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Moving from What to Why

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Every company, regardless of size or technical acumen, has an opportunity to increase the sophistication with which it makes use of its own data.

By starting with existing management reports, companies can start down the path of moving from simple reporting to the generation of actionable, data-driven insights.

Veröffentlicht in: Daten & Analysen
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Moving from What to Why

  1. 1. Moving from “What” to “Why” January 2020
  2. 2. Abraxas Group LLC 2Abraxas Group LLC 2
  3. 3. Overview • Successful companies understand that data-driven insights are the one universal value creation opportunity. • By investing constantly in data reporting and analysis, high-performing companies develop crucial insight into themselves and their markets and then seek to constantly push out the frontier of that insight. Abraxas Group LLC 3Abraxas Group LLC 3
  4. 4. The Importance of Context Abraxas Group LLC 4Abraxas Group LLC 4 Absolute measures of performance at most companies are meaningless. Context is necessary to better understand whether performance was superior to, in line with, or below expectations. Period Q1 Bud/Act Act Revenue $ 25,500 Cost of Goods Sold 15,989 Gross Profit 9,512 Operating Expenses 7,650 Operating Profit 1,862 Non-Operating Expenses 2,540 Net Income (679) EBITDA Add-backs Interest 1,560 Taxes - Depreciation 920 Amortization 200 Other - EBITDA 2,002 Profit Measures Gross Margin 37.3% Operating Margin 7.3% Net Margin -2.7% EBITDA Margin 7.8% What Happened With Context Period Q1 Q1 Variance Bud/Act Act Bud $ % Revenue $ 25,500 $ 27,000 $ (1,500) -5.6% Cost of Goods Sold 15,989 17,685 (1,697) -9.6% Gross Profit 9,512 9,315 197 2.1% Operating Expenses 7,650 7,830 (180) -2.3% Operating Profit 1,862 1,485 376 25.4% Non-Operating Expenses 2,540 2,760 (220) -8.0% Net Income (679) (1,275) 596 -46.8% EBITDA Add-backs Interest 1,560 1,560 - 0.0% Taxes - - - N/A Depreciation 920 920 - 0.0% Amortization 200 200 - 0.0% Other - - - N/A EBITDA 2,002 1,405 596 42.5% Profit Measures Gross Margin 37.3% 34.5% 2.8% 8.1% Operating Margin 7.3% 5.5% 1.8% 32.7% Net Margin -2.7% -4.7% 2.1% -43.7% EBITDA Margin 7.8% 5.2% 2.6% 50.8%
  5. 5. The Power of “Why” Abraxas Group LLC 5Abraxas Group LLC 5 Comparative analysis alone is not sufficient. High performing companies look to provide additional context that will further aide in understanding the drivers of performance. Additional Context Period Q1 Q1 Variance Classification Notes Bud/Act Act Bud $ % Revenue $ 25,500 $ 27,000 $ (1,500) -5.6% Timing Major customer delayed $2.5MM purchase to Q2 Cost of Goods Sold 15,989 17,685 (1,697) -9.6% Operations Achieved better pricing with new supplier Gross Profit 9,512 9,315 197 2.1% Operating Expenses 7,650 7,830 (180) -2.3% Timing Temporary staffing lower due to delayed customer order Operating Profit 1,862 1,485 376 25.4% Non-Operating Expenses 2,540 2,760 (220) -8.0% Operations Fee expense lower than anticipated Net Income (679) (1,275) 596 -46.8% EBITDA Add-backs Interest 1,560 1,560 - 0.0% Taxes - - - N/A Depreciation 920 920 - 0.0% Amortization 200 200 - 0.0% Other - - - N/A EBITDA 2,002 1,405 596 42.5% Profit Measures Gross Margin 37.3% 34.5% 2.8% 8.1% Operating Margin 7.3% 5.5% 1.8% 32.7% Net Margin -2.7% -4.7% 2.1% -43.7% EBITDA Margin 7.8% 5.2% 2.6% 50.8%
  6. 6. Revenue Adjusted for timing, revenue seems to be tracking to budget. Gross Margin Operating Expenses Improvement due to better pricing with a new supplier is higher than forecast. Why was this opportunity missed or under-represented in the budget? Has the market changed? Out-performance was temporary and directly tied to the delayed customer order. Insights Abraxas Group LLC 6Abraxas Group LLC 6 The more robust report format has yielded superior insight of both the company’s own performance as well as offering tantalizing hints about the broader market. Additional follow-up in these areas would likely yield further insight.
  7. 7. David Johnson David Johnson (@TurnaroundDavid) is Founder and Managing Partner of Abraxas Group, a boutique advisory firm focused on providing transformational leadership to middle market companies in transition. Over the course of his career, David has served as financial advisor and interim executive to dozens of middle market companies. David is also a recognized thought leader on the topics of business transformation, change management, interim leadership, performance improvement, restructuring, turnaround and value creation. He can be contacted at: david@abraxasgp.com. Abraxas Group LLC 7Abraxas Group LLC 7

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