Boost your
business’s brainpower through business intelligence
Making uninformed decisions can cost your company dearly
in mistakes and lost profits. As your business’s operations
grow in size and complexity and competition intensifies,
developing a business intelligence competency becomes
increasingly important. The ability to make effective
decisions quickly is essential to keeping a step ahead of
competitors.
Through business intelligence, your company can learn how to
better address customer needs and preferences so you can do
just that. Thus, acquiring business intelligence is
essential to position your company for competitive advantage
and continued profitable growth.
Intelligence in a business context
“Intelligence” is defined as the ability to learn, to reason
and to apply acquired knowledge to successfully adapt to and
improve one’s situation. In a business context, intelligence
essentially entails the process of gathering, analyzing and
applying business data to enhance a company’s strategic
decision-making capabilities.
The goal, therefore, is to help your company gain a
sustainable competitive advantage by identifying its
strengths, weaknesses, opportunities and threats relative to
market trends and factors. You can then use these insights
to help your business successfully adapt to and improve its
situation in the market.
In other words, business intelligence is about becoming a
learning organization.
Intelligence-gathering methods
Before you begin the intelligence-gathering process, you
must define what you want to know. For example, your goal
may be to collect data to analyze the profitability of a new
product. Or you may wish to analyze the cost effectiveness
of a new marketing program aimed at raising awareness of
your company’s brand.
Then, start the intelligence-gathering process by looking at
your company’s internal sources for data pertaining to the
business’s strengths and weaknesses. This includes financial
and operational trend data, such as product inquiries and
sales or returns, maintained in company systems, along with
other insights from personnel.
You’ll need to look outside your organization, though, to
gain more information about your customers’ needs and
preferences, your competitors, industry and technology
trends, market and economic factors, and other data that
will also help you assess your opportunities and threats.
For example, you may discover that a competitor has
introduced a new product using an advanced technology,
posing a threat to your market share.
Gathering the necessary data will require some legwork.
Expect to invest considerable time combing through a variety
of sources. Fortunately, however, you won’t have to resort
to industrial espionage to gather the data. You’ll find a
bounty of information from publicly available resources,
such as:
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Industry analyst studies and reports,
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Industry association data,
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Customer and market surveys and focus groups,
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Commercial databases,
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Competitor Web sites,
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Internet searches, and
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SEC
reports.
Most of
your intelligence-gathering can be done on the Internet. For
instance, SEC reports on public companies may be obtained
electronically on the EDGAR Online site. Commercial
databases, such as DialogWeb, Dow Jones, Dun & Bradstreet,
and LexisNexis, also may be accessed over the Internet.
Analyzing and applying intelligence
The critical analysis step entails translating raw data
into meaningful and actionable intelligence. So, if an
investment to produce a new product is supported by data
that shows strong sales and revenue growth, you can make an
educated decision to continue offering the product.
Fortunately, there are business intelligence software tools
to facilitate this process.
It’s important to understand, however, that there’s more to
the process than just interpreting tangible,
financial-oriented results or metrics.
To effectively assess your business’s position in the market
and guide the development of strategies, you’ll also need to
establish a set of Key Performance Indicators (KPIs) to
quantify the not-so-tangible, nonfinancial metrics specific
to your business for gauging performance against goals. For
example, KPIs used for measuring progress toward a goal of
improving product delivery might include the percent of
on-time deliveries, accuracy rate of orders filled and
number of returns.
Once your KPIs are defined, use the same set each year so
you can easily compare current and historical trends.
Step confidently
Trying to predict your competitors’ next moves and determine
the best course for your business can be agonizing. With
business intelligence behind your company’s decisions, you
can step forward with greater confidence.
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Don’t let the well run dry
Cost-saving strategies
The inclination of human nature is that the more money you
make, the more you want to spend. It’s also common to
develop a false sense of security and become lax about
saving. When tough economic times hit, however, those who
don’t save can suffer a blow to disposable income.
To avoid that situation, apply these practical tips for
reducing major drains of cash:
Credit cards. Make paying off high-cost
monthly credit card expenses promptly a top priority to
minimize interest charges and avoid late fees. Shop for
better payment terms and rates as well as cash-back or other
bonus programs. Also review monthly statements carefully to
catch potentially costly billing errors and fraud.
Insurance. Use the competition among insurers
in your market to your advantage by requesting comparative
quotes and demanding better rates. Also look for insurers
that offer reduced rates if you purchase multiple types of
insurance from them. And ask about discounts available to
low-risk customers. For example, you may be eligible for
applicable discounts if you have installed safety features
for your home, have a good driving record or are a
physically fit nonsmoker.
Mortgage. Periodically evaluate the
opportunity to refinance your mortgage at a better rate.
Also consider rounding up your monthly mortgage payments;
paying off your loan a little sooner may save you
considerable interest over the long term.
Around the house. Compare rates from competing
telecommunication providers, such as phone, DSL or cable.
Just by asking, you can generally negotiate better rates.
And consider whether you may benefit from installing new,
more energy-efficient appliances and a programmable
thermostat.
