How Could Profits lead to Bankruptcy?
If your Business is Profitable but still it is getting sick, then this is called the case of a profit trap that usually businesses get into unconsciously.
In this blog I will be talking about four profit traps that could lead businesses to bankruptcy.
Profit trap no. 1 : Your business is profitable but still it is not generating enough cash to grow, to invent, to innovate, to improve, for shareholders distribution, or for capital purchases…And the reasons for that vary; it might be dampened sales rate, frustrated demand , fluctuations in the commodity pricing and availability, a rival poaching your customers or a technological shift that your business is not aware of. In this case of a profit trap I advise you to consider these solutions after investigating the reasons behind your current business situation:
- Broaden or shift your resources .
- Conduct smart agreements with suppliers.
- Creatively entice customers needs and usage.
- Go for clustering…
- Look for multiple niches…
- Partner intelligently with key players.
Profit trap no. 2 : Detrimental Profits.
And that is when your profits enchants in too many roots that are profitable and expensive but perishable and your resources are bounded and your paramount is to get the highest return out of them. So, in this case you are supposed to specify your first and foremost streams in order to obtain and recoup the highest return out of your available and confined resources.
Profit trap no. 3 : Diluted Profits.
It is when your business is generating great profits but they are diluted due to over expanding .Sure, we business owners like to expand but dear you should first invest in strengthening your business and then expand wisely.
Profit trap no. 4 : Cash is not collected.
In this case of a profit trap your business is profitable and it is generating enough cash but the cash isn’t collected. If you are conducting transactions and giving credits state duration and rate limits. And I prefer if you use the cash paying privileges technique.
Please be aware of these traps they could end your business in an unexpected way or it could be sold to a competitor, remember your business is profitable.
Remember you can always consult me at any time about your business .You are more than welcome . Let me share you your Success story.
Whatsapp me 00962795116324
Skype Dr.Salam Amin.
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