Top Six Profit Leaks When Growing a Business

Top Six Profit Leaks When Growing a Business

There are many reasons why profit loss occurs in service-based businesses. Fortunately, there are several steps you can take to prevent profit leaks from happening.

When talking about profit leaks, you can think of it like a leaky bucket that’s full of water. No matter how much water you pour into the bucket or how fast you fill it up, the water will continue to leak through the holes. This is how businesses work as well.

So, to grow your business, you must first find out which areas have leaks and how you can plug them in before more profit leaks out.

Once you figure out where you need to make adjustments and what kind of changes would benefit your business, you will start to notice an increase in profit. As a result, your business will start to grow at an even faster rate.

This article will cover the top six profit leaks that your business could be struggling with right now.

The 6 Leaks

There are many things that you, as a business owner, can start doing to boost your business’s profit. But the first step you need to take is to figure out which areas of your business are “leaking.”

Know that profit leaks are rather sneaky. And you could even be losing money without even realizing it.

The six most common profit leaks include:

Leak #1. Your Own Mindset

To prevent profit loss, the first thing to consider should be your mindset. You must figure out how you feel about profit in the first place.

The thing is that money has a way of getting our attention, whether it’s positively or negatively. Unfortunately, it’s usually the latter. Money typically gets our attention through missed payments, tax fillings, and stress.

The wrong mindset could also be seen as a lack of awareness. For example, some business owners avoid the topic of money as it makes them nervous and uncomfortable. But if you’re not thinking about profit because it isn’t a priority to you, you will end up losing even more money in the long run.

In other words, not thinking or caring about money is actually going to cost you, so you have no excuse not to focus on it.

Leak #2. Undercharging

Undercharging is another common reason why profit loss occurs, especially in service-based businesses. In fact, as much as 90% of businesses in the service industry are not charging enough for their services.

How do you even know how much your services are worth?

In many cases, it’s not just about the service you provide. You should also consider all the time it took for you to gain those skills and many other things, not just the end result.

All of these factors should be taken into consideration when you’re setting your fees.

Leak #3. Procrastination

Procrastination permeates almost every aspect of our lives, and this includes how we do business.

After all, growing a business is no easy task, and it may seem daunting. Overthinking and worrying about how our business is doing and whether it will succeed adds even more pressure. And this pressure makes some business owners procrastinate.

But how does this lead to profit leaks?

It might surprise you that people procrastinate the most in situations that could potentially bring you money.

Procrastination can prevent business owners from making an offer, coming up with sales ideas, hosting workshops, following up with business partners, making business deals, and many more areas of business.

Interestingly enough, activities that could generate the most revenue are almost always avoided.

Leak #4. Not Knowing Your Numbers

If you’re not tracking your numbers or even aware of how your business is doing financially, you could experience serious profit leaks. But the reality is that financial responsibility is another big area of avoidance.

Having a handle on your expenses is key. Once you know how much revenue your business brings on a monthly basis, you will figure out how much profit you’re left with.

What’s more, even if you do grow your business and your revenue increases two or three times over, it won’t matter if you don’t know which numbers you’re starting out with. In fact, not tracking your numbers can result in thousands of dollars in missed revenue each month.

To change this, you can start by tracking how much money your company earns daily over a period of 30 days. Remember that the more you focus on bringing money to your business, the more positive results you will gain.

Leak #5. Making Fear-Based Pricing

Fear-based pricing is closely related to undercharging. To put it simply, fear-based pricing is when service business owners set their prices based on fear, not profitability.

This happens because business owners worry that if they increase their fees or prices, they won’t be able to get new clients or they might even lose the old ones. Unfortunately, this fear of judgment or criticism can also lead to profit loss.

That’s why instead of basing your fees on fear, you need to rethink your pricing structure and set it according to relevant data.

What you definitely shouldn’t be doing is comparing your prices to other businesses in the same industry. More often than not, their pricing model is faulty and it might not be based on accurate financial data.

Leak #6. Lacking a Profit Goal

One of the biggest mistakes business owners in the service industry make is not setting a clear profit goal. Every business is different and they all have different profitability goals, which mainly depend on their expenses, overheads, revenue, and similar aspects.

The general rule of thumb is that your initial profitability goal should be 5% of your total monthly revenue.

Then, once your business starts to grow, you can aim for 10%. You can even move on to 15% when your business starts going in the right direction.

In any case, setting an initial profitability goal is a good start, even if it is just 2%.

Prevent Profit Leaks From Ruining Your Business

Profit leaks can occur in many areas of your business. Not only will they take your business a couple of steps backward, but they’ll also prevent you from generating revenue and growing your business.

The great thing about the process of “plugging” profit leaks is that doing even one of the things mentioned above would already help your business.

That means even if you can focus on just one or two of these areas, you will soon see an improvement in your company’s profitability.


I’ve been exactly where you are. I know what it feels like when deep down inside you know you were destined for more but things aren’t going fast enough or you’re feeling stuck or frustrated.

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