Business Trend Analysis

You can become a more proactive business owner by examining your company’s historic and recent internal performance and the external business factors that affect you. Identifying trends helps you spot strengths and weaknesses so you can improve your performance and address potential problems and opportunities.

One way to conduct a trend analysis is to review several years’ worth of performance. This requires you to gather data and sort it by year, quarter or month going back several years, depending on how mature your company is. A young company will most likely see larger fluctuations in performance during the past three years, for example, compared to a company that has been around for many years and has saturated the marketplace. Use a spreadsheet or other program to enter your data so you can compare sales, expenses, revenues, employee turnover or production output by month, quarter, territory, department or other identifier you want to examine. This will help you spot patterns, such as more production delays during seasonal sales periods or decreased cash flow and borrowing during an off-season.

Taking a look at what’s been happening at your company for the past year can help you anticipate changes that might be coming, or it might just show a temporary blip. For example, if sale revenues have remained stable during the past six months but the number of new customers has declined during that time, this could be because you’ve saturated the market place. If your expenses are rising, it could be caused by a temporary increase in fuel or materials prices, or it could be a sign that your labor costs have increased and will remain at this level for the long term. Your performance during the six months or year can be the most accurate indicator of the future, so take time to look at raw numbers and consider potential reasons for changes in your recent performance.

Examine recent trends that are happening within your business, which include factors you can control. Look at trends by department, such as the performance of your sales, human resources, production, marketing and information technology functions. Trends you can examine include sales by territory, representative, product and distribution channel. They can include overhead and production expenses. Other internal trends can occur in employee costs and turnover, debt, profit margins and gross profits. Analyzing sales is one example of using a trend analysis to help you improve performance. Knowing that you have a trend for a rush or slow period during a specific time of year lets you plan production, inventory and labor and capital needs in advance. You might make inventory in advance during a slow period to address an expected rush and keep more cash on hand to pay bills during a slow period, avoiding the need to use credit.

In addition to keeping an eye on your internal performance, you should stay abreast of what’s happening in the larger marketplace. Trade associations, government agencies and business magazines are good sources of information for business trends. Track trends that involve your competition, such as whether the number of competitors is growing or shrinking, where competitors are locating, how they are selling and who their customers are. Keep track of new technology and how it’s affecting your customers. For example, as consumers spend more time on smartphones instead of computers, you might need to create apps or modify your website so it works on smartphones to address your customers’ changing shopping and purchasing habits.