Gross Profit Margin (GPM)<\/a> will have a significant impact on how organizations negotiate with vendors and how their sales professionals interact with customers.<\/p>Understanding desired GPM will assist sales professionals to leverage their price-setting latitude and shape their customer discussion. The ability to pitch their product or service as having the potential to increase their client’s GPM shifts the dynamic away from simply buying and selling. They are enabling their clients to make well-informed, business-savvy judgments.<\/p>
Only 13% of consumers believe salespeople can demonstrate a grasp of their business difficulties and solutions. Forrester Research<\/p>
When Should People Exercise Their Business Acumen Skills?<\/h2> Honing business acumen skills is beneficial at all stages of a career. Although the depth of knowledge varies depending on seniority and familiarity with the business, smarter business decisions benefit the organization at any level. The added benefit is that business acumen training is now more accessible than ever thanks to virtual services and asynchronous training.<\/p>
#1. Onboarding New Employees<\/h3> New hires can contribute more quickly to an organization if they are educated early on about how the business produces money, how they fit into the big picture of the business, and how they can add to the organization’s financial success. Understanding these issues not only orients new hires to the business but also connects them to the organization’s mission.<\/p>Onboarding programs have been demonstrated to boost employee retention by 25% and improve employee performance by up to 11%. <\/p>SHARP<\/em><\/strong><\/cite><\/blockquote><\/figure>#2. Developing High-Potential Employees (HiPOs) into Leaders<\/h3> Many high-potential individuals in an organization are promoted without improving their present skill set or thinking strategically. Some of them even start managing P&Ls without even knowing what a P&L is!<\/p>Sixty-nine percent of the more than 300 executives and supervisors polled failed to identify the definition of “free cash flow.” <\/p>Business Week Magazine<\/strong><\/em><\/cite><\/blockquote><\/figure> <\/p>
Nothing will better equip a HiPO for their trip than an awareness of how their decisions affect bottom-line performance. With strong business acumen as a foundation, everything else on their quest to becoming a future leaders will fall into place.<\/p>
#3. Finance for Non-Financial Managers<\/h3> A nonfinancial manager will benefit from understanding the dynamics of how their business works, regardless of the area he or she works in. And it makes complete sense. A manager cannot help lead a business if they do not grasp how money flows across their organization, what their gross margins are, and the overall consequence of their department’s decisions.<\/p>
Teaching these managers the main criteria used to determine whether or not an organization is making sound business decisions will result in more business-savvy leaders.<\/p>
Why Should a Company Create a Business-Savvy Workforce?<\/h2> Employees, managers, and leaders must be able to accurately assess the competitive landscape and integrate day-to-day decisions and actions with key financial, functional, and business performance indicators and goals for organizations today, regardless of how successful they are.<\/p>
Although most corporate goals will be centered on profitability, expansion, and sustainability, cultivating a culture of strong business acumen will have far-reaching, organizational-wide implications.<\/p>
#1. Culture<\/h3> Instilling a culture of ownership, accountability, and entrepreneurial thinking enables individuals to connect their business actions, the impact of those decisions, and the enterprise’s performance.<\/p>
Individuals on teams with strong business acumen skills will begin to represent values such as accountability, integrity, fiscal responsibility, entrepreneurship, and others (through their decisions and behaviors). This will foster an environment and culture of ownership, which will eventually lead to a culture in which individuals accept responsibility and ownership for positively influencing business performance.<\/p>
#2. Profitability<\/h3> Strong business acumen skills foster a data-driven decision-making atmosphere. The ability to convey the story behind the data leads to employees at all levels of an organization taking action and making decisions that affect the bottom line, whether through cost management, process improvement, waste elimination, or doing more with less.<\/p>
Profit: <\/strong>An absolute number established by the amount of income or revenue received more than a company’s costs or expenses. It is calculated as total revenue minus total expenses and appears on a company’s income statement.<\/li><\/ul>Profitability: <\/strong>Profitability is a metric used to estimate the breadth of a company’s profit with its size; it is a gauge of efficiency \u2013 and, ultimately, its success or failure.<\/li><\/ul>Giving employees an in-depth understanding of the financial indicators that their firm uses to assess performance will provide them with the knowledge they need to create better efficiency and boost profitability across their organization.<\/p>
