Building a successful company is all about management. Fuzzy management leads to no traction. Precision management leads to predictable growth, ability to respond to changing market conditions and, in the end, a company that has greater value in the market. This is a fact of life that has very few exceptions.

With that in mind, we have just expanded the lines of business (LOBS) supported in the Corelytics™ Financial Dashboard from 3 to 5. For many companies just getting 2 LOBs is a big deal. But for others, 3 has been a limitation. The 5 LOBs are:

1.  Services – for recurring monthly service offerings (a.k.a., managed services)
2.  Time & Material – on-demand hourly work (a.k.a., break-fix)
3. Projects – projects, small or large, usually with a defined fee or budget
4. Product – sale of hardware or software and resale of services provided by a third party
5. Other – the great catch-all; often includes software development, hosting, etc.

The new LOBs are Time & Material and Projects. Some companies already using Corelytics will continue with T&M and Projects included in the Services LOB, but when they are ready for greater precision, the structure is now in Corelytics to split out the services into 3 separate lines of business.

We are advising business owners to take a gradual approach to implementing LOB analysis. For many companies, just looking at their data as a single “Combined” LOB is just fine. But as companies begin to expand their offerings, a multiple LOB perspective becomes critical. The reason is simple: you need to know how each segment of your business is contributing to the bottom line – profitability. Without this understanding, it is common to have one part of the business doing well and another part dragging it down. Overall things may look okay, but without the detail view on what is happening you can’t make informed decisions and you can’t  communicate needed details to your team. And worst of all, you will never be able to see when you are getting it right or wrong because it will be invisible.

Here are the stages we recommend for taking advantage of multiple LOB management.

1. Start with getting your revenues split by LOB. Ideally you should have your accounting system set up with separate accounts for each category of revenue. But if these are combined on your chart of accounts, you can split them in Corelytics.
2. Split COGS (cost of goods sold) across lines of business. This should include the cost to you for products and services that you sell. It also includes splitting payroll for staff that is directly involved in selling and delivering products and services that you bill for. This is a bit more difficult, but all companies need to get to the point where they understand their costs so they can determine their gross margin by line of business. If you don’t split your payroll in your accounting system, using the Adjustment function in Corelytics is a perfect solution.
3. For those who really want to hold your management team accountable for LOB performance, split overheads by LOB to get a full picture of profitability by LOB. Here again, most companies are not going to want to have overhead accounts set up for each LOB in their accounting system and can use Corelytics to make adjusting entries in Corelytics to see the entire picture. Call us if you would like further explanation or make a comment on this blog and we will get back to you

When you master multiple LOBs, you are then able to scale your business. Without this level of detail, you may be damaging your business as you grow and may never know what hit you.

More enhancements are coming your way. Stay tuned…