by Elizabeth Hines | Aug 16, 2016 | Blog, Data/Analytics, Logistics, Strategy, Supply Chain
Look at your financial metrics on a granular level, beyond the basic snapshot, to identify opportunities for growth.
Big data can show homogeneous revenue opportunities and cost inputs. But that overview is inadequate for determining how different aspects of your business are performing and where opportunity for growth may lie.
Essentially, you need to analyze your financial metrics at a granular level rather than in aggregate. For example, your business probably offers several products or services and feeds off of more than one revenue stream. Each must be evaluated separately in terms of value and profitability to determine how each is performing, rather than just examining your entire portfolio as a whole.
The key to increasing profits is not always blazingly obvious, but rather it is hidden in the minutia. There you will identify what is growing the business and what is not.
How to get down to the granular level of your financial metrics:
Consider your sales figures.
What is your profit — broken down by product, brand, region, etc.? Note any similarities and differences. Can you identify outliers? Can you identify what works and what your barriers are? If not, you must drill down further. For example, if a specific product is successful, why is this so? Is its success the result of a team or an individual? Can this knowledge or skill be applied to other products or services?
Identify products, brands, or services that don’t make financial sense.
You know they exist already. They are the ones that eat up your resources or simply no longer fit well with your brand. It may be time to eliminate ill-fitting clients, products, or services that don’t benefit the company. You then can pour the freed-up resources into higher-profit activities.
Know what the critical numbers are.
What is important to your business can be very specific to your industry. Inc. magazine’s guide to tracking critical numbers offers a great example: “A software consultant may focus on billable time, for instance, while a food retailer should be looking at sales per labor hour.”
Repeat this review process often.
This is not a one-time exercise. Typically, financials should be reviewed monthly, but each business will vary. Things that ebb and flow, like inventory or manufacturing output, should be reviewed each day, and the sales pipeline should be examined once per week.
Related posts:
by Elizabeth Hines | Aug 19, 2015 | Blog, Data/Analytics, Strategy
Understanding your financial metrics at a granular level is important in that it allows for a true understanding of what is happening, and what is not. It enables you to drill down and appreciate, for example, similarities, differences, and outliers. Being informed at a granular level enables better decision-making when it comes to determining how to increase profits. How often does one need to look at these metrics and how does one evaluate and react to numbers?
The frequency with which to look metrics depends upon the area of business. For example, inventory flows and manufacturing output should be looked at on a daily basis. Your sales pipeline, on the other hand, should be looked at on a weekly basis, and your financials should be looked at monthly.
Once a schedule has been established, the question is what to do with the data – how should the data be evaluated and when is it time to act? The reality is that there is no hard and fast answer to this question. When to act is dependent upon the type of business, its typical cycle, and the company itself. It is therefore important to develop a database that captures your metrics. This database should be updated with the same frequency that the data is collected (see above for suggested frequency). A historical database will enable you to quickly identify a data point that is deviating, positive or negative, from the historical. When this happens, it is time to act.
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by Elizabeth Hines | Aug 28, 2013 | Blog
Last week I wrote a post for EBN about how to increase profits by looking at financial metrics on a granular level rather than in aggregate. Understanding your financial metrics at a granular level is important in that it allows for a true understanding of what is happening, and what is not. It enables you to drill down and appreciate, for example, similarities, differences, and outliers. Being informed at a granular level enables better decision-making when it comes to determining how to increase profits. The post was met with a couple questions. Specifically, how often does one need to look at these metrics and how does one evaluate and react to numbers?
The frequency with which to look metrics depends upon the area of business. For example, inventory flows and manufacturing output should be looked at on a daily basis. Your sales pipeline, on the other hand, should be looked at on a weekly basis, and your financials should be looked at monthly.
Once a schedule has been established, the question is what to do with the data – how should the data be evaluated and when is it time to act? The reality is that there is no hard and fast answer to this question. When to act is dependent upon the type of business, its typical cycle, and the company itself. It is therefore important to develop a database that captures your metrics. This database should be updated with the same frequency that the data is collected (see above for suggested frequency). A historical database will enable you to quickly identify a data point that is deviating, positive or negative, from the historical. When this happens, it is time to act.
