Is your company doing well? Are you profitable? How much longer will it be until you are? Where can you cut expenses? What are your most profitable products or services? Which are the least profitable? What the shelf-life of a particular product? How effective is your marketing strategy?
As business leaders, this type of information is the type of information that we need to have on hand in order to make decisions about the company. Planning solely on what is in the bank, or focusing only on one aspect of what makes your company a) successful or b) keeps it out of closing is a very poor way of operating. This is pure tunnel vision.
If you consider, for a moment, two tools that are widely used in the business world – Porter’s Five Forces and the SWOT analysis, you’ll notice that part of the analysis is based on things that impact the business – are outside of the business’s control. As business leaders, you know that strategically, this cannot occur just in exercise, but must exist in the way that you do business. Monitoring, making adjustments and acting must be an ongoing mentality if your goal is to build an extraordinary business.
Several recommendations we have made to clients include:
- Understand what questions you want to answer. Here are some samples:
- How do we know when we can purchase a new building or expand capacity
- How do we know how effective our sales people are
- How do we know how effective our marketing and other business development activities are
- Understand what kind of data you need to collect in order to make your decisions. Typically, these are going to be things such as your financials – sales, cost of goods sold, expenses, profit, investments, interest and taxes, your business development activities, manufacturing costs and rates, etc.
- Determine how to collect the data – including what is feasible. Take into consideration how you operate – does it need to be mobile? does the information need to be housed in a cloud?
- Determine how the data needs to be delivered. If you have a ton of data and like to drill down from “high level” analysis down to the details, perhaps you want something more visual. If you like to play with the numbers yourself and run scenarios, perhaps you like to play with the raw data.
- Decide how much your level of investment. Consider this:
- No Investment – If you don’t get the data to make decisions, the likelihood of success is minimalized.
- Your Time – If you collect and mine the data yourself, what else could or should you be doing to build or grow the business.
- Your Resources – You could have a qualified employee collect and mine the data for you.
- Your Money – You could invest in a software solution – be it customized, off the shelf, or a combination of the two – that could collect the data. We have used and recommend a product called Work, Etc., to centrally house most transaction that occur in the business in order to give us a single data-collection source.
- Research solutions that will work best for your company, considering the factors we pointed out above. You may consider other factors that are specific to your company, such as the ability to sync with certain existing solutions or the ability to be housed on a centrally located or remote server, etc.. May companies look at Open Source solutions such as xTurple or SugarCRM. Despite your choice, consider the total cost of ownership of the solution before investing in it.
- Determine how the solution will be implemented and how training on the software will roll out. This may mean hiring a consultant, going to a class or classes, investing in an online training solution or spending time with tech support for a self-install. Consider the different types of investment.
- Plan to re-enforce the need to use whatever solution is recommended. Change takes time. Habits take time. By providing some structure, you will increase the likelihood of success.
Your company’s ability to collect and decipher the data from the activities in and around your company can be the determine factor between a series of successful ventures and a series of hit-or-miss activities. Even the simplest data-collection activities should help you determine your company’s path.
Rick Meekins is passionate about helping business leaders start, run and grow extraordinary businesses. He focuses on helping leaders clarify their business goals and develop strategies to achieve them. He is a strong believer in alignment between people, purpose, passion and pursuit. He believes that people working in alignment with their individual purposes is the foundation for successful businesses and successful communities.