Think MI is all about finance and figures? Think again. Lucy Haines – Director of the Firebird Partnership – uncovers the nuances of this often-misunderstood business asset.
“MI is about creating pictures through facts, then using those pictures to focus on what’s interesting”
If the phrase “Management Information” (MI) generates off-putting thoughts for you around finance and figures, you’re not alone. Many founders and owners have the same knee-jerk reaction. What they perhaps don’t realise is that MI isn’t really about numbers. Instead it’s about creating pictures through facts, then using those pictures to focus on what’s interesting.
To put it simply, MI is the data you can use to better visualise, and understand, how a business operates. The more information you have, the clearer you can see what’s going on.
This data will always include the basic information of your revenues and costs – and therefore your margins. It can also hone in on detailed figures around sales, conversions, average prices, the margins of individual products, trends and so on.
Altogether, that information creates a factual picture of exactly what is happening now, what happened in the past, and therefore what is likely to happen in the future.
“As companies start to grow, MI becomes increasingly important”
I first encountered MI at the very start of my career – working in the City in investment management. My job as an investment analyst was to look at businesses, meet management teams, and hear their stories on how things had gone, were going, and were likely to go. Every time, MI was an essential piece to complete the overall jigsaw: real data and information that presented the most accurate account.
If you were to look at any FTSE 100 company, you would find it holds huge amounts of MI. In the early days of a business, however, this key management tool tends to be overlooked. Usually, one figurehead – the founder – will know how their business is performing, including details on daily operations; what works and what doesn’t. But this vital mass of information will be stored in their head and nowhere else.
As companies start to grow, extracting and sharing that information becomes increasingly important, not least when a business wants funding, or investors to support their growth ambitions. Founders then need to back up their performance and ambitions with solid information, rather than their word, no matter how thorough and accurate this word may be. They need to tie their story to the facts.
It’s also worth noting that aiming to generate MI that late in the process will cause owners to miss some opportunities. Once a business has reached the point where it is growing a lot, or looking for new opportunities to evolve, it can be very difficult to retrieve the historic information needed to prove the detailed back-story of its achievements so far.
The ideal is to implement MI early on in your business’s journey.
“MI objectively identifies trends, gives focus for strategy, and pinpoints opportunities for growth”
Whereas many owners streamline their attention on sales, and are reluctant to spend on finance when they could be investing in – for example – an extra person in the sales team, those who take the time to establish MI early will be able to put the building blocks in place to protect their growth and success in sales so far. They can use the data to determine what approaches to sales will work well going forward, rather than trying scatter-gun alternatives.
They may also find what they thought to be true of certain aspects of their business to be incorrect, while overlooked strategies may turn out to be hugely successful. A product generating high revenues per product, for instance, may not be doing as well as other lower-priced products due to its higher costs and lower margin.
After leaving the City, I worked within companies in a number of different directorships, and found MI to be the best way of keeping an eye on everything; making sure each piece of the whole was functioning well. Within businesses operating in Europe and worldwide, I found that MI gave an easy-access guide through numbers, showing me what was happening now and most likely to be happening next.
Using MI, I also supported a fledgling business to establish accurate reporting and forecasting. MI had the advantage of giving the business the information it required and also a thorough analysis of its risk as it developed its growth strategy. This ensured that the strategy kept within an acceptable level of risk and therefore that the margins within the business remained at suitable levels, meaning they could ultimately sustain rapid expansion.
Today, in my work for Firebird, I look forward to showing more and more clients how MI can objectively:
Identify trends early
Give focus for strategy and direction
Pinpoint opportunities for sustainable growth
Flag up where potential is being missed
“MI does not need to be an expensive resource”
Many owners are surprised to learn that, as positively impactful as MI can be, it does not need to be an expensive resource. Businesses can tailor MI practices to their specific needs and size. You might make space to review MI for just a couple of hours a week, twice a month; whatever works for you. And once the relevant processes are in place, MI can easily be produced in-house.
As soon as you put the right resources in place, you’ll almost immediately have your core information. Obtaining more detailed MI can then be done quickly. After that wide-view snapshot comes the process of going deeper and deeper; exploring and unpicking the interesting details.
At Firebird we can guide owners on putting bespoke MI in place, validating this, and giving what you have an MOT. It won’t be long until you are seeing the full picture, and have uncovered the value of MI for yourself.
Lucy Haines is a Director of the Firebird Partnership, and has held both FD and MD roles in a number of companies with turnovers of up to £50m, including Compass Group, Vinopolis, and portfolio businesses within TUI Travel. As a consultant, she specialises in helping businesses establish financial reporting and obtain financial insight as they grow, attracting investment. Lucy is an expert for the Finance & MI modules of Firebird’s Foundations for Growth programme.
Learn all about the programme, and get in touch with Firebird, at www.firebirdpartnership.com