A large portion of my career has been spent analyzing numbers. I have been blessed (or, some would say, cursed) with an ability to see stories in numbers. Once, an intern handed me an incredibly dry report which only reported the numbers from a market research study. I told her to go back and find the story in those numbers. The report she came back with (and with a little guidance) laid out a road map product management needed to create a successful marketing campaign.
Owners need to know their numbers and be able to find the story in those numbers. But that isn’t always the case. A number of years ago, I worked with a client who could not tell me his bottom line. Worse, he was on the verge of launching an extensive marketing campaign to increase sales but didn’t know his marginal cost of production. He was on the verge of bankruptcy.
What numbers should owners be looking at?
As someone who teaches marketing, I’d be remiss if I did not mention something like “look at the number of units sold”. However, the numbers I stress to my students as the most critical are the effect of the marketing plan on the company’s bottom line. Put another way, the overall most important numbers for any owner are the company’s financials. That is the story owners need to know.
The action in most good stories takes place over a period of time. It’s no different with your company’s financials. How do the numbers compare over time? What are the trends? Where have you been and what worked? Forecast out the numbers according to your plan for growth and then track how well you do against those forecasts to see if you’re headed in the right direction. And what about the numbers over which you have little control such as vendor costs or even world trends such as oil price fluctuations. How will changes in these numbers affect your company’s story?
But what if the owner is not good with numbers?
Not everyone is blessed (or cursed) with the ability to see stories in the numbers. The good news is this can be learned. And there are a wide variety of resources available. Locally, owners can take any class at HACC even if not enrolled in a degree program. If you don’t have the time or inclination to sit in a classroom, HACC, Elizabethtown College’s School of Continuing and Professional Studies and many other schools offer most of their courses online.
South Central PA also has a little known gem which is well worth checking out. ExecuStar is a program only including and especially designed to meet the needs of owners and other senior executives. ExecuStar brings in nationally recognized speakers to touch on a variety of business topics including a session on understanding your financials which will truly give you a perspective on how to find the story in your numbers.
There is one, often underutilitized resource available to all owners: Your accountant. Do you annually spend time with your accountant reviewing your company’s financials? If you don’t, start. At first you may even want to do this review quarterly and then settle on a brief meeting every three to six months and then a thorough review of your year-end financials. As an added advantage, your accountant has access to financial ratios to compare you’re operations to industry standards. But most importantly, you’ll soon find you have a whole new, well-rounded perspective of your company’s story.
One Caveat
Don’t get lost in the numbers alone. They tell you a story but a more informed and meaningful story only comes about by talking with your staff, vendors and customers.
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