#3. Growth<\/h3> Managing a corporation’s day-to-day decisions and guiding a business with a big-picture grasp of leading and lagging indicators, working capital management, and creating returns on investments can pave the path for long-term, organic growth.<\/p>
#4. Recruiting Talent<\/h3> Teams are better positioned to make excellent hiring decisions when they understand the financial impact of attrition and the costs of poor hires. A successful corporation that promotes a culture of strong business acumen is also a company that people want to work for.<\/p>
#5. Marketability<\/h3> Being a financially aware firm makes you a company that clients want to work with, in addition to being a company that people want to work for.<\/p>
#6. Project Management<\/h3> Ensuring that individuals understand how scope creep or key stakeholder influence might affect the possible outcome of a project helps project team members succeed. Even enormous organizations can be brought to their knees by poor project management.<\/p>The average project cost overrun was 27%, while one in every six projects had a cost overrun of 200 percent – and a schedule overrun of nearly 70%.<\/p>Harvard Business Review (HBR)<\/em><\/strong><\/cite><\/blockquote><\/figure>#7. Competitive Advantage in the Market<\/h3> Sales teams with strong business acumen can better position the value of their products and services to generate effective customer solutions by aligning the value of their products and services with customer pain areas. Individuals who have an ownership mindset accept responsibility for contributing to the business in a fiscally prudent manner. Employees with business acumen can build a competitive edge both internally and externally by increasing their top line and streamlining their cost structure to boost profitability. <\/p>
How to Develop a Strong Business Acumen<\/h2> Now that we’ve looked at some of the skills that are indicative of high business acumen, let’s look at some particular techniques to help you develop them.<\/p>
#1. Recognize the Business Model<\/h3> A thorough understanding of your company’s business model is essential for building strong business acumen. This goes beyond a simple understanding of how the firm produces money and must go into many parts of the business such as the company’s supplier chain and business life cycle.<\/p>
A dentist’s business model, for example, is based on providing dentistry services to patients. However, to develop business acumen in the dental industry, you must go into specifics such as how the insurance procedure works.<\/p>
Understanding the importance of talent acquisition and the types of skills that enable a person to flourish in their profession is another component of the business model.<\/p>
This is a type of HR business acumen that you use to ensure that team member recruited into the organization have the skills that will help them succeed. Some HR software will analyze resumes to identify applicants with the necessary skills and assist with staff planning.<\/p>
A business’s marketing component is also an important part of the business model that should be studied. Understanding the company’s marketing objectives, as well as essential marketing concepts such as positioning strategy, customer segmentation, and the four marketing principles will help you improve your marketing knowledge.<\/p>
The more you can go into understanding the business elements that influence your company’s potential to generate money, the more it will help you with all aspects of growing your business acumen, such as comprehending the business ramifications of your decisions.<\/p>
Suggestions for Comprehending the Business Model:<\/h4> It’s difficult to tell if someone has a thorough understanding of a company’s business plan. Here are some pointers to get you started.<\/p>
Learn new things: <\/h5> Make an effort to learn everything there is to know about the business. This entails learning about topics to which you may not have had much exposure, such as the elements that contribute to the manufacturing costs of supplying products and services. You don’t have to know every minor detail, but you should have a general idea and be able to delve deeper into specific areas that are critical to how the business produces income and manages expenditures.<\/p>
Understand the strategies: <\/h5> It’s also critical to grasp the company’s present business goals. What are the company’s expansion plans? How will its products and services evolve? Why is the business pursuing some revenue sources but not others? Understanding the strategies and the aim of each contributes to a complete picture of your company’s business model.<\/p>
#2. Understand the Financials<\/h3> Financial measurements are used in every business. To develop business acumen, you must comprehend the important figures and financial processes that determine your company’s economic health.<\/p>
This is because these data points assist you in focusing on what is important and serve as a means of measuring the success of your decisions.<\/p>
Some of these measures, such as net income and customer lifetime value, are shared by all businesses. Others may be specific to your business strategy.<\/p>
