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Monday, March 7, 2016
Too Small for Business Intelligence?
When we first formed Bimotics, we saw a large gap between the variety of business intelligence options available to large enterprise and the slim pickings available to small and medium sized businesses (SMBs). We knew we could build a service that addressed the data analysis needs of smaller companies. As we discussed our idea with the community, many asked whether automated business analytical reports was really needed by small businesses. They were most likely envisioning “mom and pop” operations with time-proven processes that yielded predictable profit margins, and they would be justified for asking that question in that context. We, however, like to define these businesses as “micro-businesses”, not SMBs.
Is business intelligence technology overkill for small businesses? I think not. Bimotics defines our target small and medium sized business segment as organizations with at least 20 employees and revenues of at least one million dollars. You see, teams of employees spanning multiple departments inevitably generate vast amounts of distinct data, making the need to organize and analyze this data imperative. Here are a few points on how business intelligence can bring basic value to any small business.
Real-time Gross Margin
Understanding gross marginis essential to small businesses. Sales that rise disproportionately to gross margin can actually set a business back- requiring even more sales to make up for lost ground. Not only does gross margin show the relationship between costs and sales, but it indicates the quality of sales being made. Entrepreneurs and sales teams alike can over commit to making sales when they are hyper-focused on revenue goals and commissions. The risk of this over commitment is truly real. Keeping an eye on this key analytic as sales come in rather than at the end of a quarter can boost the discipline needed to keep gross margin high. Studying gross margin side by side with the spending profiles of your customers will help indicate which relationships your account managers should prioritize and develop, and which ones should be placed on the back burner.
Cash Flow Projections
For start-ups in particular, understanding the length of your cash runway is critical. Burning through cash reserves before product sales take hold will keep you grounded. Business analytics is a great way to help you monitor cash flow, as sales numbers, costs of goods sold, overhead expenses and goals are all major components of an accurate cash flow forecast. You probably track these statistics individually, but have you seen them side by side in one place? Have you interacted with them and seen how they look overlaid against each other? Visualizations, more commonly known as charts, and a business dashboards not only help keep track of your cash flow fluctuations but also help track the number of months of runway left and which cost factors are affecting your cash flow. Visualizations can illustrate the relationship between multiple data points so that you can get a real feel for your business. Keeping track of monthly cash flow is sufficient for making yearly projections, and visualization software helps you stay on top of your costs day in and day out.
As long as business intelligence and analytics software bring insight and cover essential analytics like gross margin and cash flow, small businesses can only benefit from the technology. It is not overkill at all. Smart BI for small business works to perpetuate good business practices and helps you achieve optimum insight and efficiency.