged™
This blog features Carol Roth's tough love on business and entrepreneurship, as well as insights from Carol's community of contributors.

How to Evaluate Losses

Written By: Catherine Morgan | Comments Off on How to Evaluate Losses

Cupcake with candleWhen you run a small business, you have to make a lot of decisions – and often without a lot of information. Not every decision you make is going to be a good one. When you launch products or services, some will be successful, and some will not be profitable.

In Carol’s recent post on the Nextiva blog, “5 Practices that Can Help Small Businesses Cut Losses,” she gives some advice for how to evaluate what is truly a loss, and what to do about it when you have a loss. She begins:

“After spending 7 years and $7 billion, Shell Oil recently decided to suspend drilling operations in Alaska. They were patient for a prolonged period, but they simply could not afford to keep waiting for oil prices to rise.

Granted, a major corporation can afford to spend mountains of money before deciding to cut losses. As a small business owner, however, you can’t afford to watch cash flow out in hopes of better times in the future. Here are five tips on how to keep a hand poised on the cash spigot and how to know when to shut it down.

1. Think critically before acting

If you have a great accountant, you probably know the precise cost of each product or service and can clearly identify the ones that are earning profits or creating losses. You know the products that are perfectly-priced and you can spot the ones that are so popular that they deserve a price increase.

But, can you do the same thing to repair loss situations? You shouldn’t always remove unprofitable products from your line. Your yummy chocolate chip cupcakes might cost you more to make than you can recoup in sales. Sure, you can stop selling them or cut costs by using fewer chips. But, how many customers will you lose and how many other profitable products will see reductions in sales as a result?”

You can read the rest of the post here.

Article written by
Catherine Morgan is the founder of Point A to Point B Transitions Inc., a virtual provider of coaching services to individuals who are in business or career transition. She specializes in helping entrepreneurs transition to corporate jobs they love. Catherine is the author of the eBook Re-Launch You: Discovering Your Point B and Embracing Possibility. An experienced independent consultant who was employed by three of the former Big Five consulting firms, Catherine speaks frequently on topics related to career transition, small business, productivity, and mental health. She doesn’t take herself seriously, but takes her subject matter very seriously.