Money is an interesting thing when it comes to small businesses. It is often hidden from you, like a long lost Easter egg. A common place for the Easter Bunny to hide money from you is deep in your financial statements, in areas known as business verticals. Business verticals is a strange sounding term. Simply put, business verticals are the service or product lines offered by your business. If your company offers multiple verticals, very valuable information may be hiding in your financial statements, waiting to be found.
Finding these “Easter eggs” requires digging into the financials on a deeper level than you are likely accustomed to. If you are already performing a thorough monthly analysis of your consolidated financial statements, CONGRATULATIONS! You are already well ahead of many, many entrepreneurs. The data on that next level, however is potentially more valuable than the data you are reviewing at the consolidated level.
The business verticals offered, produced, and sold by your company are each going to have differing revenues and costs. This, of course, means each business vertical will have a differing contribution margin to your company, which in turn means each will have a varied impact on your bottom line.
A thorough analysis (Easter egg hunt) of business verticals will likely provide very important information, which could be absolutely invaluable in managing your company. A few examples are the following:
- For each vertical, where is the cash going?
- Is revenue by vertical reasonable compared to expenses?
- What is inefficient and should be investigated?
- Should elimination of a product or service line be considered? (Is it possible that a “hunt for Easter eggs” in your financials will find that a business line is actually costing you money?)
I hope this has been beneficial in considering areas of your business where greater success is possible. Money can be like the Easter egg just waiting to be found. And even more importantly, it’s your money and you’ve earned it.