Standard & Poor companies posted a 6.6% rise in 4th quarter earnings in 2011 but if you excluded one company, Apple, the growth figure shrinks to 2.8%. The reality of the S&P 500 earnings growth is far less impressive.
What could you see better by stripping out the best or the worst?
- Your sales growth last year was 35%. However your best sales person knocked the ball out the park increasing sales by 180%. Take her out and the remaining 4 sales team members grew by 11%!
- Your sales growth last year was 20% but excluding December the growth was 2%.
- Your sales grew by 40% last year but excluding that large solar panel order your sales grew by 5%.
- Product unit sales dropped by 5% but excluding your oldest legacy product, unit sales grew by 15%. Or even worse overall sales grew by 20% but excluding your oldest legacy product, unit sales declined by 10%.
- Overall costs were down last year but excluding your biggest cost center, marketing, costs rose by 8%.
- Take out Facebook from a few VC portfolios and what return are you left with?
- Accounts receivable days are averaging 55 but excluding that large prompt paying customer x, AR days are averaging 80. You have a problem.
As you review your business results in a climate of deep uncertainty, ensure you see the true patterns underlying your metrics. The Best and Worst can hide the reality of the general performance in any area, so dive deep into the analysis and get your arms around your business and understand the real stories driving you forward.
Write to Ian.Smith@portfoliopartnership.com & please leave a comment.