What you don't know will hurt you Imagine you're the owner of a successful wholesale company that's been growing really fast. Large and small retailers are beating a path to your door to buy your product. Things are looking great. You've predicted sales are going to grow by 50%, so you plan purchases of your supplies accordingly.
All of a sudden, a year goes by, you don't have any cash to pay next month's payroll and your warehouse is full of unsold items. This situation hits you like a ton of bricks, from left field (sorry, I can't think of anymore clichés to add to these two). What happened? You didn't realize that while sales were only growing 20%, your inventory was growing by 50%. You lost track of your numbers. A situation similar to this happened to a client of our friend Ken Kaufman of CFOWise.
Situations like this happen to hard-working entrepreneurs throughout the world. It's probably happened with your business, your labor of love. You've busted your tail to build your company from scratch. You've worked 10-15 hour days, surviving literally on fumes. Your company has gotten to where it is today based purely on the strengh of your will and your vision for the future.
But now that you've reached a certain level of success, you've plateaued. Cash flow and profitability still seem elusive. Customer service calls are on the increase. Your inventory is stacking up. Your kids are wondering when they'll be able to take that big vacation to Costa Rica you've been promising them "when we're successful." But you're still working as hard as ever.
The problem is, things are moving so fast that you don't know the basic numbers of your company. Despite the warnings from your accountant, you can't find the time to sit down and really figure out what the numbers are telling you. You've got another proposal to write, a negotiation with a new vendor, and a new marketing campaign to kick off. That's where Business Intelligence comes in.
You can't improve what you can't measure: the case for Business Intelligence The entrepreneur's dilemma is that the skills that got you where you are today are not the skills that will help you grow into a viable, sustainable business that doesn't need the "indispensable you" to operate it on a day-to-day basis.
What helped get you where you are today is your passion, hard work, salesmanship, marketing savvy and unshakable vision for your business, yourself and your family. What will help turn you into the next Inc. 500 company is to know what the numbers are on every aspect of your business so you can stop bad habits, improve good habits and institute new habits for growth. These numbers have to be at your and your employees' fingertips at all times. They've got to become part of your company culture.
Basic numbers such as:
Track revenue, cost of sales, gross profit, gross margin, revenue trends, sales per sales executive, top 10 products, sales by region, sales per customer, etc.
Track payroll, utilities, travel, actual expenses vs. budgeted expenses, expense trend analyses, expenses by cost center, expenses by type, etc.
Track inventory days left, inventory by product, fastest moving inventory items, slowest moving inventory items, overstocked items, etc.
4. Accounts receivable.
Track expected payment schedule, fast pays, slow pays, payment trends, etc.
5. Accounts payable.
Track past due payments, categorize vendors by payment terms, check payable trends, determine who to pay first and who you can delay payments to, etc.
6. CRM data.
Track details on sales reps, best customers, worst customers, customer complaints, customer loyalty, defections, referrals, etc.
7. Human resources.
Track vacation days, employee efficiency, employee complaints, employee retention, compliance, etc.
This is by no means a comprehensive list. Here are more things that you can track in order to grow:
- Technical support calls: time to resolution, issue tracking, common complaints, favorite features.
- Route driver efficiency: miles driven, time taken for delivery, time per customer visit, on-site invoicing.
- Product optimization: most popular products, least popular products, most profitable products, least profitable, product returns
- In-store sales: most profitable days of the week, most popular specials, least effective specials, most effective point-of-purchase displays
- Logistics: best delivery companies, slowest delivery companies, number of lost items during shipping, number of broken items
- Medical: most expensive procedures, most profitable procedures, most complicated procedures, procedures requiring minimal skill
- Software development: developers producing most bugs, most efficient developers, best development environments
- *insert your urgent items needing measurement here*
Keeping it simple Have we lost you yet? Still here? Good. Now you know what you need to know to take your company to the next level.
But the big question is: who has time to analyze all this? Who has time to organize all these numbers into spreadsheets and try to figure out the best way to organize the data? Your accountant? Maybe...
What about a simple-to-use Business Intelligence tool?
The terms dashboards and analytics are often cavalierly tossed around as terms associated with Business Intelligence, but here for the first time a brief explanation:
Dashboards are tools to visually display data such as Performance Indicators and Key Performance Indicators via tables, charts, graphs, etc. Dashboards allow you to customize what is displayed or you can build them from scratch with the information you want to see. Dashboards also allow you to "drill-down" into the data, such as viewing revenue by region, department, product, and sales executives, for example.
Analytics is the practice of looking at historical data to gain insight and understand business performance. Through analytical capabilities, users can dissect business data to fully understand and answer the "how", "what", and "when" questions. You can in turn use this data to plan the best performing mix of products and special offers, for example, and predict with accuracy what the outcome will be.
Sounds complicated, right?
Here's the beauty of dashboards and analytics: they're now available in pre-built, easy to use visual displays. With simple point and clicks, you and your employees can actually see how your products or expenses are trending.
Click on certain interesting metrics to drill down and find out: which customers are really slow pays? Who are my top 5 hot-shot sales guys? What was my best retail sales day and why? What was the actual product that sold the most that day?
You want to see how things are different now than they were, say, 3 months ago? View a visual time-line to see how your expenses or inventory figures are trending. Want to urgently correct something that you didn't know was going downhill, fast? Start a project with your BI tool that will shoot off emails to your people to take immediate corrective action.
How to get the info into the tool Ok great, now I can see all my company's data visually, and it doesn't take a rocket scientist to figure out how to understand the numbers. I can see where I'm bleeding red ink and I can take action (you like taking action more than you like crunching numbers).
But how do all those numbers get there?
Glad you asked.
Most BI solutions today have simple tools to help you with that. There are Extract, Transform and Load (ETL) tools that can connect directly to your accounting system or CRM, providing a tunnel for your info to get from one place to another on a scheduled or manual basis. There are also excel templates so that when you export the information from your accounting system you can organize them into the right columns with the right column headers and then upload them into your BI tool.
It wasn't always that way. As little as 3-4 years ago these kinds of tasks required highly paid data analysts who were experts in databases, data integration tools, and DTS scripts to get the data from point A to point B. As a matter of fact, it used to require these gurus to build the reports and dashboards you needed to actually see the data that would be useful to you. Ugh!
You're actually lucky you're in business now. A lot of blood, sweat and tears have been shed to make these tools easy for small and growing businesses to use, and affordable. Cost of BI tools Sounds expensive, doesn't it? Well yes, it was.
Traditionally BI tools were reserved for the Fortune 500 and just below. They really needed tools to keep their upward growth trajectory (and some of them didn't do a very good job. Maybe they spent too much on their BI solution???). They were complex, the tools were expensive and unwieldy, and the implementation took a long time and sometimes cost more than the tools.
But now BI applications are essentially websites. You use websites to run your business. If you use Google Analytics, then you're using the simplest, most commonly used BI tool delivered on a Software as a Service (SaaS) model. SaaS really means software that's a website.
The advantage of using BI tools, or any software for that matter, delivered as a SaaS, is that the cost can be broken down into easy to consume monthly payments. All the maintenance costs and hosting are absorbed by the software vendor. Literally for the daily price of a Latté you can have access to a web-delivered, powerful tool so you can measure all your company's key numbers and get a handle on your business. You can focus on growth, and empower your employees to check on important company metrics and take corrective action if necessary.