Developing a trend analysis system

By monitoring your business's performance over an extended period of time, you can establish useful information on trends. You can then use this data to refine your business decisions and strategies.

Stages of trend analysis

Set up an effective trend analysis system by:

  • preparing for analysis - determine what performance data or results you are going to examine and compare
  • applying a threshold - define the level at which a variation is worth noting. For example, a 10% increase or decrease in sales over a period of time should be investigated for causes. Use your discretion as you know your business best
  • conducting cause analysis - investigate why the variation occurred so you can use this information for future planning and decision making.

Use a management information system

To make sure your analysis is meaningful, put a record keeping system and process in place to record accurate information. Communicate a set of procedures that both you and your staff understand.

Make sure the business data is collected, recorded, reported and evaluated quickly and efficiently by:

  • keeping accurate business records - including financial information, staff hours, stock (in or out) and marketing campaigns
  • analysing trends at critical decision points - for example, potential cash flow issues, staffing, peak sales periods and the success of marketing campaigns
  • collecting information on a regular basis - with the frequency determined by the type of data you are collecting
  • maintaining data integrity - by agreeing on definitions of what is included or excluded from a particular count; for example, including sales of new season stock and not old season stock for the duration of a marketing campaign
  • storing information in a useable format - for example, using spreadsheets or accounting software
  • encouraging team participation - by promoting what you are doing to the people who collect and record your data.

Learn more about record keeping for business.

Benchmarking your business

Benchmarking is a way of measuring your performance against similar-sized businesses in your industry. You can benchmark almost all the areas of your business that are important to your success.

Limitations of trend analysis

Keep in mind there are situations when trend analysis is of limited use. Examples include:

  • if conditions change dramatically, historical data may not apply
  • comparing data on an annual basis may not always accurately represent business performance, since other factors may influence results
  • data collected over an extended period of time does not allow adjustments for inflation.

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