From: “Help! My Business is Growing” Podcast
We all know that data is crucial to the financial health of any growing business.
You’re probably sitting on a mountain of financial data right now – including historical sales, your current balance sheet, profit and loss (P&L) statements, and more.
But is it “good” data? Is it accurate, timely, and correct? Or is it erroneous, disorganized, and unclear? Poor data can be highly damaging to your business. Often, business owners and founders don’t even know the data they are working with is bad, and the company fails despite all efforts.
However, there is a solution: to work on your data so that it can work for you. Good data can provide the insights you need to increase productivity, sales, and profits.
But how can you turn your data into profit? What does that look like? What are the steps to harness the power of data to help you connect the financial dots of your growing business?
Today, our guest is Lynn Corazzi, the “Data Magician” and owner of Data2Profit Consulting.
We took a closer look at how to use your data to the advantage of your growing business and create sound business strategies.
In this week’s episode, we discuss:
- 2:50 What’s the difference between accounting and finance?
- 3:55 What are some of the misconceptions business owners have when it comes to data and making decisions?
- 5:25 What to look for, what to process and what steps to take when using financial data (profit and loss statements, income statements etc.) to come up with your sales strategy.
- 9:30 When does it make sense to sell certain products or services at a loss?
- 15:30 What are the steps to take to become proactive versus reactive when running a growing business?
- 23:50 How do business owners and founders develop financial confidence?
- 27:07 How are revenue, profit, and cash different and why is it important to know the difference?
- 32:50 When you get a new client, what do you focus on when you start working with a business?
- 38:55 What is the next tangible step business owners can take in the next week or so to get them to be more proactive and have clean data in their business?
Listen to the podcast here:
What are some of the misconceptions business owners have when it comes to data and making decisions?
- Many don’t have a clue about what their data is all about.
- For example, many only see high summary results – the P&L, and equate them with the whole story – it’s not.
- Founders don’t “rip data apart” or go down to the invoice level to check by customer or product, to find out what caused both increases and fallouts in sales, and to identify possible sales gaps that need filling.
What to look for, what to process and what steps to take when using financial data (profit and loss statements, income statements, etc.) to develop your sales strategy.
1. Look deeper into your customer data and the customer characteristics
2. Find out the average sales or orders your customers make and analyze if you would instead grow your business by selling more to the same number of customers or selling the same amount to a much larger number of customers.
3. Refer to your business RAPS:
- R – Retention of customers
Check where your sales are coming from. Is it mainly new customers? That’s good, but don’t forget your existing customers. Check up on how they are doing and stay proactive to keep their business.
- A – Acquisition of customers
Get new sales by finding and maintaining a steady stream of new customers. Listen and discover what else your market is asking for, what they need that they can probably get from somebody else – why not from you?
- P – Product penetration
Aim to have a wider variety of your products and services – including those which customers don’t even know they need until they see it – available and on hand – also to encourage impulse buys. Some examples of these:
- All the candy by the checkout counter
- Adding pool floaties when selling big and small bikes to complete the summer theme
- Placing ketchup bottles by the mustard if it’s hot dog season
- S – Same-store sales
Monitor and check if your customers are buying more or less of the same products vs a year ago for example.
“When your transactions (data) are accurate, your statements are accurate, then your forecasting can be accurate.” – Lynn Corazzi
What are the steps to take to become proactive versus reactive when running a growing business?
1. Ask the following questions:
- What’s going on with your business?
- What data/KPIs are you looking at?
- Who uses and accesses your data beyond your accounting staff?
- What do you think your pain points are?
- Do you have the information needed to dig into/analyze?
- What are you doing with the information available to you today?
2. Determine your overall success rate.
Understand who you are winning with and who you are not – despite all your efforts.
3. Check your profitability.
4. Evaluate your capacity.
Do you have enough people on your team to grow your business effectively?
How do business owners and founders develop financial confidence?
Developing financial confidence is a natural evolution of starting and working on a business.
Over time, you’ll receive monthly statements and reports and develop a basic understanding through conversations with your (typically outsourced) accountant.
As your business grows and expands, you’ll hire an in-house accountant, accounting manager, and a controller and eventually engage with part-time, fractional CFOs. As you spend more time with them, you will gain the confidence to perform business and performance analyses and make better decisions, hopefully leading to more profits.
“I would never tell a business leader not to trust your gut. Because you have an intuitive sense of what’s really driving your business, but occasionally test it, validate it.” – Lynn Corazzi
What is the next tangible step business owners can take in the next week to get them to be more proactive and have clean data in their business?
1. Accept that you can’t do “everything, everywhere,” to increase your sales and expand your business. So focus and identify what you can do to get a small win because that small win will give you the confidence to take another step.
2. Make sure you tell your team what you’re doing and why, and what it’s going to mean to them. This will reassure them that you are working on your data to improve the organization and that it isn’t about them – but about the whole company collectively getting smarter.
3. Stress the fact that you want them all to have better information going into a sales pitch, for example, so that they are ready to go without spending hours and hours prepping for the meeting to find the data needed.
4. Aim to get people the correct information when they need it, in the format that they need it, which will be the most useful to them because ultimately, that’s how you get the buy-in.
We go in-depth with this topic and more over at the podcast. Listen here:
Data is the foundation of the financial health of your business.
It must be clear and accurate to prevent making bad decisions based on inaccurate data. You can turn your data into profit by harnessing the valuable insights it provides.
To effectively make this happen in your business:
- Don’t be afraid to rip your data apart by asking questions and drilling down to the invoice level, checking customers and product sales information to gain a deeper understanding of your sales trends.
- Always refer to your business RAPS when using your data to come up with a sales strategy:
- Retention of customers
- Acquisition of customers
- Product penetration
- Same-store sales
- Aim to become proactive versus reactive when running your business by asking all the pertinent questions, understanding your overall success rate, checking your profitability, and evaluating your capacity.
- Don’t be afraid to dive deep into your financial data. You might feel lost initially, but over time, you will develop financial confidence via the constant interaction you will have with your accounting and finance-related team members.
- Temper your “enthusiasm” and accept that you can’t do “everything, everywhere”. Focus on small wins since they will encourage you to keep going.
- And finally, get the right information to those who need it – when they need it, in the correct format most beneficial to them – so they can focus on pitching and closing sales instead of finding data.
About Lynn Corazzi
Lynn Corazzi is also known as “The Data Magician” and owns Data2Profit Consulting.
He helps small and medium-sized businesses make more money with their data by sharing financial ideas and tools typically only available in large corporations. He goes beyond the numbers provided by bookkeepers and accountants.
He also brings his unique ability in helping clients think of the big picture while at the same time digging into the details of their results. When you feel you have a lot of numbers around but no answers, Lynn will make those numbers work as hard as you do.
Website – https://www.data2profit.net/
by Kathy Svetina
Kathy is a Fractional CFO and the founder and director of NewCastle Finance LLC. She is a financial puzzle solver, focusing on women-owned businesses, providing financial insights needed for a healthy and sustainable business.