If you are a business owner and you have yet to experience financial losses, buckle up. The truth is that the most successful entrepreneurs in the world hit rock bottom before they made it to the top. Take Richard Branson, he has a longer history of failures than successes. For example, after recently attempting the launch of ‘Virgin Orbit’, he lacked the necessary funding to put his space trips for the masses into action and ultimately had to file for bankruptcy. But, with this, the smartest entrepreneurs learn a valuable lesson. Losing money is not the be-all or end-all. Look at it from a different perspective. You are paying to learn a lesson from your mistakes and have the tools to know what to do differently moving forward, learning mistakes to avoid for your business.
Navigating financial losses, especially at a large scale is never easy to come to terms with. The most resilient entrepreneurs understand that how they move forward will define their success, not how much they pull back. In this blog post, we will share exactly how to navigate losing money as an entrepreneur, first of all from a mindset perspective, and secondly sharing actionable steps to find your way out of difficult financial situations.
The fear of financial loss
The fear of financial loss is something extremely familiar to ordinary people and new entrepreneurs alike. Financial loss is a threat to success, and can somewhat diminish the ‘clear reputation’ a business has. The truth is that the fear of financial loss can significantly limit your earning potential. When business owners are overly cautious with money, they unintentionally freeze/ halt their progress to grow. You need to be prepared to make sacrifices to get to the next stages, and if that sacrifice comes in the form of finance, so be it! Product and service development should be put above all else, so if you are looking for a reason to take a risk and put some money on the table, let it be to better what your company offers to the masses.
When losing money is considered a risk
Financial risk is always looming over the minds of entrepreneurs. These risks come in so many different shapes and sizes, but knowing when you have gone too far is also essential when navigating financial loss as an entrepreneur. If you have borrowed capital for example and are starting to struggle paying your repayments, you are putting your credit at risk. Credit is essential for business owners, especially if they need to keep borrowing money.
It is not uncommon for entrepreneurs to be victims to financial scams either, especially those who seek to diversify their portfolio. Financial loss from these areas can come in the form of simple investment scams, to more complex scenarios such as crypto scams. Although entrepreneurs may be liable to get their money back using investment fraud lawyers, there is always a cost involved with being a part of these schemes.
There are also external factors when losing money can be considered a risk. For example, if you are selling a product through your e-commerce business and the demand significantly drops without seasonality or economic reasoning, you perhaps need to have a fresh overview of the entire business and where expenses are going. These are things that all businesses will experience, but you truly will never understand how to navigate this level of loss until you experience it yourself. Having a level of understanding of how to recuperate, along with resilience is all you need to boost ecommerce sales and strengthen your business.
Shifting your mindset
You need to shift your mindset when it comes to financial loss as an entrepreneur. If you are at the beginning of your journey of being an entrepreneur, the smallest of losses will make you think you’re failing or heading in the wrong direction. Instead, look at it from a different perspective. If you didn’t make the mistake or decision that led to financial loss, would you have known not to make the same mistake in the future when potentially more is at risk? Financial losses are essentially lessons learnt. You pay to learn from your mistakes and therefore know what not to do in the future. Let’s call this a ‘glass half full instead of half empty’ perceptive.
Strategies for moving forward:
How you move forward from losses will be a direct reflection of your skills as an entrepreneur. Even if you are coming from the depths of financial rock bottom, proving that you believe in your business and yourself will put you in the category of some of the top entrepreneurs in the world!
Cost-cutting measures
Your first instinct might be to panic, but instead, you should look to where you can cut costs with a fine tooth comb. The loss might be great, but you need to consider how much can be saved, whilst still managing a sufficient output to generate the finance back to eventually be in positive equity. Cutting costs can be anything from pulling back on production and increasing prices, cutting labour costs and outsourcing, or even looking at your finances and seeing where you can save and re-invest in the business instead. Cutting costs should not be the sole action you rely on to make your money back, but it can work as a pillar towards getting you into a stronger financial position.
Boosting revenue
Boosting revenue is something we all strive for, especially when it comes to being in a slump. Increasing revenue will be very specific to your industry and operations. For example, you might currently be offering a product that still holds a lot of stock, therefore offering flash sales will encourage more sales. As long as the cost of the materials and labour does not exceed the sale price and leaves room for profit, this can be a quick way to boost your pots of money.
Seeking investors
Seeking capital from investors is another way you can recover from financial loss. If you believe in your business and know others will acknowledge its earning potential, there are likely a handful of investors looking to offer their finances in exchange for shares or even part ownership. You can find hungry investors at networking events specific to your industry or even general networking events.
Bottom line
Overall, it is important to know that financial loss all comes with being an entrepreneur. It is common for businesses to break, if not finish the financial year in minus equity. The struggle is real for entrepreneurs trying to make a name for themselves and their brand, but with the struggle comes valuable lessons learned and endless opportunities to grow.