You might think you know what’s happening around you but you’re probably wrong.
Evolution did not create a human brain designed to run a business. We’re evolved to hunt woolly mammoths, avoid sabre-toothed tigers and dig yams out of the ground. None of those things require much in the way of analysis.
But business is different. It’s more complex than mammoth-hunting and yam-digging. In order to run a business profitably and efficiently it’s essential that you stay on top of the numbers and use them to your advantage. Unfortunately, a lot of people associate numbers and data with complexity and confusion and they avoid them like the plague.
Get over your irrational fear of numbers.
It doesn’t need to be like that though. Here’s why: we live in the age of computers and smart accountants. Most businesses already have the information in their accounting systems and other software that make it possible to get amazingly useful and valuable insights into their businesses without the need for a degree in applied mathematics.
How to get value out of your data
Step one – figure out what would be good to know. Fortunately, there are a lot of standard ratios and measures that are available to get you started.
Step two – when you have the figures, figure out what they mean.
Step three – figure out what actions you need to take.
How about some examples?
OK, here are some examples…
Gross profit analysis.
Get a list of all your product lines. Your list will need the gross profit % for each line and the total sales for a recent period. Then give a score to each product line. Strong selling, high margin lines get an “A” and poor selling low margin lines get a “D”. Look at the “D” products. Unless there is some essential reason to keep them you should delete them. Divert that capital into promoting your “A” products.
Customers Won and Lost
Look at every sale for six months. If your sales are static and the majority of your customers are first-timers, then your customers aren’t coming back. That equals lost opportunity. You then need to figure out why. Start by asking some of them.
Average sale per customer.
This one is really important. Your turnover equals the number of sales times the average amount per sale. So pushing up that figure is vital for success. The good thing is that it is easy to measure and it’s important to know.
If your average sale per customer is trending down, you should be asking yourself questions like: What’s wrong with my pricing policy? Am I selling the right products? Am I targeting the right market?
OK, so how do I know what to look for and how do I find it?
Start by talking to someone who knows where to look to find the answers. At Certus Group we’re perfectly at home with digging into the numbers and coming up with clear actionable solutions.
Stop missing opportunities. Call us today.