Gaining Insights from Customer Segmentation

Grow For It!

Hello and welcome to GROW FOR IT! I’m Jim and this is a business podcast designed for small business owners, managers and other professionals. My goal is to work in the space between your ears – on your mindset – to help you focus on the actions and activities that help you to move closer toward your vision.

In today’s episode, we’re going to discuss a couple ways to use your financial reports, breaking down your customer segments and I’ll even give you a few tips on maximizing your profit margin.

The simple truth is Business Planning can be as high-level or as micro-specific as you want it to be. The company size, the organizational focus, even your specific role can benefit from a Business Plan. However, none of these really determine how complex your planning has to be. The fact is, if you’ll invest more time upfront, you’ll have a better chance of achieving your goals and moving closer to your vision.

We can’t get time back, so momentum, focus and velocity are typically to your advantage – SO LET’s PREPARE!

The best way to begin is to do a DEEP DIVE on your financials for the previous year. I’m not talking about just looking at your Gross Revenue and Net Profit. You’ve got to go deeper.

I recommend you break the numbers down by client segment, service and vendors. YOU HAVE TO KNOW YOUR METRICS!

Let me caution you here. People like to get very enamored with margin percentages. “Hey I’m making 38% on this product!” The reality is you don’t pay your bills with percentages. You pay with dollars. It’s always about the margin dollars!

As you stack-rank your client segments, you can quickly see which deliver the most profit margin to your bottom line. Simply looking at gross sales by segment can be very misleading. Topline revenue is only part of your business formula. I won’t tell you it’s unimportant, but it’s definitely less important that net margin, and ultimately net profit.

You want to fully understand who is driving your margin! The next step is to align business activities to focus on those client segments, products and services.

What you’re really looking for are your sweet spots. Which activities deliver the most margin dollars, for the least amount of effort? How can you do more?

Equally as important, which activities deliver the least amount of margin dollars? How can you do less of them?

Consider this: Did you leave money on the table last year? Are there discounts or rebates you simply didn’t take advantage of? Make a note to start asking each vendor about various programs, discounts and rebates. If there’s free money on the table, you need to figure a way to get your share of it!