Explore What’s Behind the Numbers

Deutsche Lufthansa has reported that their AG’s Frankfurt airline facility transported 110,000,000 animals during 2011. That’s actually more than the 106,000,000 people carried by all Lufthansa units.
     Does this mean the airline is primarily an animal freight company? Well, not really. You see, of the 110,000,000 animals, 80,000,000 were tropical fish. That still leaves dogs, cats, and race horses. Still, less than about 2% of Lufthansa’s total cargo revenue comes from transporting the creatures, and cargo revenue is but a part of the total. Lufthansa can safely say they are primarily a passenger airline.
      But can you safely say you understand what’s truly behind all the numbers you look at as key performance indicators (KPIs) for your business? Consider profit margin, for instance. An analysis by global management consulting firm Bain & Company notes how although Amazon’s five-year operating margin is only 4%, compared to an average of 6% for discount and department stores, the Amazon return on invested capital is more than double the average for bricks-and-mortar (B&M) retailers.
     To know what’s behind the numbers and set the right benchmarks, you’ll want to separate online from B&M figures.
     When analyzing financial indicators, slice and dice the numbers in different ways depending on your objective. For example, consider the size of your typical retail sale.
     Suppose it’s been a slow morning with only ten transactions. Two of those were for $100 and eight of them were for $5. The easiest way to calculate the average is to add up the total value and divide by the number of transactions. The total is $240, so the mean average for the ten transactions is $240 divided by ten, or $24. But $24 certainly isn’t the typical transaction. It’s $5, with two exceptions of $100 transactions.
     Instead of using only the mean, also look at the mode, the median, and the range. For the mode, group transaction amounts, such as everything from $10 to $19.99 into one bucket, everything from $20 to $29.99 into another bucket, and so on. Then see which bucket has the most entries. In my example, the mode is $0-$5.
     To get the median, line up the amounts from highest to lowest and then find the point where half the amounts are above it and half the amounts are below it.
     To get the range, look at the lowest and highest values.

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Look At Mean, Median, Mode, and Range
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