Better decisions, better business

“Trajectory” is not a common business term. It’s usually associated with missiles, footballs and career paths. But it can be a very insightful way to visualize your business.

Most business owners know that you need to “take aim” if you want to hit a target. Even so, most business owners don’t aim their business focus with any real precision and as a result they only have a fuzzy notion about corrective actions needed to hit a specific goal.

The concept of taking aim is very simple, but difficult to implement and manage over time.

A closer look at the concept of trajectory can make a big difference. There are 2 kinds of trajectories to consider: one is the planned course or direction you would like your business to take and the other is the course that your business is actually taking – with or without a plan.  Rarely are these two trajectories the same. And even more rare is the effort to measure the difference between the two.

If you could see the trajectory of your business, you might be very surprised. In my 20+ years of business consulting, most business owners are surprised when they get a look at the graphical analysis that shows exactly where their business is headed.  To be clear, I’m not talking about a graph that shows monthly revenue or profitability. I’m talking about their trajectory of revenue or profitability. This is line that shows the average change that is occurring over time. In mathematical terms, it is the linear regression line that is created from 24 months or 6 months of revenue or profitability numbers – or any other business performance metric. The trajectory is a straight line and it is pointing in a very specific direction and has a very specific rate of increase or decrease (slope).

It can be a real surprise to realize that your growing revenue trajectory is actually masking an expense trajectory that is growing at an even faster rate – a collision in the making. This picture can be seen early with trend analysis (trajectory analysis), but most companies rely on numerical reports, and will not see a clear picture of the patterns. As a result corrective action only gets taken when the situation becomes critical and the remedies are drastic – and most expensive.

A financial dashboard can resolve this problem. Rather than spending hours cranking spreadsheets or paying hundreds of dollars per month to have an accountant do the analysis, you can use a tool such as the Corelytics™ Financial Dashboard to see the picture “on demand” and know exactly where your business is headed.

There is much more to be said about business performance trajectories. Each part of your business has a trajectory including overheads, COGS, payroll, investment, staff utilization, cost per labor hour, and the list goes on. And benchmarks are an important way to understand the general trajectories in the market. Knowing where these business elements are headed is the first step toward getting your business in sync internally and with the outside world and ultimately delivering the maximum reward for your efforts.