Where does your company stand right now? What is your most profitable product or service? How much do you expect to make next month? What about next year?
There are a number of ways to gain insight from the information available to you. This is what consultants do. They know how to use information to construct a story. While consultants can be extremely valuable, it is important to understand the basics of evaluating the condition of your business. Two of the key things to focus on are trends and anomalies.
Trends
Financial data, especially, typically holds little value as a snapshot in time. In most situations, you want to compare to prior periods. For instance, let’s say your net income (net profit) was $800,000 last year. What does this say about your company? It says you had money left over after all expenses. Now, what if you compared this to the last 5 years and it showed the following
|
Current Year |
PY 1 |
PY 2 |
PY 3 |
PY 4 |
|
$800,000 |
$850,000 |
$1,100,000 |
$980,000 |
$1,020,000 |
This tells a different story. While the current year was profitable, clearly it is trending downward. You may find that sales (quantity) are flat, but the margin per unit is down. That could be due to cost increases, a change in product mix, or something else entirely. More investigation would be necessary to really identify the cause.
The comparison could be the last 5 quarters or the past 5 years. The timeframe might change depending on what you are comparing, but the term must be sufficient to identify a pattern.
Anomalies
Numbers that look out of place and/or are unexpected can mean a number of things. First, it could be an error. Generally speaking, that is the first thing to consider. If you see an anomaly, check the data first. If the information presented is determined to be accurate, then it should be telling you something.
Look at the reason for the anomaly. If sales spiked, why? Did it coincide with some other event? Sometimes, this can occur without a true marketing effort. If you can determine what caused it, you need to ask yourself, can I repeat it? Of course, if the cost to produce a widget
Financial and operational reports provide information, but it is the trends and anomalies that tell the story. They represent the events that have occurred over a time period. Information itself has no value unless you know how to use it.
What is your story?


