Get the Real numbers on the Business

Riann Umaga-Marshall Odds & Ends

We get it, a whole lot of numbers, statistics and percentages doesn’t sit too well with the sexy idea of owning and running a business. We understand that it can look like a lot of mumbo jumbo and not mean anything.

But, we also know that having accurate figures and someone to help you break it down can really uncover a lot about your business and how it is tracking. Real data analysis is a key element to a deliberately designed business.

The Problem

Business owners are often running flat-tac from morning to evening getting things done. Seldom do they have time, or more accurately, seldom do they put aside time to stop and see where they are and where they are headed. They have a gut-feeling about things, but no real analysis has been done to verify their gut feel.

Relying on this gut-feel means energy can be poured into areas that (frankly) don’t gain the best return on their investment. With accurate business analysis, a well-designed business can separate fact from fiction, gain clarity in thinking, and makes more informed business decisions.

In short, they see the true situation instead of relying on a gut-feel.

But I hate numbers …

We know. Most people don’t like numbers. To tell you the truth, we don’t always like them ourselves. But…

What any business analysis means is getting stuck in to the real numbers in your business. It’s like going to piano lessons as a kid, or taking that medicine you really didn’t like. You did it because you knew it was good for you, not because you wanted to.

The key with numbers is not just taking them at face value. Business analysis is about working through the numbers and then wrapping context around them – this means looking at the “real world” and what’s going on for you at a personal level and understanding the impact of this on the numbers.

Once we’ve got the numbers and the context, you’re able to work through where you are now, what got you where you are now, where you want to head, and what’s stopping you from getting there. For more on this, checkout the Business Growth Curve here.

Ultimately the business analysis helps get you heading in the direction you want to be heading, and to separate fact from fiction.

Where do I start and what should I analyse?

Making a start and knowing what to analyse is the tricky part. It’s the part that isn’t too appealing to business owners who are used to running non-stop making the business happen. But ultimately it’s like the medicine you didn’t want to take as a kid – good for you once it was over and done with.

Step 1: Financial Modelling
Take the data from your current accounting system and use this to form financial models to help understand high priority areas like, turnover, gross profit, debt to equity ratios, cash flow and working capital.

These give you clarity around what is happening, what is going well and what areas may need more attention.

Step 2: What if Analysis
Using the financial modelling in Step 1, you can run different scenarios to show what the business is likely to face in difference situations. This helps you see what’s likely to happen by changing one or two variables at a time. For example, what happens if my sales drop 20% after taking on 2 new staff members, or what happens to my cashflow if sales increase by 40%.

Step 3: Technology Analysis
We look at how the business uses technology, uncovering what is working and what may deliver better results or efficiencies within your business. Technology we know plays a big role in today’s business environment and many opportunities are missed when no technology plan is in place.

Step 4: Survey of Customers, Staff and Suppliers
Key stakeholders in your business need to be listened to. Performing a quick survey to gage the sentiment of these key parties gives you great insight into what is going well and what may need work.

Step 5: Business Exit Insight Report
Understanding the valuation on your business can help inform where you spend capital (and time). A Business Exit Insight Report shows how the value of your business changes by investing in plant, staff, processes, products and more. Put another way, does it answers where your business is more valuable if you invest in “X”, rather than investing in “Y” instead.

Taking Action

Breaking down what is going on in the business through a thorough analysis can uncover many areas that not only need improvement but also areas of growth potential that may have been missed out on due to the busy day to day running of the business.

From here, checkout what good business design looks like, where your business sits on the Business Growth Curve, how to unpack the assumptions you make about your business.

If you’d like to find out more about anything we’ve talked about in this article, feel free to get in touch. We’re happy to grab a (no-obligation) coffee to talk about your situation.

iif Chartered Accountants help business around Wellington, Porirua and Lower Hutt with accounting, tax, and growing businesses. We’ve grown quickly ourselves so know what it takes to build a successful business.