Why does the most of company earn high revenue but o% profit? (2024)

We have seen many startups, getting more-more revenue, but they have 0% profit. They have invested more money in service production. They have also a quality product. What reason behind it. They are always struggling to maintain profitability and margins in recent years.

Hear are reasons for low profitability and margins in business.

1. Wrong strategy of pricing:

One of the main reason behind low profitability is, if product or service charge too little, then it will be not enough money to cover their cost . Now, if companies put more charge, it will price that out of market. Therefore, company need to consider their cost, their competition, and what consumers are willing and able to pay to determine the right price.

2. Miscellaneous expenses:

Miscellaneous expenses cost are associated with your running business, such as rent, utilities, insurance, and employee salaries. It all expenses can consume your profit and make it difficult to compete against other businesses in your industry.

There are a few ways to reduce your overhead cost.

• Negotiate better term with your employee and service provider.
• Reduce overhead cost with streamline operation.
• Relocating a cheaper location.

3. Competitive market:

There are lot of competition. It is difficult for company to maintain their profitability and margins, therefore, companies have to keep their prices low.

4. Focus on marketing:

Customer is very important to sustain any business, therefore, we should focus on marketing and mitigate all that elements which lead to low profitability and margin.

The most common reason of low profitability and margins.

1. Lack of targeting: - The big problem is - not targeting our true audience and what needs and wants they have.
2. Lack of updating: - Updating and innovation is very important for business. Customers are always looking for latest and greatest service.
3. pricing of product: - It is important to keep medium price so that you can sustain your business.
4. Inconsistency in expenses:- When companies don't have a consistent way of handling their finances, it can lead to problems. Flux of money can create difficult for business to maintain their profits.
5. Poor management:- Poor management can lead to wasteful spending, mismanagement of resources, and other problems. They can not track their cash flow. This means they don't know how much money is coming in or going out. They can not take informed decision about where to allocate resources.