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Two Minute Tips

Look at business success the right ways

February 17, 2021

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Credit: Pixabay user nattanan23

You have a business selling used bottle caps at 5 cents a piece to collectors (because there’s a customer born every minute). Last year the volume was 10 and you collected 50 cents. This year—zowie!—as 17 people (some return customers, good for you) bought 20 caps. Your take: $1.00.

Congratulations, you saw a year-over-year sales increase of 100%.

That, in a nutshell, is the point. Numbers are slippery things and companies regularly use slippery expressions of data to make a bigger impression than they deserve. As a business reporter, you have to chase down what’s actually going on. And if the full data isn’t available, or can be taken multiple ways, it’s your job to put it into context.

I mentioned the annual percentage sales increase because you see this all the time with private companies that are trying to promote themselves. A doubling of sales can mean something significant if the volume is enough or laughable if the initial number was tiny. You might interpret it one way if there were hefty profits and another if year-over-year losses increased significantly.

Context is everything. In public filings, a company might decided to use GAAP versus non-GAAP accounting, which means standard interpretations and presentations versus non-standard metrics the company points to. Not that non-GAAP is necessarily bad. However, it does offer the potential for companies to try and lead a discussion in a way that ignores fundamental problems. Again, context is everything.

Companies, particularly those that are privately held, often don’t want to reveal contextual information for competitive considerations. Corporate executives might not want to clue competitors in to how well they are actually performing, the financial resources available, or strategic directions they’re taking.

None of that is necessarily a problem, but you always should push for more information. For example, if they’re talking about their history in an industry, find out how long they’ve been around (which should be available in a public filing in whatever state they incorporated). If you can’t get revenue numbers, try for the number of employees, as that gives at least some sense of scope.

If a business won’t provide the data you need, consider dropping them. You’re the one with the reputation on the line. Or if you really need them specifically for the story, then provide the appropriate caveats, like, “So-and-so Publication could not verify initial revenue numbers, so the percentage growth may not be as profound as the size would suggest.” /p>

The more you push, the greater the chance of getting something of value. The more you explain to the audience, the better they can understand what is happening, and what might not be.


  • Erik Sherman

    Erik is an independent journalist and author who primarily covers business, economics, finance, technology, politics, and legal/regulatory, while elegantly expressing the complex and often incorporating data analysis.

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