Data Driven Profits – Part 3

Author: Tony Rule, Partner, TAG Financial Services

In the final week of our three-part series on “Data Driven Profit” we are exploring the idea of how businesses can use data to grow profits.

So, how should you use that data to grow profits?

As mentioned in last week’s blog, there are just five key numbers you need to create a simple and clear budget. Once you know the five key numbers that are going to get you to your profit, your monthly reporting becomes simple.  In relation to Sales, you need 2 numbers – what was your budget and what was your actual number.  Same for Cost of Sales, Gross Profit, Fixed Expenses and Profit.  Just 10 numbers to let you know where you stand.  The five budget numbers are your map and the five actual numbers are your path.  Are you on track or not?

Your key role as a business owner is to learn to ask “the great question”:

    • How do we grow our sales?
    • How can we produce more efficiently?
    • Why have our fixed costs increased?

Sometimes you will also be the one that has to answer the question, hopefully more often someone else will be able to answer the question for you.

When answering the question, that is when the additional data is needed.  That additional data, when analysed the right way, will give you the answers to those questions.

But the answers will not come if the questions are never asked.

Profit is not what is left over at the end – it should be set at the start and should not be negotiable.

The Importance of Clarity and Questions

Time and time again I have seen two competitors in the same industry achieve wildly different results.  One business owner is very profitable and happy while the other business owner is struggling to make a dollar and frustrated.  But how can this be when they are both in the same industry?

The difference between the good performers and the bad performers is that the good performers have clarity about their goals, and therefore have a budget in place. Then, they ask great questions about the results that are achieved.  The bad performers believe that their results for the year are the “leftovers”.

If you are not getting the result that you deserve – we need to chat.  Give me a call on 03 9886 0800 to discuss how you can get what you deserve out of your business.

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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2021. Please do not reproduce without the expressed written consent of the author.