by  Search Engine People Blog

Quick, can you tell me which is your most profitable customer?

Or as the headline points out, pick the dimension or view of your company and tell me what, who, which is most profitable?  Or least profitable?  And can you tell me why?

There are typically three answers to this question:

Companies in the first group answer with a resounding “No way!”.  Why?   Likely the information they need to analyze these points is all over the place – in different systems that don’t talk to each other or worse not in any system at all.  Maybe some in an accounting application and the rest is in a spreadsheet somewhere.  Or maybe on a napkin in your sales managers pocket.  You know what I am talking about.

Companies in the second group answer with “of course”.   This sounds pretty good until you ask the next question which is something more complicated like “who are your top 5 most profitable customers by product line?”.  What I find at this point is these companies have some decent rudimentary analytics, likely manually extracted from various systems and housed in a spreadsheet.  This is not altogether bad – they know what metrics are important to their company and have a process for producing those metrics.  The problem is that this isn’t scalable – as soon as you want to change the question, even slightly, you’ll find the metrics are created in an inflexible way.  Someone has to go back and manually change the spreadsheet, maybe making another version, maybe disconnecting it from the base data.  The thing about analytics is that as soon as you know one thing you want to know something else about that thing – it never ends!    This means static spreadsheets, while  good for getting your feet wet, won’t last long.

Companies in the third group can answer with “of course” and then proceed to further analyze their business for key insights and trends.  In this case they have integrated their data from various systems and sources into a source for analytics and reporting using business intelligence tools.  These tools allow them to more easily change their questions without re-doing  bunch of spreadsheets.  Some of you have probably heard about business intelligence and business intelligence tools and dismiss them for use by small and medium sized businesses.  It is time to think again!

What has changed in BI tools?

Traditionally large enterprises have been able to leverage BI tools and data warehouses to gain tremendous insight into their businesses.  They can do things like predict what products you might like to buy after an initial purchase or tell a store how to most effectively position products on their shelves.  They can analyze service routes and call center performance.  There really is no end to what CAN be done – it just takes money.  A boatload of money.  Money on software and hardware and lots and lots of money for people (either employees or consultants) install, configure and make sure all the pieces work together.  In recent years this has started to change.  There are tools that run as a service (SaaS, in the cloud) that provide many of the capabilities that the large BI tools can.  These smaller, nimbler tools can pull data from your existing systems (even files and spreadsheets) and organize it in a way to be easily accessible for analytics and reporting.  Usually your expenses will be a monthly subscription for these tools and probably some initial consulting help to get you started (some of the vendors purport that you don’t need that but I’m dubious – at the risk of venturing into the realm of self-promotion I think that some consulting help at the beginning to define goals and metrics and help choose a vendor would save most businesses money in the long run.  But I digress.).

In short, what do these BI tools do?

They can  help you measure and manage your business, enabling what-if analysis and the easy ability to change the questions you are asking.  They make pulling the data together from diverse sources easier and less painful.   They create “one version of the truth”.  Some even package up solutions for function-specific analysis – pipeline analysis (sales), financial analysis (finance), cost analysis (operations) , or supply chain analysis (supply chain).

How do I get started?

There are a number of good vendors in this space.  They include (but are not limited to) Birst, Pivotlink, Gooddata, Easy Insight, Jaspersoft, and Zoho Reports.  Each of these has different features and integrates data in different ways.  If you have someone experienced with analytics and reporting on your staff you are in luck.  Otherwise your next step is to talk with your technology advisor to determine what your needs are and which product suits them the best.  Then you can put together a plan that lays out initial steps and associated costs.  Start with a plan, start slow and measure your progress (use metrics to measure your analytics!) and soon you’ll have greater insight into your business.

by  Arbron

Don’t act innocent, you know what I mean.  Spreadsheet software is oh so easy to use and so inexpensive (or even free).  You can use it to keep your company books, to keep your budget and forecast, to keep lists of customers, to create invoices, to create sales orders, reporting and analytics, inventory…the list goes on and on.

It is time for a spreadsheet intervention!

Following are the top 10 reasons you should stop and reconsider the use of spreadsheets in your business:

