Analytics to a Fault

I am an analytics  guy. I did analytics for Bank of America and other companies. I can throw together a mean spreadsheet. I am going to share some of the analytics from my business. And then I am going to contradict myself so be prepared for that.

I always want more details than what people are sharing so I am going to overshare here. Hopefully it will be insightful or at least interesting.

When I bought this store I didn’t know anything. I looked at sales and then I asked about expenses. The guy I was buying it from said, “Yeah I don’t know. When I get a bill I pay it” That should have been a red flag. So let me share some information that I keep track of now.




This is last month’s numbers. Not bad, but not killing it either.  Let’s look at the costs for those sales.

cost of sales




Now for the most simple minded we could say that we made $14,000 in March. Of course that is not very useful since it doesn’t include all of the other expenses like rent. But let’s look at the gross profits of sales.

gross profit



This is interesting. Mailbox services is by the most profitable product because there is not any product cost. (There is other costs like the time it takes to sort the mail) In fact if you add them up the top three products make up 2/3 of all profit. What business am I in? The top three do not have any cost associated with the products so they have a distinct profit advantage.

Now I am going to combine all the shipping carriers and call them just shipping and see what difference that makes.

gross profit

Ok so shipping makes up a large portion of sales and profits.

The Sales-Other are other costs of sales that do not tie into a product, but are a cost of selling. The two main categories are Credit Card charges and Franchise Fees.

But let’s look at other expenses



Now if you add up all of the expenses including cost of sales I actually lost $603. Inside the Non-operating expenses there is a category of distribution. That is money I took out and spent on personal items. But still $900 for the number of hours I worked makes it about $3.25 an hour. That is below minimum wage.





Here is where I am going to now reverse myself. Analytics is interesting, however it is useless if it does not influence a business decision. It is best to define that business decision before the numbers are analyzed. So if I was trying to decide whether to buy this business or not, these numbers might be helpful. I could decide that I need to make at least $10 per hour for it to be worth my time. And in this case the answer would be not to buy.

I am very capable of skewing data to fit into what I want to be the truth. I have to be careful of that. This is more art than math, but I need to see the facts for what they are. Here are some other ways to look at the data



Comparing last month to this month so far (a week to go) things are looking better.




This compares this month to last year. Things are looking flat or worse.


But I will re-iterate: What is the business decision that needs to be made? I don’t know what that is right now. So all of the data is worthless. No need to drill down, analyze, summarize or evaluate. Figure out what is the decision that needs to be made.

I am about to advertise in the yellow pages. I have to pick a category. Notary makes sense since it is a high profit part of the business. What about shredding? I only made $400 in March. Here is where the art is. Does that mean there is more opportunity in shredding? Or does it mean that I want more notary since I make 8 times more than shredding. I don’t know what the right answer is.

Sometimes looking at the numbers gives me comfort that we are headed in the right direction. We are up 7% this year compared to last year same time period. But what is the use of numbers if they do not cause us to do something different. Even if we do something that impacts the numbers tremendously. Let’s say that we decided to implement a program where we gave a coupon to every customer. And let’s say that it resulted in greater sales. Well if we were going to do that anyway, then why look at the numbers at all. So what is the use of numbers?

I was at a large e-commerce company and we were looking to implement an accounting system. They were $100 million dollar company and yet they didn’t even have Quickbooks. They paid their bills when they came in (not to unlike the bozo who owned this store before me) without questioning whether the bills were right. The owner pressed us. “Why do I need a better accounting system? I pay my taxes. I don’t need to pay them better.” He had a point. Now if he was looking for better financing that “better” accounting system might be useful. However I have gone to the bank for financing and they have not asked for audited or certified financials. I gave them my schedule C (taxes) and they gave me a line of credit based on that. Funny thing is that I could have been lying. (I wasn’t) I gave them the schedule C before I had filed them. I could have filed something completely different. Now they did not give me as much as I wanted, but that is for another post.

So in conclusion I like numbers. They give me comfort (or distress if they are bad). In order to really use analytics there has to be a business decision dependent on the numbers. That is not easy. Hopefully I can come up with a scenario where analytics will be critical.


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