Take Control of Your Data to Create Companies That Truly Scale
Numbers may drive finance, but the right tools help businesses take the wheel. That’s true of most businesses in our sector, but especially in private equity. For the past two and half years, I've worked with LongWater Opportunities, an operationally-focused Private Equity (PE) firm based in Dallas, TX and Fargo, ND that targets control buyout equity investments in lower-middle market US-based manufacturing companies. In my time here, I've learned that to truly understand our portfolio companies, we need to look deep into the data. But without the right tools, we’ll never find the insights we need to bring real value to these companies.
Our hands-on approach to data has helped LongWater become even more operationally-focused. We try to create scalable solutions for our portfolio companies. It isn’t simply going in and firefighting; it’s about developing a system where we won’t have to put out that fire the next time. We focus on creating long-term, sustainable companies that are primed to grow.
At its core, better data insights help us make more impactful decisions at our portfolio companies. Without a proper way to analyze information, all we’re doing is guessing. I view data analysis similar to the scientific method: First, we have a hypothesis. Then, we gather insights and make assessments. Once we’ve completed our initial research, we can go out and try to implement our discoveries.
Unfortunately, finding the information to begin with isn’t the simplest of challenges.
The Wrong Access
As we provide data-driven advice, LongWater needed a way to connect directly to systems of our portfolio companies, and then manage and analyze that information. My first attempt to create this tool began with a Microsoft Access For Dummies book. I connected to our SQL server and began extracting data every day with Access as my data repository tool.
Many of the companies whose data I needed to analyze had invested in ERP systems back in the 1990s or early 2000s. Unfortunately, as the technology advanced, they added in software that didn't integrate well—let alone talk with each other. So all of the data was compartmentalized within each company. Extracting was nothing short of impossible. Even though I had my hacked-together system in place, it was a daily two-hour endeavor that took way too much time. LongWater, our portfolio companies, and I all deserved a better solution.
The Search Begins
I began to search for business intelligence (BI) tools that could handle our needs. One company—Numetric—came across my desk in typical finance fashion: I heard about their latest round of funding. I threw them in the mix with 10 other solutions.
When I looked deeper into all the different options, Numetric rose to the top because of a few key factors. First, with Numetric's turnkey solution, our portfolio companies wouldn't need to bring BI or Systems professionals in-house in order to manage the data and reporting. These resources are already included in Numetric's offering. Moreover, Numetric already provides a data storage warehouse system, so we didn't have to engage an outside consultant to manage all of the servers or data warehouses for each of our investments. The tool would be easy—and powerful—enough that we could manage everything ourselves.
Second, Numetric is cloud-based, so we would have access to our data without any lag. The processing all happened on the back-end, which meant the data could be accessed at any given moment, analyzed, and we could quickly see what metrics worked and what metrics didn't. Numetric was clearly the best solution, so I put it to work for our portfolio companies.
Away with Anecdotes
The first thing I realized with Numetric was that the platform had the ability to change our approach to decision making. The tool would allow us to dig deeper into the data than we ever thought possible. We could move a business away from a culture of operating off of anecdotes to one driven by data. People have their own biases, but numbers don’t lie.
The first area we dove into was the shipping departments of our portfolio companies. If you want to ramp up sales, you first need to ensure you’re serving your customers well, so shipping seemed like the logical place to begin.
On-time complete orders were my biggest area of focus. If a customer orders 10 pieces of a product, they want all 10 on the promised delivery date. Delivering them piecemeal often doesn’t work, since it inhibits their ability to do their job. And for our companies, it puts us in a position where we might forget to put that last unit on the truck the next day. We put a stop to shipping partial orders.
Because we finally had a system where I could easily track on-time complete orders, I set that up. In the last month, we’re at 98% on-time completion every day. Our customers love the new shipping practices. Now, they want to do more business with us because we get products to them quickly, on time, and with quality.
The next area I couldn’t wait to dive into was our bookings and billings. Bookings, meaning new orders, and billings means we ship out and invoice. If our billings grow faster than our bookings, then we’ll run out of work to do. And if our bookings outpace our billings, then our backlog should grow, and that should be a good sign unless there's some issue in our manufacturing operation. So if our backlog grows but our shipping performance declines, then something's happening because we’re not able to scale, and we’re probably going to run into issues.
You can’t look at one metric in a vacuum. So by having these different data sources—among many others—within Numetric, we can get the full picture. Now, when I look at one metric, I ask myself: “What’s not included in this metric?” I don’t act on a whim. I can see everything I need to make informed decisions.
An All-Seeing Future
We’ve only been using Numetric for a short time, but the progress we’ve made has been incredible. We’ve begun to shift to start making data-driven decisions. If someone has an assumption, we can back it up—and counter it—with the proper numbers.
My hope is that we have Numetric implemented at all of our portfolio companies within the near future. I also want to put some of the onus on our companies to take control of their own data. Because Numetric allows me to create separate instances for each organization, I can ensure everyone only has access to their data. That’s why it’s such a powerful tool for PE companies.
With Numetric in place, our portfolio companies will be able to take customer feedback, implement it, and then track exactly how they’re performing. They’ll be able to optimize their businesses like never before.
If you want to succeed in business, then you have to constantly change and grow. If you sit still, if you forget the importance of data and metrics, then you won't be able to evolve. In today's rapidly evolving world, Numetric really shows companies that they not only need to evolve, but that they need to accept change. Before, companies would set up their operations, pat themselves on the back, and stay the same for 15 years. Today, if you take the latter approach, then you won't create a sustainable environment.