Study Financials Granularly to Increase Profits

financial metrics

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.

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