Recently, billionaire entrepreneur and investor Mark Cuban was asked what advice he has for small business owners who are experiencing a downturn in the wake of COVID-19. In addition to focusing on ways to connect with future customers, he is also advising small business owners to take this time to clean up the parts of their business that they’ve been neglecting. By taking these actions now, businesses can emerge from this uncertain time stronger and more ready for growth than ever.
Clean up your Data
Every company has dirty data, at least to some degree. But how serious is it? Consider this: The Data Warehousing Institute (TDWI) estimates that dirty data costs companies over $600 BILLION each year!
What is dirty data? Dirty Data is a database record that contains errors. These errors include spelling discrepancies, duplicate records, incomplete or inaccurate data, and data that is inconsistent across records.
The information contained in the database is used to analyze a business. If the data is not clean and contains inaccuracies or duplications, the analysis will be flawed. If you are not getting correct insights from your data, the decisions you make for your business will be flawed. This will greatly affect your bottom line! In fact, studies have shown that dirty data costs companies an average of 12% of their revenue each year!
Optimize Your Product Assortment
To get the most productivity from your product assortment, it is necessary to have your product hierarchy defined and attributes assigned to each of the items. By doing this, you will be able to analyze your business and make strategic product decisions that optimize results.
Attributes are the important selling features of products. Once you have determined the attributes that are important to your business and assigned them to each of your products, you can use your sales and inventory data to determine what product attributes are driving your business. Likewise, you can determine what product attributes are liabilities to your business.
Create a Plan for your Inventory
Inventory is often the largest asset of a company. It can also be the greatest expense, if not managed properly. Carrying costs often account for 25% of the inventory value. Excess inventory reduces cash flow, preventing you from buying profitable inventory. It is important to make the inventory as productive as possible – here are some ways:
Classify your products by priority level. Different products will have differing profitability and seasonality, just as customers or sales channels may be of differing priorities. Sales usually follow the 80/20 Rule, where the top 20% of the products produce 80% of the sales. By categorizing products in this way, a company may realize that they are over-assorted and may move to liquidate excess inventory immediately, thus saving themselves the inventory carrying costs associated with that inventory.
Forecast the demand for your products to determine future inventory needs, factoring in sales curves, lead times, velocity, and criticality. This is a continual process, as sales trends can change. Because of the increasing complexity of the marketplace, it is important to have tools, such as a forecasting system, that can gather the data from the multiple sources and provide visibility to the inventory.
Take action to liquidate slow selling or unprofitable items in a timelymanner. As a product’s sales slow, it is not hitting its inventory turn goals, and the product becomes obsolete. The faster that slow-selling products are removed from inventory, the faster they can be replaced by more profitable, better-selling items.
Create a financial roadmap for your business that provides direction for achieving KPIs. Plan and track Sales, Inventory, and Gross Margin metrics by meaningful categories of business, so that strategic decisions can be made to achieve company objectives though Key Performance Indicators.
Emerge Stronger and Healthier
Business owners can use this downtime to clean up the parts of their business that have been nagging them in the past. Taking a hard look at their data, inventory and processes, will only help them in the future when the world returns to “normal”.
For more information about cleaning and organizing your data, forecasting and sales analysis, contact the industry experts at SAFIO Solutions! We’d be happy to help your business!