1. Sometimes the creator of the spreadsheet doesn’t know what they are doing and the calculations are incorrect.
2. If you make changes to values on a spreadsheet and save it you no longer know what the original value was.  Unless you saved a version off first, creating yet another spreadsheet.
3. If you have lots of versions, on hard drives, in email, on various computers you have no single version of the truth – whose spreadsheet is right?
4. Often the creator of the spreadsheet leaves it on the hard drive of the computer.  And often that hard drive isn’t backed up.
5. While we are on the subject of security risks, what do you think happens to all those spreadsheets you mail around?  Any idea where they go?
6. As you put more and more stuff into your spreadsheet the more unwieldy it becomes.
7. As you put more and more stuff into your spreadsheet and make multiple copies because of versioning you are now eating up disk space.  Every day.
8. They waste time.  If you pay someone to do a repetitive task in a spreadsheet, add up how much time they spend on it each week.  Then find out how much it would cost to automate that task.  The numbers are usually enlightening.
9. The second you save the spreadsheet the data is old.  Inventory is not up to date, customer contact information isn’t accurate, accounts are stale.
10. It isn’t scalable.  You can’t continue to use spreadsheets as an integral part of your business for very long without running into roadblocks from bad or inaccurate data or the sheer manhours required to keep up with them.  Your company will grow, I’m sure of it, and if you rely heavily on spreadsheets you will get mired in the muck at some point.
11. You can’t easily integrate the data from one spreadsheet to another.  So you copy and paste date, duplicating it and opening it up to errors or staleness.

See I couldn’t stop at 10.  I could go on even further but I think I’ve made my point.

Today’s business owners are fortunate – there are software solutions for most business needs and small businesses can get great functionality for free or low-cost.  CRM systems to keep up with customers, accounting systems for your numbers, inventory application and the rest are plentiful, have great functionality and have been tested to ensure the data and information they produce is correct.

I am not a spreadsheet hater – I think there are good uses for spreadsheets.  One time financial or what-if analysis.  As a front-end to a database for more detailed analysis and reporting.  For lists.  But not as an integral part of running a business of any size.  Its just not good business.

Retail and food service businesses probably don’t have this problem but service companies that are growing know exactly what I am talking about.  After identifying a customer, engaging in a protracted sales process, and wrangling over the fine details of the contract you are ready to begin providing services to your new customer, and better yet, start invoicing them.  But when you talk to the various parts of your company you realize it is all a lot harder than you thought.  Why is that and why does it take so long?

To answer that let’s look at a typical set-up a medium-sized company might have:

• Your customer is hopefully already set up in your CRM system, at least as far as your sales folks are concerned.  You will want to make sure your customer service folks have them set up for their needs too.
• You will want the new customer set up in your accounting system…
• And your billing system..
• And in whatever operational system(s) you use (consulting firms might have project management systems, shipping companies might have logistics systems, wireless carriers will have network systems).

Even if you don’t have individual applications for these functions, you still have people who have to know about the new customer and to adapt their internal processes to accommodate them.

So why would doing this take a long time?  If you are a smallish company it might not be too bad – you may have to update your various applications, spreadsheets or lists yourself or holler over to the guy in the next chair.  As your company gets bigger, however, you’ll likely start dividing the work functionally – you may have an accounting group or department, another for billing, another for sales, one for customer service and another one for the operational aspects.  Suddenly getting everyone on the same page, and better yet, with the same information, becomes a challenge.  As you become more successful and grow you may find that your automation has become fractured – some groups have grownup applications, some use spreadsheets or their own databases.  This uneven growth and lack of integration across the organization becomes more and more difficult to manage.  Which leads to increases in your cost to onboard a customer.  And, because every group updated their processes and systems manually you may have played “telephone” with important information like customer name, addresses, contact info, etc.  This in turn will lead to issues down the road doing analytical reporting about things like the profitability of a customer.

The good news is this not a new problem – millions of companies face this all the time.  Think of it as a good sign, a growing pain for a successful company.  It is a legitimate problem though and if left to get out of hand can bog a company down, making your organization a modern day Tower of Babel.  Here are some of the symptoms:

• You have  ”bad data” – which is, generally in this situation, inconsistent data.
• You miss key dates – for example your contact stipulates an SLA period for follow up on issues that never made it to customer service.
• You notice frequent miscommunications with customers.  Or about customers.
• You experience more the than usual instances of over or under billing.
• Or your numbers aren’t what you expect but you don’t know why.

What can you do?  Here are some thoughts:

• When you start to see these symptoms force yourself to take the time to stop and take a look around.  If you are still small you may be able to institute some policies and procedures that govern how new customers are set up.  Something as simple as a check sheet can go a long way to staving off problems.  Collaborating with lists and spreadsheets in the cloud might help as well.  Look at Google Docs, Zoho, Dropbox or the like.
• Listen to your employees carefully for statements that indicate the symptoms such as “We’re doing business with ABC in two different offices and it is so hard to keep it straight.  Sure would help if they were set up the same in both places!”.  When you hear this ask probing questions to figure out why.
• Take the time to document your processes.  Then review them and look for inefficiencies and opportunities to automate processes or integrate processes for which you already have applications.  As a bonus you’ll have training material for onboarding new employees!
• Review the processes regularly, at least annually, as input into your technology plan and budget for next year.

Like I said earlier, this isn’t the sign of a “bad” company, just one that has grown by focusing on getting the job done and not “how” the job gets done.  And as you can see, taking a look at the “how” now and again can help you continue to grow.

Has your company experienced this growing pain?