Business growth—who doesn’t want that? But the narrative around growing a business is really off kilter. Headlines belong to unicorn companies that saw a need in the market and filled it fast. But the reality for most businesses is a lot different. Growth doesn’t just happen. And it doesn’t come solely from external factors, like market opportunity or lack of competition. Sometimes the opportunity for growth is sitting right in front of you—in your company’s financials. Here’s what to look for:
Segment Your Customer Base
When you started your business, you probably didn’t pay much attention to the types of customers you had. You probably just cared that they were paying customers! But looking at your customers under a microscope can help unlock growth opportunities. Josh Farber, XMI chief financial officer, suggests segmenting your financials by customer industry, customer size, customer location and service line. This can help you identify market potential through the lens of each of these segments.
Zone in on Profitability
Another benefit of segmenting customers as well as service lines is its ability to help you see which of these segments are most profitable. Driving additional resources to these segments can result in growth.
“In a world of fixed costs, businesses have to choose wisely where to invest their valuable resources,” he says. “You don’t want to succeed yourself to death. If you’re growing the top line significantly, but losing money with every dollar you make, that’s not sustainable growth.”
This is another benefit to segmenting your financials—it helps you better identify the revenue streams that are profitable versus unprofitable.
Implement a Rigorous Set of KPIs
Tracking key performance indicators on a regular basis is important to help you identify where your business is growing. But tracking the right set of KPIs could also illuminate the areas that are lagging and have potential for growth.
No two businesses will track the same KPIs, because they’re based on the specific goals of the company. There are literally dozens of KPIs you could track (136, according to this blog post). Some common ones, beyond revenue and profits and losses, are customer turnover rate, revenue per employee, and expense as a percentage of revenue.
Look at Periphery Services
The best companies do more for their clients than just their core service. In the majority of relationships, there are all sort of value-added products and services that don’t get billed but still add to the overall customer experience. “Identify your periphery service offerings that you historically provide but don’t currently monetize,” Farber suggests. “Are your competitors charging for those services? Should you?”
If those services cost your company money but offer no return, the answer might be yes.
To be able to glean any of the abovementioned insights from your financials, they need to be more than just numbers in an Excel spreadsheet. With XMI’s outsourced accounting services, Farber and his team can help you enhance your financial clarity to see growth opportunities more clearly. For more information, call 615-248-9255 or email firstname.lastname@example.org.