We often dread looking at numbers. The problem is when we avoid the data we don’t know what we have to do to grow our business. Did I reach my sales goal? What was my net income this month? Were my expenses over budget? These are examples of what you have to know to grow. Whatever type of business you are in benchmarks are an important tool.
It’s critical to know how to analyze the data you collect in order to grow your business. The purpose of benchmarks is to make comparisons in order to understand what actions will increase your revenue. Think of the adage “work smarter, not harder”. By studying the data you collect on your income, expenses, and customers you gain the knowledge to purposefully take your business to the next level.
I often see businesses that look at their income/expenses regularly but still don’t grasp how to turn that information into a plan that moves them to the next level.
I ask this question: “What do you need to focus on over the next 90 days to increase your revenue or attract new customers?” 80 – 90% of the time I hear, at best, a vague answer.
Examples of standard benchmarks
Compare to industry standard
For instance if the standard net margin for your industry is 10% and your current net margin is 6%, start to dig deeper into your data. Once you know what’s going on with income and expenses, you can come up with a plan to grow your net margin towards the industry standard.
Compare to target goal
Are your expenses tracking with what you budgeted? Or are they over or under your budgeted amount? If you are over or under your budget, do some detective work. Why are my expenses out of line with what I forecasted? If they are over-budget, how can you change that?
Compare revenue month to month and year to year as well as project to project or product to product. Don’t immediately dismiss an offering an offering that is not paying for itself as a stand-alone product or service.
When I was working in general aviation for an avionics business we often installed intercom systems. When I looked at these jobs by themselves, we lost money. There are so many unbilled man hours involved in an intercom installation. However, when I looked by individual customer 2 out of 3 intercom customers came back to us to have a panel mounted GPS installed. The GPS installs were crucial to our revenue. We could have missed the opportunity to for the GPS jobs, if we decided to not install intercoms purely on an income vs. expense analysis.
Study your sales every month, every quarter, and every year. Look at your sales by product and service line, as well as the sales of each individual customer or group of customers.
For instance you may have a customer you spends a low to moderate amount of money every time they do business with you. Have you looked at the amount of income that customer generates over the course of the year? You may be surprised to find that all those small sales add up!
You have to know to continue growing!
Just as important as analyzing data when you are falling short of your benchmarks is analyzing data when you are achieving and surpassing your benchmarks. You may have 2 or 3 months where you achieve strong revenue. That’s definitely a cause to celebrate, but don’t forget to also learn. Ignoring the data you have that can tell you why and how you achieved those results almost guarantees you won’t consistently be at that level.
Make it a habit to monthly analyze your data. This will help you stay on track and you will catch problems early. When you find you are on a downward trajectory as far as revenue, quickly taking educated action is best.
For more on benchmarks, listen to Episode 2 of Sky’s The Limit Business Strategy podcast.
Laurel Fischer is a business strategist, intent on helping individuals and organizations focus their hustle. At STL Interactive Innovations, LLC, the “Sky’s The Limit” in what you and your organization can achieve. Want to learn more? Contact Laurel today.