When I worked at an advertising agency, for example, one crucial data item was traffic acquisition cost (TAC), which reflected the amount of money spent to drive consumer online traffic to a client’s website.<\/p>
Others may be important just to a particular department. Sales analytics, for example, is a collection of metrics relevant to the sales team, such as average deal size. You may grasp the ramifications for your business by knowing these KPIs.<\/p>
Tips for mastering the financials include:<\/h4> It can be difficult to learn your company’s financials if you don’t already have a background in finance. Here are some ideas to help you learn this information.<\/p>
Keep track of key statistics: <\/h5> Determine the most critical financial KPIs for your business and track them over time. This provides you with quantifiable data to make informed judgments as well as a tool to measure the outcome to learn from the experience. One strategy is to go into the company’s business intelligence to acquire insight into the types of data and related analysis that your organization is interested in.<\/p>
Find assistance: <\/h5> If you don’t grasp the significance of metrics used by your organization, you can learn about typical business financials on a website like Fool.com, or for company-specific metrics, ask coworkers who are familiar with those data points. Finding a mentor within the organization is another excellent technique to improve your understanding of the company’s finances.<\/p>
#3. Pursue Education<\/h3> Education is important in building business acumen. The reality is that you can’t always develop the necessary business acumen skills on the job, and if you’re an entrepreneur, there’s a larger organization to learn from.<\/p>
You must search out information on your own. Signing up for a business class about your sector or trade, as well as reading business books like John Doerr’s “Measure What Matters,” are frequent approaches to obtaining that expertise.<\/p>
The type of study you seek will be determined by your level of business acumen. If you’re just starting, it’s a good idea to check into classes or books that provide general business management advice.<\/p>
If you’re over that point, you can concentrate on schooling linked to your specialized industry, or you can target certain skills that need to be improved.<\/p>
Tips for Pursuing an Education:<\/h4> Here are some ideas to get you started on the path of obtaining business acumen through education.<\/p>
Paying attention to business news, particularly events that occur in your field, is an easy approach to gaining information crucial to business acumen. This helps you to stay up to date on events that may affect your business and learn from how other organizations deal with similar difficulties as yours. To stay informed, you can also subscribe to industry newsletters or visit industry websites.<\/p>
Follow business leaders: <\/h5> Following renowned business leaders in your sector is another approach to expanding your business knowledge. Find their blogs or follow them on social media to learn about their thoughts and thought processes.<\/p>
#4. Pay Attention to Your Customers<\/h3> The final thing on this list is the most crucial. Find out what motivates your clients to buy from your business. You want to understand their problems so you can analyze how your company’s services can help.<\/p>
The more you know about your customers, the more you will be able to discover the best way for your organization to produce attractive products and services. This is vital for increasing business acumen since you are acquiring insight into the most important stakeholder, and it helps with all other business acumen skills, such as focusing on the products that are most important to your clients.<\/p>
For example, Steve Jobs constantly concentrated on the consumer experience for each of Apple’s technological innovations. Jobs was able to develop legendary products such as the Mac, iPod, and iPhone by understanding what constitutes a fantastic solution for his customers.<\/p>
Suggestions for Listening to Customers:<\/h4> When it comes to gathering customer insights, there are two approaches. I recommend that you do both.<\/p>
Qualitative Research<\/h5> This is speaking directly with your customers to learn their thoughts on your business’s services. There are a few issues with this method. To obtain a significant sample size, you must speak with a large number of clients. Customers also submit feedback that is pertinent to their current circumstances and whatever is on their minds. Because these two factors can bias the outcomes of your research, you should combine this method with quantitative research.<\/p>
Quantitative Research <\/h5> This entails gathering information about your clients. Using CRM software<\/a> is one of the greatest methods to accomplish this. Data provides two advantages that compensate for the drawbacks of qualitative research. It gives you a larger client sample set and is unbiased. If a client tells you they don’t like a certain product, but your data reveals it’s a best-seller, you know the customer you spoke with isn’t indicative of the majority, and you need to speak with others.<\/p>