Leveraging ITR Insights
April 2, 2021
Ready to start leveraging your company data to become a data-driven decision-maker? ITR can help - catch our newest TrendsTalk episode with ITR Senior Business Advisor Alex Chausovsky to learn more.
Transcript by Rev
Hello, everyone. Alex Chausovsky here, senior business advisor at ITR Economics. I wanted to welcome you to another edition of TrendsTalk with ITR. Today I wanted to talk to you about how you can leverage the insights that ITR brings about the economy, about different vertical markets, and about how you can be looking at your own company data to be a data-driven decision maker. I was having a conversation with a client just a few days ago, and he wanted to know if he can use the methodology that we deploy to predict what his monthly sales are going to be over the next month or two month or three month period. I had to explain to him that that's not really the way that business cycle analysis works.
Now, looking at your company performance from a rate-of-change basis is certainly extremely beneficial, but it doesn't provide that very near-term indication, especially considering the fact that your monthly sales tend to be quite volatile and sometimes get influenced by what we call exogenous factors, things that are outside of the macroeconomic domain. Meaning things like supply chain disruptions, pulling in orders, delaying shipments, and things that you manipulate essentially, or your customers manipulate, as a part of the day-to-day operations of your business.
So the way that you can bring that rate-of-change analysis and business cycle analysis to bear is in a couple of different ways. The first thing that you can do is look at business cycle phase identification. So if you look at your performance, if you plot the rates-of-change over time, you can identify when you transition from one phase of the business cycle to another. For example, many companies that correlate to the economy right now are in the process of shifting from phase D recession to phase A recovery. That means that their annualized rates-of-change, their 12/12 rate-of-change, is going from being negative and declining to turning in a more positive direction. It's still negative, but it is rising over time.
With that comes the understanding that the decisions and the actions that business leaders need to make in response to that change have to be implemented at this particular point in time. You have to be going from being conservative and pessimistic to more aggressive in terms of the investments that you make. You need to be thinking about the implication of supply chain impact, and certainly capacity limitations, as you look out over the next year to two years, and hopefully a period of time where you'll be able to get back to pre-pandemic levels of revenue. So, identifying where you are in the business cycle of your own company at any given point in time is really beneficial and you can do that by looking at your own growth rates.
Another way that you can leverage our methodology is for benchmarking purposes. So you can take your moving totals or your rates-of-change and you can plot them relative to the data for your underlying markets, to see if you're outperforming or underperforming, leading to a realization potentially that you are gaining or losing market share. That's extremely beneficial from trying to gauge, "How am I performing relative to my overall market?"
Another great way to use the data of your own business is for capital deployment purposes. So, really, the key here is understanding that there's a specific time in the business cycle that is more beneficial from an investment perspective. That investment can be looking at your business internally, so looking at new product development or capital investments like machinery or equipment considerations, or external, looking at acquisitions. Typically speaking, you want to be investing near or at the low point of your business cycle, because that tends to be the best way and the best time to invest. In essence, it allows you to use other people's pessimism to your advantage, and brings about this whole adage of buy low, sell high mentality. So certainly, look at leveraging business cycle analysis and rates-of-change in terms of bringing about how to deploy your capital most effectively.
And then resource allocation is the last point that I'll mention. Because as you identify, both in your own business and in your markets, the low-hanging fruit, so to speak, you can tell your sales and marketing divisions to focus on those areas of opportunity and to not waste time or stay away from the areas that are going to be harder to achieve the kind of ROI that you're trying to get by pulling the trigger on investments, or simply devoting time, energy, money, and investment in terms of pursuing specific markets.
So if you're able to do all of that, we offer several other ways for you to really benefit and be the data-driven decision maker that you need to be. In particular, I wanted to mention that we have an on-demand portal now at ITR Economics that has all of the latest information that you would need to be able to be that data-driven decision maker. We also have developed an ITR app. So imagine, you're sitting there in a meeting, you're talking about a particular market, you can pull out your smartphone, look up your trends report subscription, and say, "Well, we know these are the prospects of market growth over the next three years." Think about the impact that that can contribute to the decisions that you make as a management team or as a business owner.
So I hope that this has been helpful to you in terms of understanding some of the more practical applicability of the economic data and the analysis that ITR Economics provides every single day. If you have specific questions about how to leverage some of these things for your own business, we're here for you. Please reach out to us. Our goal is to make the world of business better, faster, stronger, and we certainly want to help you do the same for your business. Thank you so much for your time today. I hope you found that useful onward and upward into 2021 and '22. Take care.