IDENTIFYING YOUR BUSINESS’ S SWEET SPOTS
Using revenue data to win
Reaching your goals as a business isn’ t an event. It’ s a process that you have to recommit to every day. Have you outlined what goals you as a business owner want to reach? And have you thought through how you might achieve these goals?
Here at Rea, we make it a priority to look at how we can sharpen our focus to create growth that is not only economically viable, but that also utilizes our skills and fulfills our passions. One of the ways that we identify areas of opportunities to reach our goals is through analyzing our revenue. Each month, we create three reports giving our management teams three different views of our incoming revenue. The three reports are:
• Revenue by industry. In sorting our revenue data by industry, we can see, for each industry that we serve: 1. Which services are most popular, 2. The average number of services that clients utilize, and 3. The average transaction size.
This serves as a benchmark and identifies opportunities to grow our practice in each industry.
• Revenue by service. This report is just like the industry report, but focuses on service.
• Revenue segmentation. This is where it gets fun – we combine our industry and service data to get a comprehensive picture of our financial performance. We create a column for each of our industries, and a row for each of our services. Each cell – where a service and an industry intersect – shows the total revenue for each service within each industry. With this set-up, we can see exactly where our revenue comes from each month.
Put Your Revenue To Work
Could a similar method help you elevate your business? Here are four ways that revenue segmentation can help you:
1. Identify your core products or services. No one can be everything to everyone. Are you using your resources in areas that are most fruitful? Or are you pushing a product to those who are just not that into you? Determine what your core products or services are and make that your focus.
2. Pinpoint areas for improvement. Are there areas of your business that are underperforming? Get creative about how you can make a difference, like adjusting your pricing or updating your packaging.
3. Identify opportunities for growth. If your data indicates that most of your customers buy six products from you each month, look for the customers who buy less than six and see if they’ re interested in trying something new.
4. Predict the future. As you compare these reports over time, you’ ll soon identify critical trends and cycles of your business. This information will help you budget and manage your cash, and may also identify opportunities to increase sales during historically slow periods.
What Are You Waiting For?
There’ s nothing special about our data – the excitement is in the slicing and dicing. When you look at your revenue sources, you’ ll be able to see what your core products or services are, who buys them, where you should concentrate your resources and where you have areas for improvement.
If you want to learn more about how we use our data to identify opportunities for growth, give me a call! I’ d be happy to walk you through an example of how you can analyze your revenue data in different ways to ensure you’ re making the most of any growth opportunities. by: Kyle Stemple
CPA, CGMA, Principal 122 Fourth St. NW PO Box 1020 New Philadelphia, OH 44663( 330) 308-6883 kyle. stemple @ reacpa. com