As an entrepreneur, you understand that profitability is vital. However, the underpinning of it is business revenue growth.
Revenue growth requires that you have in-depth knowledge of your company's performance metrics. These three things: 1. Profitability; 2. Business revenue growth; and 3) Performance are all interlinked.
This article provides you the information to understand how, like a pyramid, one is foundational to the other. Moreover, learn how your personal bias could harm your operation. And, discover the solution to ensure that bias does not interfere whatsoever in the performance of your company.
Problem: During a time of massive uncertainty, business leaders focused on earning a profit, which is good. However, what many have put to the side is how business revenue growth underpins it. Add to that, making decisions with bias and missed opportunities has resulted in a lack of growth.
Opportunity: Entrepreneurs and business leaders have a chance to dominate competitors by understanding profitability, revenue growth, and performance. Moreover, it's essential to comprehend why it is crucial to eliminate personal bias in business.
Resolution: By knowing the fundamentals between profitability and performance, you gain insight to propel your business forward. Once you make the connection, and you implement several performance-enhancing measures (without bias), business revenue growth, and profitability follow.
Definitions for Business Revenue Growth
To know the fundamentals of revenue growth fully, it's essential to know a few definitions. Profit is "an absolute number determined by the amount of income or revenue above and beyond the costs or expenses a company incurs." However, profitability is "the metric used to determine the scope of a company's profit in relation to the size of the business." So, you see, there is a distinction. Moreover, revenue growth is the "increase (or decrease) in a company's sales from one period to the next." In short, the operative word there is "sales." And finally, performance is business intelligence. With the use of business performance management tools, such as key performance indicators (KPIs), you understand your results.
Alignment of Your Performance to Propel Your Company Forward
In short, by understanding your company's performance, you have an opportunity to maximize your revenue growth (e.g., sales). Once you have a hold of your sales performance (projected and in real-time), you then know your profitability in relative terms. What your company is making and should make is comparable to the size of your business. As you see, this is a build of one element on top of the other.
Therefore, to ensure your business's success, it's vital to identify what's up, what's down, and what's sideways. And, there's only one singular way to do it. In short, you have to know everything from a data perspective.
Following your gut, past experience, or intuition does not cut it in the current climate. It's crucial to stay relentlessly focused on the results—not professional preferences or biases.
Confirmation Bias Clouds Business Judgement
We live in a digital world. Because of it, we are entirely in the midst of a digital transformation that changes every aspect of society.
The way we work, communicate, and live is in a state of massive evolution.
Sure, we're at the advent of the digital age, and it would be fascinating to time travel even 100 years into the future. Nevertheless, we also have to keep in mind that human nature does not change. So, while we have all of this emerging technology, humans remain human.
And, that means they have the same emotions, ideas, and biases that have helped and hindered ancient peoples. For instance, there is still hate, fear, love, greed, and judgment, etc. As a business leader, this is not good, and it could seriously and adversely impact your company's revenue growth.
There is a term called confirmation bias, and you need to understand it as a leader and manager. Warren Buffet said, "What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact." What he alludes to is confirmation bias.
It's just human nature to absorb and accept information that only reinforces what we think.
Business leaders have to recognize that they see everything through their individual filters and lens. That's all based on every experience each of us has as people. So, for me, I know the world as only Ben Stroup can see the world, and that is how I interpret it and sometimes make decisions. And, you view and understand the world as only you could do it.
How Personal Bias Impacts Business Revenue Growth and Profitability
Confirmation bias is not just an obstacle to effective leadership—it’s like driving your car forward and only looking through the rearview mirror.
For example, let's say you have had a top performer on your sales team for years. But, at some point, something happens. This salesperson isn't closing the deals she used to close. What's more, newer (and greener) members of the team surpass her performance. Deep down, you understand that there's something wrong. Nevertheless, you continue to give this person slack.
Let's say you spoke to her, and she expressed to you that she has a lot of personal challenges, such as divorce. You want to give her the space to recover because you personally like her, and you and she have been aligned in how you approach her work. Your business revenue growth is not where you expected it last quarter, because you were expecting 1000% percent from her.
This is only one example of how your confirmation bias and personal preference in a situation could hamper your profits.
Here's another example. Let's say you have been a senior executive for more than 20 years. Your past performance is impressive. Because of it, you think you remain on top of your game. However, the reality is that in the last year, your profit projections have dropped as has your revenue growth. It's still impressive by other standards, but it's not where your performance has existed in the past. Why? It's that darn confirmation bias again. You rely heavily on your personal preferences, insights, and experiences. And, as Buffet said, the information you filter is such that it helps support what you have already in your mind as a foregone conclusion.
Eliminate Any Bias With Concrete Data
Now that you understand how personal bias can impact revenue growth and profitability, how can you become a data evangelist? The short answer is simple.
Bring data information into every aspect of your business.
Hopefully, you have an eye on your income statement, balance sheet, and cash flow. Make sure that's all automated. Within your business, take a look at your team. You want everyone at minimum to achieve their key performance indicators. There are plenty of great tools on the market, such as Tableau. Also, consider talent optimization platforms.
Ensure that you understand your customer in every way and every place possible. For instance, you want to do a lot of social listening. Like Amazon, you want to have a relentless focus on your customers and leads. But, you have to do it only with data—no guessing games about what you think they might want or need. Consider getting digital tools for customer feedback. And finally, understand what your competitors are doing. Believe it or not, yes, you could also do that with data. For instance, you could use LinkedIn Sales Navigator or Zoom.info.
Your profitability and business revenue growth depend on you being aware of your personal cognitive bias, mainly confirmation bias.
Take those biases out of the equation and maximize performance with data and appropriate digital tools.
Ben Stroup is Chief Growth Architect and President at Velocity Strategy Solutions where he helps leaders design, develop, and deploy smarter business growth strategies. Ben is a futurist, disruptor, and data champion. He leads a team that takes a structured learning approach to business challenges, which allows them to assist leaders in bridging the gap between ideas, innovation, and revenue—taking ideas from mind to market.
Velocity Strategy Solutions is an on-demand, next-generation business strategy and management consulting firm which provides clients with a relentless focus on data, execution, and results that positively impact the bottom line. Velocity delivers integrated people and revenue strategies combined with a disciplined approach to growth architecture that elevates the capacity of leaders, teams, and organizations to succeed and win more.