Did you know that you could lose a lot of money if you don’t have the right data? Find out how to get your hands on it so you can set benchmarks for your business.
I’m a bit of a numbers geek. In fact, digging into data and numbers is the first thing I do when I start working with a new client.
That’s because I know it’s tough for a lot of small business owners to do it.
So many of them struggle to analyze what they’re doing and why. And I know how it feels because I struggled, too.
When you started your business, you just wanted to get out there and make a difference. You fell in love with your industry and wanted to do whatever you did for yourself. So, you shot first and asked questions later.
I respect that approach!
It shows that you’ve got passion and you want to go out there and make a difference. However, it’s also this approach that leads to a lot of business owners leaving dollars on the table.
I was a victim of that.
I’ve lost out on a lot of money in my career because I wanted to execute before planning. And it wasn’t until I realized how important the numbers and data are that I turned things around.
You need good data to run your business.
It’s the data that you’ll use to benchmark and figure out where your business stands versus others in the industry. And, ultimately, it’s the data that shows you what you need to change to create a stronger business.
Let’s look at how to find and use it.
Technique #1 – Google’s Great for Finding Key Data
As I said, I jump straight into the numbers when I start working with a new client. I check profit-loss statements, balance sheets, and cash flow. And then, I ask myself a question…
How are they doing compared to the rest of the market?
Let me give you an example of a company that I worked with a while back. It was a landscaping company that looked pretty successful from the outside looking in. But internally, the business had cultural, communication, and organizational issues.
The owner asked me this question:
What do you think about my business?
I told him I needed to do a little due diligence on his industry to find out how he compares to others. So, I got his numbers and opened up a certain tool that we all have access to – Google.
I searched for the keyword “Landscaping Benchmark Report” and checked everything I could. My goal here was to collect as much data as I can so I could set out some key metrics for the landscaping industry.
That’s the first tip.
Google is your friend and there’s a ton of useful stuff that you can find with the right keywords.
Keep in mind that you may end up downloading a few lead magnets along the way just to get the data. But any source of industry data can help you figure out where your business stands right now.
Technique #2 – Consider Customer Retention vs. Growth
There’s one really interesting metric that I found for my landscaping client:
Their industry has a customer attrition rate of between 25% and 28%.
What does that mean?
If the company’s revenue is to stay flat, they need to grow their business by between 25% and 28%. In other words, they need to get that number of new customers to replace the ones that they’re losing. They’ll only start raising their profits if they can get about 28% in growth. Alternatively, if they can cut their attrition rates below the industry standard, they can profit that way.
Now we had something we could work on!
I think this is a key piece of data for you to have in your own business, too. You may see yourself making a lot of sales without your revenue numbers really going anywhere. If that’s happening, your attrition rates may be what’s causing your issues. If you can drop that attrition rate while maintaining your rate of growth, you will generate more revenue.
Technique #3 – Benchmark Yourself Against Your Competition
I know what you’re thinking about collecting this data…
It takes time and it’s probably going to cost you money. So, you start telling yourself that it’s probably not worth it. You could put that money towards building your business instead, rather than spending it on data.
But there is an ROI here.
I recommend that you benchmark yourself against your competitors as accurately as you can.
If you don’t, you’re never going to know how your business stacks up. You won’t know what they’re spending on, how well they retain customers, and so much more. And if you don’t know those numbers, you don’t know if you’re doing better or worse than them.
What if all of your competitors have lower attrition rates?
If that’s the case, there’s a problem with how you deal with clients. But you won’t know about it unless you’re benchmarking against others, which means you end up losing money.
There are so many great questions you can ask here.
How do your peers manage their equipment expenses?
How quickly do they collect accounts receivable?
How profitable are the larger companies in your industry?
What are their expense ratios?
All of this data gives you a picture of the standard that you need to meet and hopefully exceed in your business. It’s absolutely worth spending the time, and sometimes the money, to get your hands on it.
Technique #4 – Look for Data from Industry Associations
Let’s say that you can’t find any useful data with a Google search for the benchmarks in your industry.
You can still use Google to find that data. All you need to do is to change how you search.
Let’s assume that a search for “landscaping benchmarks” came up with nothing for my client. In that case, my next search will look like this:
“National Landscaping Associations”.
That’s going to pull up the pages of all of the industry-centric organizations that I need to know about. And these associations constantly generate reports and data about the industries they focus on.
It pays to know who they are and what they have to offer. If you can, aim to become a member of as many of these associations as possible. Doing so raises your authority in your industry and, at the same time, gives you access to some amazing data.
Again, you may have to spend a fair amount of money to get your hands on the best data from these organizations. But you will also see an ROI from that investment, as I explained earlier.
Technique #5 – Examine Your Percentage of Revenue
This is one of the most important pieces of data you can find about your industry.
The goal here is to figure out what your department cost is as a percentage of revenue. For our landscaping company, we saw that wages represented 31% to 53% of costs. Purchases came between 13% and 22%, with all other costs landing between 20% and 32%.
That told us that the average net profit for the industry stood between 6.1% and 8.5%.
Again, these are all useful numbers to have as benchmarks. If you can bring your costs to the lower ends of the spectrum, you can bring your net profit up. Ultimately, these numbers help you to see where your revenue goes.
Technique #6 – Contact a Competitor
I know what you’re thinking. Your competitors aren’t going to give you any useful data about your industry. That’s information that they’re going to use to get ahead of you.
The key here is to speak to competitors who operate outside of your geography.
These guys aren’t in direct competition with you, so they’re more likely to listen and share. Show them who you are and prove that you’re not a direct competitor to them. Then, ask them about the numbers that you need to know about.
What do they pay for certain types of services?
What margins do that achieve on those services?
Of course, you need to share with them to make this work. I’ve found that most people actually want to help, especially if they’re getting something in return. And if they do blow you off, just move onto the next one.
Eventually, you’ll find somebody who’s willing to share.
Data Is the Key
Hopefully, you now understand just how important data is for your business. And these techniques will help you get your hands on that data.
Use it to figure out where you stand in your industry compared to everybody else. The data gives you some insight into what you need to change and how you can do things differently. And that means you’ll no longer leave money on the table.
You’ll have what you need to create sustainable and effective change inside your business.
And whenever you’re ready… here are 3 ways I can help you make you and your team more productive in order to grow your business:
1. Join the Executing Executives Facebook Group and connect with other business owners who are strategizing to execute, too. It’s our new Facebook community where smart entrepreneurs learn to get more income, impact, and independence. — Click Here
2. Get 90-Minute Crash Course
I’m getting business owners together this month to map out a simple plan, so they can get you and your team executing productively in 30-days. — Click here for the details, and register if it looks useful to you.
3. Work with me and my team privately
If you’d like to work directly with me and my team to take your business to the next stratosphere… Just reply to this message and put “Private” in the subject line… Tell me a little about your business and what you’d like to work on together, and I’ll get you all the details!