A heavily underrated discipline in most companies is that of business analysis. Whenever a company decides to ‘get smart’ on products, customers and marketing, it should reinforce its business analysis leg. That does not mean companies need to hire armies of ‘beancounters’ that sift through the financial statements to explain variations to budget. It also does not mean hiring a legion of heavyweight controllers. It’s more than that, and the bulk of the work can be done with a few skilled analysts. As long as they keep this in mind:
- Most business models are very simple – and can therefore be analysed similarly. Most companies are either in manufacturing goods or in providing services. They either sell it to end consumers or to other businesses. So here’s a few exercises you want to be doing when analysing your profit line.
- breakdown by major family of products (or service). Work with lines containing 6 columns: the revenue (vs bud or prior year), quantity (vs same), the price (vs same). Repeat this line for every major product family and you’ll have a clear overview.
- follow up sales: are certain products related to each other? Do we sell them in equal quantities to the same customers. Did we sell them pieces of equipment that will require spare parts/consumables? Do we sell it to them at the expected volumes?
- YTD? YTG! 90% of all managerial reviews I sit in, review the actual performance from 1 Jan that year until now. I understand that’s what the bonus depends on, but it’s also a bit like driving a car by looking only into the rear view mirror. A really proactive business analyst almost naturally will work on a landing forecast, connecting the Year to Date (YTD) results with the Year to Go (YTG) forecasts to have a good view.
- Start with end in mind: one of these good habits of highly effective people: When swimming upstream in the endless river of data, it’s very easy to drown in it. At all times, keep an eye on what information you need to get. In the end, it’s not about the volume of data you crunch, it’s about the information you turn it into. A good example is the Pareto analysis, one of the best ways to visualize and prioritize.
- Ratios: decide with the management on a few key ratios that will serve as the Key Performance Indicators (KPI) for the business. Chart their evolution over time, it will show deterioration/improvement quicker than other financial statements.
- Technicalities: ‘Garbage in is garbage out’ as the adage goes. That indeed is true for the business analyst. What is needed in the first place is data, flat data. By ‘flat’ data I mean having all data (down to the individual invoice line) in one sheet, consistent, with the fields next to each other in columnar format. No half fabricates that already contain subtotals and special grouping, that will come later in the mapping you do yourself. That way it is easy to crunch it in Excel or Access. Consistency is easily reached if data are delivered in flat form. On top of that, you need the confidence to handle these often huge datasets. And for that you need deep excel knowledge, where in my opinion the most important ones are vlookup and pivot tables. Macros are however not essential.