Ask Dr. Jana | What Story Does Your Data Tell?

June 19, 2020

Q.

Dear Dr. Jana,

Before I came to your Clinic you asked me to provide a lot of company information and data, and every year you ask me for updates. So – how about sending some of that data back my way to guide me on what to do or not do in order to recover from this pandemic?

George

A.

Hi George,

You are right – we did ask for a lot of data before you came to the Assessment Clinic. We were giving your company a health check and looking at its “vital signs” – just like the doctor does a health check on you (e.g., blood pressure, temperature, blood count, etc.), then uses that data as your baseline the next time you go in. [See Afterword in the article below.]

Our Longitudinal Survey is your company’s “yearly health check”. Each August we ask you to provide specific data from your most recent financial year – and then we compare that to the data you gave us last year and the years before that and measure the growth of your company. We study that data and derive insights about growth, pitfalls, and aggregate data about small and medium companies who have gone through our programs. You can use that data to measure yourself against other companies who’ve been through our programs – and even use your own data as a baseline against which to measure the growth of your own company, year-to-year.

We also use the data to report back to the states or corporations that have underwritten and/or subsidised your participation in our Clinics and Modules. We are accountable to them for delivering the programs they funded and reporting how many companies grew and how many jobs were created by companies who went through our programs. We create graphics, write articles about how to manage different aspects of growth, and provide insights. In my article below I share seven insights based on the data from you and nearly 1,000 other CEOs who have been through our programs.

George – I hope the insights in the article will demonstrate how valuable your data is, and that you will use these insights to benchmark your growth and your company’s progress. FY20 has been a tough year, but many of the companies that have applied what they learned in our programs and have “turned the corner.” I hope these insights will help you do the same. Keep asking those questions and let us know what we can do to help you recover from the pandemic.

Dr. Jana

 

Every August the Australian Centre for Business Growth asks each CEO who has been to one of our Clinics to provide revenue, profit, export revenue, and numbers of employees as of 30 June (end of fiscal year). We compare that to the data provided the prior year and every year since the CEO came to the Clinic and measure the growth of each company and each cohort. We ask how the CEO has funded growth, and changes the CEO has made, as leader. We use that data to derive insights about survival, rebound, pitfalls, leadership, and what’s required to grow. We “publish” an aggregate set of statistics around small and medium companies who have gone through our programs, use the statistics to estimate export, revenue, and jobs growth for states, and individual companies use them to benchmark their companies.

Here are seven key insights about growth, based on the data that nearly 1,000 CEOs have provided. As you read each insight, think about how it applies to you and your company.

1. Innovative CEOs and management teams are THE MOST important factor in survival and growth.

It’s not the product, but the choice of which product, sold to which customers, through which channels, at which price that determines the death, survival, or growth of a company. The CEO and management team need to be nimble, flexible, make good decisions – and move quickly. Clarity around mission, values and a three-year vision has enabled a lot of CEOs and teams to make changes rapidly, to capitalise on opportunities, and stop selling or doing things that no longer work.

2. CEOs who rated themselves as innovators spent more money on databases and software.

Better access to financial information and customer information enables you to make better decisions; project management systems enable you to keep people aligned and projects on track. These kinds of systems provide data that enables you to make better decisions, more quickly, and get a jump on your competition.

3. Growth companies have learned the proper order of marketing:

  1. What are our company’s capabilities? What do our customers need and want, and what do they really value? What do our competitors’ offer, and why do customers buy from them?
  2. How big is our addressable market? Our serviceable market?
  3. Are we offering the right product/service, in the right place, through the right channels, at a price that makes sense, and with promotions that reach our prospective customers?

Don’t skip the hard questions and think that “promotion” (e.g., website, social media, ads) is really “marketing”. Our research shows that company failure is often related to inadequate market research and poor execution – the market was simply not big enough or the company couldn’t figure out how to differentiate its offering from its competitors’ and died from lack of revenue.

4. In FY19, 265 companies who had attended our programs responded to our Longitudinal Survey. They reported an aggregate:

  • 12% growth in REVENUE
  • 13% growth in PROFITS
  • 10% growth in JOBS
  • 23% growth in EXPORT REVENUE

This is data that every small and medium company can use as a benchmark against which to measure their company’s growth in these four areas.

5. Last year CEOs reported that they had taken the following actions:

  • 96% had continued the planning process that they learned in the program and were working to keep all parts of the company aligned;
  • 92% said they were better delegators;
  • 90% said they were better communicators, had been working on values and culture, and were managing their executive team more effectively;
  • 78% had CHANGED the people or changed the PEOPLE.

If you want to grow your company, these are the things you, the CEO, need to learn to do. Again – use this as a benchmark to compare your CEO performance to the performance of the CEOs who responded to our longitudinal survey.

6. In order to finance their company’s growth, 86% of these companies were reinvesting profits and 42% were using bank debt.

Think about how you have funded your company’s growth this past year. Does your company have sufficient reserves and a strong balance sheet, or are you taking money out of the company in the form of dividends? Is your accountant focused on tax minimisation or helping you position your company for growth? How often are you reassessing your company’s financial needs? Have you talked with your banker about lines of credit or loans for growth?

7. Companies in our programs have had a compound annual jobs growth rate of 13.8% – and 7% grew jobs at a rate of 50%!

As we have observed company growth over the years, we have seen a common pattern. The first year after coming to our programs, the CEOs begins to implement what they learned about how to ramp revenues. After proving that they can increase revenue and profits, they feel confident enough to begin hiring new people and expanding their workforce. In short, more revenue signals that customers want to buy what your company is offering. Increasing profit signals that you have figured out how to produce or provide it efficiently and effectively. Once CEOs understand how to increase revenue and profit, they are willing to take the risk of adding more people. So, the fact that companies are adding jobs at a compound annual growth rate of almost 14% means that most of them have figured out what to offer to which customers, at what price, through which channels – in other words, more revenue and more profitability translates to more jobs.

In August we will again ask CEOs to provide revenue, profit, jobs, and export income for the year just completed – and we want our CEOs not to be afraid to share the good, the bad and the ugly! As the song goes, “…we’re gonna love you all the way – through the good or lean years, and for all those in between years, come what may”!

Afterword

Here are some of the data elements we review during your health check – and each year thereafter:

  • Financial Statements: Your Profit and Loss (P&L) and Balance Sheet statements tell us how money flows in and out of the company, whether revenues covered expenses, whether you made a profit, and the strength of your balance sheet (more assets than liabilities).
  • Data on numbers of employees, your company’s revenue (including exports) and profit two years ago, last year, and what you project for this year. Each year, during the longitudinal survey, we ask you to update these four data elements and replace last year’s “projections” with actuals, because we are tracking your growth in employees, profit, revenue and exports, over time. In effect, we’re measuring how tall you grew last year and how tall you’ve grown since we started measuring!
  • Data on how you rated your company on 12 different types of innovation, with an overall innovation score. Some of our research is now showing that companies that survive and grow are making specific kinds of investments in particular types of innovation that is driving growth.
  • Data on how much you spent on marketing, and how good you think your company is in business development, marketing, and sales. Again, companies that are investing in marketing and brand building appear to be growing faster than those who don’t.
  • Data on how you financed growth this past year, e. g., reinvested profits, loans, grants, outside investment. We ask you to update this data every year so that we can understand how you and other CEOs are financing growth – and whether there are any funding gaps.

Ask Dr. Jana your questions on company survival and growth. Submit your questions via email to Dr. Jana and she’ll answer in her ‘Ask Dr. Jana’ column.

Learn more about the programs delivered by the Australian Centre for Business Growth.