5 Things Every Business Owner Should Know

5 Things Every Business Owner Should Know

Business is evolving faster than ever. Business owners who do not know their numbers, and are unable to make decisions based on these numbers are going to be left behind by their competitors.

Today we would like to show you which are the most important things that you should know as a business owner. We're also going to teach you how a software solution can help you keep track and analyse the most important numbers.

Previously we wrote about how software can help organise and automate your business processes. We wrote about document management systems, manufacturing software, and about CRM's, which help you with sales and customer relationships.

But there are other systems which can be used in a business, like financial software, supply chain software and HR software. If you connect these into an integrated system, then we can already talk about ERP software.

An ERP is an integrated system, in which multiple other software modules work together

An ERP system holds a huge amount of data. In charge of processing this data is the Business Intelligence module, or BI for short.

As you can probably tell from its name, a BI software is to make sense of our data and present you with reports and forecasts, from you or your analysts can make informed business decisions.

Our favourite definition for business intelligence is from Bill Cabiro. He said that "business intelligence is getting the right info to the right people, at the right time, in the right way"

Business intelligence is getting the right info to the right people, at the right time, in the right way

But is it different from Big Data?

There's a lot of talk nowadays about Big Data. BI and Big Data are often used interchangeably. No surprise there, as they're very similar, but they do serve different purposes.

Big Data is the process of generating, capturing, storing and processing data. BI is tasked with analysing this data and generating reports.

Think of a giant pantry, with billions of ingredients. Big Data makes sure the ingredients never get lost and always stay organised. BI on the other hand, helps you create an easy-to-cook recipe from these ingredients.

A BI software doesn't necessarily need terabytes of data. But couple with Big Data they can generate reports that are much more precise. Enough talk, let's see what are the most important numbers you should know, which we can find out using a BI software.

Big Data vs Business Intelligence

1. Know your financials

The most important numbers you should know are your finances. And I'm not talking about the ones which you get in your P&L statement, but the ones you can use to create your long-term strategy.

As a business owner you must know where you stand from a cash flow perspective, break-even point, burn-rate or when you're able to afford a larger investment.

A BI software can pull this information from your accounting software or ERP, do the math and create easy-to-understand visual reports for you. The only thing left for you to do is make the correct deductions.

When it comes to financial information, the advantages a BI software can bring are infinite. In case of one of our oldest clients, we build a financial forecasting module, which processes historical data and forecasts expected sales and ideal margins in order to maximize profits. Basically, how much they can increase prices without losing sales.

Know your financials
Know your financials

2. Know your customers

Now that we know our financial status, we can set up goals. If we have those goals, we can calculate how many customers we need to achieve those goals. But this is not always as simple as it sounds. A lot of factors can influence this number, such as the average order value (AOV) or the percentage of returning customers. This is the second thing you must know as a business owner: your customer data.

A BI software can read this information from the CRM and compute your AOV for example. But it can also help you improve these values. This is one of the most well-known areas of use of a BI software.

Suppose we're selling sports goods. If after every second tennis racket, customers also buy a ball, the BI software can notify you. You can then include this upsell opportunity in your sales process, increasing the AOV.

Know your customers
Know your customers

3. Know how your team performs

The third thing you must always know, is how your team is performing. But in order to be able to warn them of their unsatisfactory performance, you'll also have to have numbers by your side.

For this to happen, you first need to define what these numbers are going to be. They're going to be different for every role, there is no rule of thumb here. You should make sure though, that these indicators are relevant!

In case of a salesperson, the number of sales or generated income might be important numbers, but they're probably not the best indicators of performance.

Think about it. If one of your sales people always sells a product with the highest discount, his or her number of sales and total income are obviously going to be bigger than those of their colleagues.

But this is a dangerous path to take. If he or she does this on a regular basis, it can overwhelm your production facility, which won't be able to handle the orders. It's quite possible that if he or she sells less, but with a higher margin, our profits are going to be bigger by the end of the year.

This is why it's important to configure your BI software to take into account not just the number of sales and income, but also the average profit per sales.

Know how your team performs
Know how your team performs

4. Know you production numbers

Speaking of production facilities, the next thing you should know as a business owner, are your production numbers. We already wrote about these in our post about manufacturing software, so we're only going to quickly show you how a BI software can add to this.

A BI software is able to process data which comes from the production line and manufacturing software and provide you with data about the average hourly outputs, scrap rates or average downtimes. Based on this data, you'll be able to optimise your manufacturing processes and maximize profits.

Know you production numbers
Know you production numbers

5. Know how you can improve

The last thing that we would mention, is that you should always know where your losses come from. For us at Further, this is the most important piece of information, because having this data, we always know how we can improve our services and functions. The good thing about this, is that this is a never-ending process, you'll always find an area which can be improved.

These losses can appear in many forms: decreasing productivity, high employee churn rate or a lot of unsold stock.

This is the area where BI generated reports can help you the most. A BI provides you with detailed dashboards that make it easy to spot negative tendencies, or areas where your company doesn't perform according to your expectations.

Our favourite business intelligence case study about reducing losses is from Tesco. For such a retail giant, it's a constant challenge to sell products before their expiration-date.

The solution to this problem was the Tesco Clubcard they introduced in 1995. Although on the surface it seems it's only another loyalty program, it's main goal was for Tesco to get more information about their clients and to get to know their buying habits. This is then analysed using a BI software. It should be of no surprise, that when you're receiving discount coupons from Tesco, you'll find not only some of your favourite products there, but also lots of goods that Tesco quickly wants to get off their shelves.

Know how you can improve
Know how you can improve

Conclusions

Let's recap what are the 5 most important things you should always be aware of in your business.

The most important are your financial numbers and customer data. This is closely followed by the indicators which you use to evaluate your team.

If you're also manufacturing products, then knowing your production numbers will help optimise your manufacturing processes.

Lastly, you should always know where your losses are coming from, so you can improve your business.

We hope this article helped you understand how a business intelligence software can help you organise and analyse your data. If you'd like to find out more about how a BI software can be used in your business, reach out to us and we'll gladly talk it through with you.