Edition 397 – Numbers Nerd
I really am a nerd! I mean a “numbers nerd”, but some people would possibly argue in other ways as well!
Recently, on two concurrent days, two separate clients sent me through their dashboards just prior to our regular catch-up. Each of them have been a little tardy of late in sending me the updates, so occasionally, some gentle prodding is required.
For each of these clients, when the dashboards came through, I immediately got excited. Firstly, by the fact that my prodding only needing to progress as far as gentle and not to the scale of “eye-watering”. Secondly, was the quality of the data that was contained inside each of them.
When we work with our clients, some, but not all, take up my offer to help design and implement a dashboard for their business. In essence, the dashboard tracks key financial and non-financial data for a business. This data can be sourced from:
- Your in-house accounting software, such as MYOB, Xero or any of the big box systems.
- Your in house operations programmes. Some businesses have a software programme that retains all their client data, product information and other key sales data, which is then “dumped” into the in-house accounting software.
- A multitude of other sources, including very basic spreadsheets and, occasionally, what’s written into a notebook.
In the design phase, we backload two to three years worth of data. The value in this is to determine what trends have been taking place inside the business. That enables us to immediately commence conversations around what is happening in the business, now, relative to last week, last month, last quarter and last year.
I have a saying that I roll out to every client:
“Numbers are reasons in disguise”
When I first use this term with a client, they give me a funny look, much like your dog does if you ask if it wants to go for a walk. Their head tilts to the side, as if to say, what do you mean?
It’s then, we talk about the numbers that are happening in the business. Talking is a series of questions that lead to a conversation about what is happening in the “here-and-now”.
For one of the two gentle prodees, one number in particular stood out. No one had noticed it, but I did, and when I countenanced my concern around this number with how it looked over the prior two months, it led to a deep conversation around what the word is in the business when people are making purchase decisions.
For the other client, it led to the extrapolation of some data using one of my favourite tools, the flipchart, to demonstrate the numbers compared to last year were actually better than the headline numbers said, simply because the money they invested to generate 2023 sales was significantly less than what was invested to generate 2022 sales. Sales were down slightly, but the advertising spend was down significantly, putting the business well in front of the same time 12 months ago.
I know for one of these clients, the dashboard has created a world of difference in terms of their outlook and how much they want to grow their business. They’ve changed their focus from building revenue, to building profit. Whilst that might seem a no-brainer, a lot of business owners fail to realise that sometimes, you can significantly increase your profit by decreasing your revenue.
In the quest for “bigger is better”, too much focus on revenue means that, at times, unprofitable work is taken on, which builds the top line, but cannibalises the bottom line.
So, get nerdy about the numbers in your business. You may just find that by doing so, you could work a bit less, with a lot less stress, simply by taking the time to record and review the key financial and non-financial numbers that are happening in your business.
This Week’s Tip
“The best analysis comes when you involve an advisor who takes an outside perspective on your numbers to help you understand what’s happening inside your business.”