13 Data Sets Any Business Can Exploit to Increase Profit by 10–20%

Buckle up, because the 13 information sets I’m about to list will give you a much deeper understanding your business and identify improvement opportunities you were either unaware of or had not realized how much they were costing your business. The first time I used this approach I was absolutely astonished by what we found, especially in a business with an experienced management team and earnings already at an impressive 32%!

Before I get to the list of 13, let me answer some frequent questions that provide some important context:

Q: How am I able to know, for sure, that your company has the potential to generate a minimum of 10-20% greater revenue or profit?

A:

That’s simple: every day you make decisions, often in a hurry and without looking back. All those decisions have P&L consequences and while some of them create the perfect tailwind, many create drag on revenue and profit. Over time, every business accumulates strategies and tactics that cost it money rather than make it money. It applies to your business, even if it’s the most profitable in its peer group. Frustratingly, it also applies to mine!

Q: Where does the list of 13 come from?

A:

It’s a core part of our PRISM Business Assessment methodology. We use these 13 inputs to both deeply understand a client's business and comprehensively identify the company’s opportunities to make or save money. PRISM is used by CEOs who need to reinvigorate performance, enhance the profitability of their growth, or simply to identify the best use of available resources.

Put differently, we are obsessed with how to comprehensively but also efficiently identify a company’s best opportunities to maximize revenue and profit. Over time we’ve added and subtracted things to this list and today we use this list of 13 inputs to formulate our hypothesis of where a business might make or save money (Step 1 of 4 in our PRISM assessment).

Q: Is this just another article expounding the benefits of big data?

A:

Nope.  In fact, it’s about how to harness the least amount of information to uncover missed earnings. In my experience, this is best accomplished by using different types of information, much of which is not “data” that conveniently fits into a database. It is, nonetheless, often factual and consequential.

This list of 13 is made up of 3 information subtypes:

1. Unstructured information, e.g. presentations, process documentation, and research
2. Institutional Knowledge, e.g. management insights, “how” the business operates, and knowledge of “why”
3. Data, e.g. your P&L, survey responses, and operational reporting

Q: Isn't it likely my company already reviews these 13 information sets?

A:

Some do however it's unlikely you examine them together. It's even more uncommon to do so as a precursor to annual planning or as part of ongoing financial planning and analysis (FP&A).

All businesses that are a “going concern” should have these 13 information sets. If you don’t, that itself is reflective of a blind spot that almost certainly is negatively affecting your company’s performance. Second, while many executives do have and review these data sets, they review them at the time when information is published to them, grasp key takeaways and then move on to more pressing concerns. Rarely do they scrutinize them together. Similar to how examining the human body as a system uncovers new solutions to diseases and athletic performance, viewing a business as a system frequently uncovers new ways to enhance company performance.

Q: Is it really possible to find 10-20% additional profit using just these data sets?

A:

Without exception, I have found this list of 13 data sets can be used to identify potential opportunities to increase revenue and profit. It is critical, however, to evaluate your theories in order to avoid making an investment based on what amounts to a guess. If you’re applying this in your own business and need a method for evaluating theories, my next article will share our approach for doing so. Be sure to follow or connect with me if you'd like to see it.

With that context, let’s get to the list of 13 information sets.

What to look for in each varies substantially based on your situation. Unfortunately, I cannot itemize what to look for any more than a doctor could enumerate steps to diagnose a specific and complex case.  Nonetheless, I’ve included key questions to ask yourself as a way of stimulating your thinking on how to review each data set:

1. P&L and any audit reports (preferably last 3 FY)

• Where are there P&L variances and outliers, including those considered immutable realities for the business?
• For improvement opportunity hypotheses formed using the remaining 12 data sets, what are the financial implications?

2. Revenue by Customer and Product/Service

• Who and what, is and is not, generating revenue? Why?
• How has it changed over time?

3. Gross Margin Calculations

• Who and what is, and is not, generating profit? Why?
• How has it changed over time?

4. Current Organization Chart (historical, if available)

• Is the organization aligned to efficiently and effectively deliver short and mid-range results?
• How has the business invested and divested in competencies?

5. Customer Surveys and Survey Data

• What is the company doing, or not doing, that may result in significant waste or opportunity cost?
• In practice, is the company attuned to the customer experience?

6. Employee Surveys and Survey Data

• What hidden truths exist concerning the company’s management, relationship with its people, and areas of improvement?
• To what extent do employees support, or restrict, the business reaching its goals?

7. Competitor and Market Research

• Does the company have a fact-based grasp of its market position?
• How has the competitor and customer landscape evolved over time?
• Has the business systematically adapted to market and competitive changes with sufficient speed to both sustain performance and achieve its growth objectives?

8. Marketing and Sales Materials (all content used across all channels during the past year)

• How consistently and effectively are features and benefits communicated?
• How consciously and effectively is positioning aligned to customer needs and competitive options?

9. Employee handbook and written policies within each department

• Are there policies or lack of policies creating unnecessary cost or lost revenue? E.g. a variable or absent pricing policy.

10. Samples of routine business and departmental reporting

• Are departmental metrics aligned with one another and with overall company metrics?
• Do metrics compel the right behaviors, activity and outcomes?

11. Strategic and/or business plan (current and prior FY)

• Does the business understand where it is today, where it wants to go, and how it will get there?
• Faced with unknowns, does management seek a factual basis for plans or accept assumptions and generalizations with speculative accuracy?

12. Board meeting presentations and meeting notes

• Does the management team appear to have the inclusive, critical, and constructive dialogue to successfully navigate it through key decisions and challenges?
• What logical process does the company take to both encourage and mitigate risk?

13. Key management interviews

• Where are management’s most concerning pain-points and known, or suspected improvement opportunities? Note: KGK uses a 100-question questionnaire to ensure we probe all strategic and operational aspects of the business.

If reviewing these 13 data sets uncovered enough theories to make your head spin, you’re on the right track! Again, before you take action, be sure to dig deeper into why your business works the way it does and confirm which theories are indeed valid. Further still, not all business problems affect performance equally or can be solved profitably. Indeed, forming your hypotheses using these 13 information sets is really just the start of the process. As I mentioned earlier, if you need an approach to evaluating your hypotheses and their solutions, follow me to catch my article which covers our approach "Why PRISM Is Earning a Spot in the CEO’s Toolbox".

Final Remarks: I believe in openly sharing KGK’s methods. Feel free to ask questions and share your own ideas – it gives us all the opportunity to learn from one another! If you enjoyed this post, please like it and share it with your network.

About Me:

I am the Founder and President of the fast-emerging Chicago consultancy KGK & Company. I founded KGK 6 years ago with the steadfast objective of creating a firm that delivers greater value than it consumes in client fees and time.

KGK is becoming known today for its PRISM Business Assessment, originally based on the methods of turnaround experts, which has proven universally effective for improving any company’s performance. At the completion of a PRISM assessment, KGK also teams with our clients to execute our recommendations and deliver the forecasted results. I enjoy unraveling complex business problems, sharing KGK’s methods, and being a part of my client’s successes. To learn how partnering with KGK can benefit you, please contact me at kanhai @ kgkcompany.com with your phone number and the best time to call.