The following Insights post is contributed by Ray Hale – VP of Finance at Nasuni Corporation and expert JPK Group Presenter.
Analytics are everywhere. From building a business to building a baseball team, data is being used to make better decisions, predict results and drive success. Not long ago, companies faced a massive challenge to track and mine data. But today the challenge has shifted from collecting the data, to appropriate application of data.
When I am confronted with a situation that requires deeper analysis, the first thing I ask myself is: “what are the metrics that matter, and why do they matter?” I then determine if my analysis will fit three criteria:
- Alignment: Is the analysis truly relevant to the question I am trying to answer? Is the outcome or metric merely an interesting piece of information, or is it really a key indicator of the health of the business?
- Straightforward: Will the results be easily explained and properly understood by the end user?
- Actionable: Can action be taken as a result of the analysis?
Good metrics can keep a company focused. With all the moving parts within an organization, focusing on the key drivers of success isn’t always easy. Managers change, challenges evolve, and judgements can be clouded by biases and opinions. However numbers, when used correctly, do not lie. As the saying goes: “In God we trust, all others bring data.” Metrics can help maintain consistency in evaluation over time, depict trends, and remove the prejudices of individuals.
As an analyst, one of my favorite things to do is to forecast metrics out a few years. This practice can provide early insight into when and how important metrics are going to change, and perhaps more importantly, why they may change. Is expanding to a different customer profile going to drag down ARPU? Is territory expansion going to increase cost of sales beyond what is deemed acceptable? Anticipating these outcomes before decisions are finalized can save the company from going down the wrong path or set expectations of what will change and why. The latter can be particularly helpful if outside investors are involved.
Whether public or private, at some point most companies will need investors. While most (if not all) will expect certain standard financial reports and accounting statements, additional “non-GAAP” metrics can be an extremely valuable tool to position a company with investors for many of the same reasons as they do with internal stakeholders. Clear, simple metrics and succinct analysis can give investors confidence while painting a clear picture of where the company has been and where it can go.
The final component of successful analysis is the analyst’s ability to accurately and confidently explain the results to management. The audience should be expected to challenge outcomes, especially if they do not like the results. If the analysis is completed accurately, properly explained, aligned and actionable it will be defensible, and lay a solid foundation for strong business decisions which can guide a business through extreme growth, turbulent times, and all the points in between.
With over twenty years of experience across multiple industries, Ray’s career has often diverged from traditional finance and accounting roles to positions in analytics, operations and business insights. His passion lies in moving beyond traditional financial metrics to empower analytics within an organization and better position a company for success. Ray is currently VP of Finance at Nasuni Corp., a fast growing, venture-backed enterprise storage company that provides globally-distributed organizations with a simple, unified software-based storage solution. Prior to joining Nasuni, Ray spent nearly five years at Demandware, where he built a global FP&A Team which supported the company through a very successful IPO and three acquisitions, while experiencing revenue growth from approximately $20 million annually to over $200 million. Ray holds a Bachelor of Science degree in Finance from Seton Hall University and a MBA from Providence College.