If you think you’re living beyond your means in terms of the
cost of your family’s home and cars, compare the costs
relative to your overall income and monthly expenses as well
as the cost of inflation. As a rule of thumb, your home’s
mortgage cost shouldn’t exceed more than two-and-one-half
times your family’s annual income, and your monthly
home-related expenses shouldn’t exceed more than roughly a
third of income. As for your family’s car expenses, they
shouldn’t exceed more than 10% of your income.
In the interest of your family’s long-term wealth
preservation and growth, you can never afford to stop
exercising good saving habits.
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Tax Tips
How to succeed in business
A recent Tax Court opinion is good news for students getting
a master’s degree in business administration (MBA). In a
reversal of its previous position, the court permitted a
taxpayer to deduct the cost of obtaining an MBA as a
business expense.
As a general rule, educational expenses aren’t deductible if
they lead to a degree that prepares the taxpayer for a new
trade or business or satisfies a minimum educational
requirement for his or her job.
In this case, the Tax Court found the MBA helped the
taxpayer advance in his company, but it wasn’t a condition
of employment and it didn’t prepare him for a new trade or
business. Rather, the court explained, his studies “improved
pre-existing skills that (the) petitioner used before
enrolling in the MBA program.” •
Don’t overlook partial home-sale exclusion
The tax code allows you to exclude from income up to
$250,000 ($500,000 for joint filers) in gain on the sale or
exchange of your principal residence. To qualify, you must
have owned and used the property as a principal residence
for at least two of the previous five years.
But even if you don’t satisfy the two-year-use requirement,
you may be eligible for a partial exclusion if you’re forced
to sell due to a change in place of employment or health, or
due to unforeseen circumstances such as:
- Death,
- Divorce,
- Multiple births from the same pregnancy,
- Termination of employment, if it qualifies you for
unemployment compensation or renders you unable to pay
your living and housing costs,
- A natural or man-made disaster or an act of war or
terrorism, and
- Involuntary conversion of the residence — for
example, through condemnation or eminent domain.
If you qualify, you can claim a partial exclusion based
on the amount of time you owned or used the property as your
principal residence compared to the two-year-use
requirement. For example, if you and your spouse bought a
home in January 2005 and sold it in January 2006 because of
a job relocation, you would have met 50% of the requirement
and could exclude up to $250,000 in gain (50% of $500,000).
•
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It pays to learn about the education deduction and
credits
If you paid higher education expenses in 2005 for yourself,
your spouse or a dependent, you may qualify for the Hope
credit, the Lifetime Learning credit or an above-the-line
deduction on your 2005 federal tax return, due April 17. But
you can’t claim more than one of these tax breaks for the
same student — regardless of how much you spent on education
— so you’ll need to figure out which one will provide the
greatest tax benefit.
What are the qualifications?
The deduction applies to qualified expenses paid during 2005
in connection with enrollment at an eligible institution
during 2005 or for an academic term beginning in 2005 or in
the first three months of 2006. The Hope and Lifetime
Learning credits apply to qualified expenses paid during
2005 in connection with an academic period beginning in 2005
or the first three months of 2006.
The deduction is available for qualified tuition and fees
(not including room, board and books), up to $4,000. “Above
the line” means you can deduct the expenses in determining
your adjusted gross income (AGI) even if you don’t itemize.
(Keep in mind, eligible expenses may be reduced.)
The Hope credit is available for 100% of the first $1,000 in
qualified tuition and related fees (but not room, board and
books) for an eligible student and 50% of the next $1,000,
for a maximum credit of $1,500. To qualify, the expenses
must be for the first two years of a degree or certificate
program and the student must be enrolled at least half time.
The Lifetime Learning credit is available for 20% of
qualified tuition and fees up to $10,000, for a maximum
credit of $2,000 for any number of students. The credit
isn’t limited to the first two years of college and the
students don’t have to be enrolled in a degree or
certificate program. So the credit would be available for
courses designed to improve job skills.
What are the income limits?
If you’re single, the Hope and Lifetime Learning credits are
phased out beginning at $43,000 of modified AGI (MAGI) and
eliminated when your MAGI tops $53,000. For married couples
filing joint returns, the phaseout range is $87,000 to
$107,000. The deduction is reduced to $2,000 if your MAGI
exceeds $65,000 ($130,000
for joint filers) and is eliminated if your MAGI exceeds
$80,000 ($160,000 for joint filers).
If your income disqualifies you from claiming the credits or
the deduction and your children pay their own education
expenses, they may be able to take advantage of these tax
breaks — as long as you don’t claim them as dependents. In
many cases, the tax benefits to children outweigh the value
of the dependency exemption for parents.
Take the deduction or a credit?
So, which tax break should you claim? The income limits may
already have made the decision for you. But if you’re
eligible for all, the Lifetime Learning credit is probably
your best bet because it can save you as much as $2,000 in
federal income taxes, compared to the $1,500 maximum Hope
credit savings and the maximum deduction, which would
probably save you only $1,000 in taxes.
Crunching the numbers
There are exceptions, so have your tax advisor crunch the
numbers to see which tax break would be best for you. After
all, there may be other factors, such as two or more
children attending college or qualifying for only a partial
credit, influencing your situation.
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