Financing Your Business
Maximize Profitability with Data-Driven Forecasts
Tracking the right data is key to creating long-term business forecasts.
This article originally appeared on Entrepreneur.com.
When it comes to long-term cash forecasts, you have two options: pull the numbers out of thin air or pull data that can support and drive your projections. Converting data into actionable business intelligence allows you to develop more accurate cash forecasts and build them into strategies for optimizing profitability.
The first step toward achieving that goal is reviewing the data you have already collected and testing its ability to contribute to intelligent business decisions. To pass that test, the information must be organized, useful, reliable and available on a consistent basis, says William R. Patterson, CEO of The Baron Solution Group, a training and business/wealth coaching firm for executives, entrepreneurs and investors.
“Data is valuable if you're asking the right questions and you're tracking and analyzing data to find meaningful information. In addition, you must have a process for rolling that information up in a way that allows you to act on it and better engage customers," he says. “If you have the systems and processes in place to track the data, to analyze it, to view trends and to act, it's very powerful. If you don't, you miss trends and development opportunities relative to your product and service line."
Customizing Solutions, Cultivating Relationships
Peter Li, CEO of Nexcelom Bioscience, works with thousands of customers at national laboratories as well as hospital, university and pharmaceutical labs. The company's technology platform automates and improves measurement methods within those laboratory environments. Success depends on understanding the conditions and needs within each lab so he can customize solutions—a challenge complicated by the fact that he often collects his market information from hundreds of clients at a time while at conferences or trade shows.
That creates a huge data dump to digest and convert into offerings tailored to individual requirements, so Li and his team must leverage not only the information they receive, but the relationships they've established. "We need to make sure that we can solve problems that they have not solved before, and it must be a better solution for them compared to other products in the marketplace," he says. "So we stay very close to the customers and we can react very quickly and adapt to their needs."
Information about the focus of clients' research and work methods is key to marketing success because it reveals what's most important to each customer. "We can actually be very specific about how our products will help their work, improve their workflow and get better results. That kind of information can only be clear by knowing the customer," he says.
Delivering Results and Driving Profitability
Getting the right answers, then, depends in part on asking the right questions. Patterson recommends asking customers what they're looking for and how they'd like to see your company's products or services improve. Information of that caliber "gives you a tremendous strategic advantage relative to other competitive businesses and opportunities in the marketplace," he says. "You end up leaving a lot of money on the table if you're not tracking and analyzing relevant data."That puts you at risk of losing not only sales, but also opportunities to “understand what the customer truly values," he adds.
"If you're struggling with that question, you're not really focused on solving the customer's problem. If you use your data to better understand your customer and to focus on what they truly want, I don't think you struggle as much with the issue of upselling, because you're solving a problem and delivering what they want."
Well-targeted data collection and analysis can also reduce struggles with cash flow. Used within the framework of your strategic plan and with your key performance indicators in mind, it provides additional information you need to manage leads and sales conversion, optimize pricing and terms and control your cost structure and processes. Ultimately, it's "broken processes" that damage cash flow, Patterson says. "If your key performance indicators are tracking those other things, the cash flow will take care of itself."
By remaining focused on what drives performance at your business and evaluating client data in that context, you can create a sustainable strategy for delivering customer value and optimizing sales, cash flow, profitability and long-term growth.
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Image: Shutterstock | Randy B. Hecht covers finance, management and expansion topics, including cross-border commerce, to help small businesses optimize their long-term performance and market potential.