Using revenue data to win the big game
The Ohio State Buckeyes didn’t just wake up on Jan. 12, 2015, and decide to beat the Oregon Ducks 42-20 to win the inaugural College Football Playoff National Championship. They trained. They strategized. They played to their strengths. They seized opportunities. And they had a singular focus as a team.
Winning a game – or reaching your goals as a business – isn’t an event. It’s a process that you have to recommit to every day.
Many of the same exercises the Buckeyes went through to achieve great success against Oregon can benefit your business including analyzing your stats and watching the proverbial game tape of your business’s past performance.
Show Me The Money
Most businesses want to grow. Rea is no different. We’re always looking 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.
Each month, we create three reports:
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 it’s by service.
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 to the next level? Here are four ways that revenue segmentation can help you:
- 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 a group of people just not that into you? Determine what your core products or services are and focus there.
- 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.
- Identify opportunities for growth. If your data shows you 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.
- Predict the future. As you compare these reports over time, you’ll identify trends and cycles of your business. This will help you budget and manage your cash, and may also identify opportunities to increase sales during historically slow periods.
The OSU football team doesn’t play baseball in the off-season. They know what they’re good at and they focus there.
There’s nothing magical about our data – the magic 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.
By Jeremy Senften, CPA, CGMA (Administration/New Philadelphia)