How Do Most Small Businesses Lose Money?

Published 3. 8. 2021

Every economy in the world is driven by the small businesses, but this does not mean all small businesses are profitable. There are so many things that can be done, from retaining talent and keeping all customers happy to paying all the vendors. It is very easy to lose track of something that is much more important than initially anticipated.

To be prepared for what will come, Monetary Library highlights the main reasons why small businesses lose money. This is important to know since the main reason why smaller businesses fail is a problem related to cash flow.




In the modern world, commerce moves fast. Businesses thus need to be flexible and agile so that they can meet the extremely fluid demands of the consumer. When the small business is not organized, it cannot move as fast as needed to remain competitive.

Make sure you have an operational and business strategy so that you can meet market needs, both current and future.


Using Outdated Technology


If you use outdated technology, your ability to actively meet customer demand and scale is instantly hindered. As a very simple example, when your POS (point of sale) system is outdated, you lose sales. This is very possible when modern payment types are not available, like eWallets. The best POS systems now include features and software that let the small business grow, with demand increases not being a problem.


Improper Security


Every single system needs to be backed up so that you can avoid deletion as an update happens. When you lose critical business information, your operation is negatively affected. At the same time, you absolutely need to secure all the customer information you gather. In the unwanted event that you lose or expose sensitive information, you end up liable for financial damages and industry fines.


Bad Employee Turnover and Training


Improper employee turnover quickly becomes costly. This is much more than just money. You can end up with lost productivity and a loss of time that you have to spend on supervising and training the new staff. Even quality customer service maintenance becomes very costly during transitions.

Even if the business is small, you need to set up a very good employee training program so that turnover can be reduced. You will have to invest in it but the investment will quickly pay itself.


Bad Customer Service


Finally, if customers are satisfied, they will most likely tell others about what went wrong. Therefore, it is so difficult to build reputation and so easy to lose it. Bad customer service creates a ripple effect. In a short time, lost sales appear.

Make sure to invest in using very good technology and practices that can improve customer service. For instance, the implementation of loyalty programs can easily support positive customer experiences.

Always make sure that you analyze, and you understand every single problem highlighted above. This will help you to better control your finances and not lose money you surely need to survive as a small business.


Author: Boris Dzhingarov is digital nomad travelling the world. He is the CEO of ESBO ltd.