In a 2017 report Forrester found Insight Driven Businesses were growing 8 times faster than global GDP. In today’s tough and unpredictable climate using actionable insight to drive your business could be the key tool which makes a difference in your organisation’s survival. This blog post has some simple tips for how Actionable Insight can drive your business revenue.
Actionable insights focus on taking meaningful and deliberate actions based on analysing trends and data within your organisation.
It is not about more information or more data. Actionable Insights start with ensuring your business is measuring the right data. Sometimes this can even mean gathering less data than before, the focus is on the ‘right’ data and not ‘more’ data. There are lots of different ways to bring Actionable Insight into your organisation. We are focusing on one of the many ways it could be done.
Start with the part of your business that you want to grow or change. For example, it might be your organisations revenue. Then ask yourself what is the key activity which drives your revenue? The key activity is often the ‘thing’ which happens before the revenue is generated. This is called the revenue driver.
An example. When we moved to Alert Level 2, I secured the first hair appointment at my local hairdressers. Probably the hottest ticket in town at the time. At the end of my appointment the stylist told me that if I rebooked today for my next appointment, I would get 20% off my next visit. It might seem odd that the most sought-after service in town was offering a discount for future bookings, but this business knew the ‘thing’ which happens before revenue turns up is that customers book an appointment. Their actionable insight was that customers needed an incentive to book again, and the risk was that customers decided not to book hair appointments every 4-6 weeks but rather every 6-8 weeks. Their aim was to get customers back into the same pre lockdown routines.
Being an accountant, I rebooked – I love a good discount. Interestingly, on my return the stylist told me things had been busy for the first 3 weeks, but business had slowed down dramatically and people were delaying rebooking.
So, in this example the company understood their key revenue driver. It was pre-booking of appointments. Great insight. The actionable part was a bit mixed; the discount drove some rebooking but not to the pre lockdown levels. Even this is a great insight for future promotions.
So, your revenue drivers might be sales orders, bookings, time sheeting in your consultancy business, client referrals, membership subscriptions, foot traffic into your store, active customers, sales leads or… Remember it is the thing(s) which happen before revenue or sales occur. Even in the most complex businesses the revenue drivers are often only a handful of things.
Having selected your revenue drivers, you need to measure them. Depending on the nature of your business and the drivers they will be measured daily, weekly, or monthly.
An example. Working with an online training business recently we decided the revenue driver was ‘number of people booked on each course’. So, they started to track each course they were running and exactly how full it was. Their focus was to measure this daily, but at any one time to look at the next four weeks of bookings.
Much of accounting is about lag indicators – accountants are great at telling you how well the business did or did not do last month. The good thing about revenue drivers is they are lead indicators. They tell you how well you will do this month and in the next few months. You are on the right track if you and your team are discussing what is happening this month rather than what happened last month. A good revenue driver can lead to businesses being able to calculate likely revenue for the month. This leads to greater predictability, the ability to react when things do not go well, and less sleepless nights for the business owner.
Create targets which are realistic but have some ambition or stretch in them. Try to come up with an aspirational goal. Our online training business has a goal of ‘having 50 people on each course we run in July’. If you are not sure about the right goal, just measure the driver for a month and then set yourself a goal to improve month on month.
Having targets can be scary and daunting for employees, particularly in these times. I know firms who have recently had to implement individual employee Key Performance Indicators [KPIs] and it has had mixed reactions across the firm. But there is a difference between mandating KPIs on employees and engaging everyone in understanding what drives your business and how they can help.
Back for my third appointment with the hairdresser since they reopened, and business is still a little slow. When I went to pay the staff member at the counter said, “Do you normally call to book your next appointment?”. Remembering that the revenue driver here is likely to be booked appointments they should have said “Shall we book your next appointment for August”. So, a more proactive ask rather than a question.
In this case there did not need to be a KPI for individual staff members, but a focus on everyone encouraging people to book for their next appointment. This could include a simple tracking system for the end of each day where the team collectively look at how many appointments they had that day and how many people rebooked.
You need to measure your drivers in a user-friendly format. It does not have to be a complex reporting system. It could be as simple as a white board or chart out the back of the store, a graph in the office lunchroom, which is updated daily, an email summary provided each week, or… The key is that people focus on the activities which managers and owners talk about and track.
Once you start to get data you need to analyse it for insights and act. There is an iterative cycle that needs to happen here. Our online training business ran a series of Facebook adverts which generated bookings. They could track how much the advert cost, how many bookings that generated for a specific course, and the net income made after paying for the adverts. They were able to determine when was the right time to run adverts to generate bookings if referrals and regular attendee numbers were low.
An online business recently told me they know when issues occur because they keep track of their online ratings on a third-party website. When ratings drop, they know there is an issue in their operational processes. But ideally the warning systems should occur so they get the insight before the customer tells them, and they are now working on tracking throughput of orders and issues.
A surprising number of businesses only track issues. So, they take reactive action when bookings fall below a certain level, or if employees do not meet an expected output target, or there are customer complaints. This means there is an opportunity cost of the lost extra business that might have come from being more proactive.
The key in this step is that if you have data that you have turned into useful information that has then given you some insight, you can act on that insight. You cannot experiment on how to grow revenue unless you have a good system on tracking what drives revenue.
You can use the above approach to focus on any part of your organisation that you want to improve or change. It could be sales, profits, customer service or whatever. The key is not about more data or information, it is about looking for the key drivers of that area and what metrics will give you actionable insights.
The examples I’ve used above are deliberately simple to explain the process, however in my experience as a Chief Financial Officer businesses often over complicate the analysis of data and lose sight of the goal of gaining actionable insights.
Get in touch with us at MacGregor Jamee Limited if you would like help with implementing actionable insights to drive revenue within your business – see our package below.
Revenue and Cost Driver Management: One-on-one coaching and mentoring session for the business owner and/or core management team on the key activities which drive revenue and cost, how to measure and manage these to improve performance.
The outcome is information that gives the business actionable insights to improve business performance. This is supported by six months of mentoring to ensure the methodology is incorporated into daily business activities and that data is reviewed for insights and action is taken on these insights.
Applied Thinking –>