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Small Business Finance Blog

Want to gain full control over your firm’s finances but aren’t sure where to start? You’re not alone and you’ve come to the right place. Read on and reach out if we can lend a hand.

Small Business Insights: What your Reporting Should Reveal about Your Business

Are you thirsting for more business information?

You know that feeling when you’re so thirsty that you just can’t stand it anymore? Sweat is beading on your brow, you’re parched and all you can think about is a pint of cold water (or beer!). 

This is exactly how small business owners should feel when they don’t have their fingers on the financial pulse of their business. After all, financial insights are just as critical to your firm’s health as water is to yours. It’s that important.

Yet surprisingly few business owners seem to lose sleep when they don’t have this information. Of course this is only true until they hit a cash crisis, want to know if they can afford that next growth investment or face a similar question. 

What these owners don’t realize is that embracing their financials can become a competitive advantage. With the right small business insights - such as optimized financial and operating metrics - they can significantly improve day-to-day decision-making, and in turn, unleash their growth.

small business insights

Make sure you see the whole picture

Take the example of a recent Driven Insights client. They were happily growing revenue, or at least that’s what they thought their income statement was telling them. But a closer look at their revenue-by-product metric told a different story. One product line was definitely growing nicely. But growth sometimes masks other issues, and unfortunately, this was the case for this client. A “look under the hood” showed that two other product lines were experiencing sharp declines over the same period. Not good news.

But once this business owner became aware of the issue, he began to ask specific questions to better understand the root cause, and ultimately, how they could resolve the issue. Was the first product’s growth tied to a new sales or marketing initiative? In looking at the products that were declining, could the owner attribute them to a specific issue? What could they do to reverse the trends and get back on track? These are the types of questions that naturally come up when the business owner is presented with easy-to-read, highly relevant metrics. 

In the case of the customer with the diverging revenue trends, they were able to attribute the growing product revenue to a sales person’s initiative in a specific end market. You can bet they chose to double down on those efforts. The declining revenue for one product was chalked up to seasonality, but the source of the other lost revenue required a bit more digging. Upon surveying a handful of customers who chose a competing product, they learned that product’s pricing model was no longer competitive. Using that information enabled the sales team to make real-time adjustments for other products in the pipeline which quickly reversed that negative trend.

A well-managed team of bookkeepers and controllers can help present the right metrics while there’s still time to adapt. For one business owner, it might be revenue segmentation by product or service that provides the critical “a ha” moment. For another, it may be the two unprofitable customers revealed by a profitability analysis. And for yet another, it might be a disturbing increase in client churn in the most profitable segment of your customer base. 

Whatever financial insights grab you, seize them. Don’t let them go. Ask probing, thought-provoking questions of yourself and your team. After all, the Q&A that ensues – regardless of the owner’s financial background, the time they have to commit or the current stage of the business – is critical to planning for profitable growth. 

Once you experience the power of this never-ending dialog between you, your finance team and your financials, you’ll never look back. You’ll soon come to believe that access to good information is as fundamental – and as refreshing – as a cold drink on a hot day.

The Driven Insights advantage

Driven Insights is experienced in leading small businesses on the journey to leveraging financial insights and operating metrics to accelerate growth. Our bookkeepers and controllers are charged with much more than simply “doing the books” – they ensure each client understands and values the insights we share.

Interested in learning more? See for yourself how Driven Insights can provide the insight and control you need to achieve your most critical goals. Contact us at info@driveninsights.com or 888-631-1124.

 


Dave Robinson

Written by Dave Robinson

Driven Insights founder, author of "Competitive Advantage through Financial Management", writes about informing business decisions.

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