What's your most profitable cupcake?

Intuit has a commercial about a small business owner wondering whether they should make more cookies and cream cupcakes.

Intuit's Cupcake commercial

In the commercial, a store owner says to a guy behind a  computer, "I've been thinking about doing more cookies and cream cupcakes."
Close-up of cupcake with pink frosting and spr...Image via Wikipedia
The go replies, "Oh well let's see what the data says."
A screen pops up with a chart, that shows growing numbers from left to right, and the computer guy looks around to see others in the computer room eating cookies and cream cupcakes.

The commercial then talks about how intuit small business software takes care of all of your data for you.

I have never used Intuit software, but I have built a number of data warehouse systems. A data warehouse is the foundation of a business intelligence solution that this commercial represents.

For small businesses, I am sure it is possible to look into a single application to get the answers to the implied question of the business owner in this commercial. The implied question, of course, is: What is my best selling cupcake?

But what if that question changed just a little bit? What if the question was: What is my most profitable cupcake?

To determine profitability takes a bit more data than just determining the best selling. If you sell 1000 types of cupcakes, but the profit margin is $.05 per cupcake, then you just made $50.00. If you have another type of cupcake that has a profit margin of $.25 per cupcake then you only have to sell 200 to make the same amount of money. In order to calculate this, you need to take into account the cost of the supplies and manpower required to make the cupcake.

Another question that comes to mind is: What is my second or even third best selling cupcakes? If someone buys the number 1 cupcake, what else do they buy? Can I give an incentive for customers to come in and buy my 2nd best selling cupcake, but once they are in the store upsell them to the other cupcakes available? This topic is really called market basket analysis, which is more than I intend to cover in this article.

Which supplier that provides the raw material for the cupcakes is the best? How do you determine the best supplier? Is it the price of the raw material? How many times has the delivery truck been late? Do you have alternative suppliers just in case there is a problem with your main supplier?  What are the questions that are important to you in making these decisions?

Which employee makes the most cupcakes? Which employee makes the most profitable cupcake? Are they the same person? How do you know?

What happens when this store owner gets more than one store? If she is able to buy an existing store, will the new store have the same application? How will the data be integrated to be able to answer "simple" questions like the question posed above?

For some small business a single application may meet all of your needs. When things start to grow, as most small business owners want them to, having a data management strategy becomes a strategic priority. The rate at which data can grow for small business owners today can cause things to become complicated very quickly. The questions that are asked about your business will change over time, and data may need to come from more than one application to answer the questions of a growing business.

Do you know if you are asking the right questions for your business? Do you know if the data you are relying on to answer those questions is the coming from the correct application? What factors should be influencing your decisions that may not be represented in the "off the shelf" application?

How do you determine which cupcakes to make?

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  1. Very good! I understood and followed the reasoning. I just wish more small business owners would think in this manner. It would be amazing and make being a bookkeeper easier.

    It is amazing to me when a client keeps asking me every month, where did all my money go? Then when I show them, utilizing Intuit QuickBooks, they ignore my answers.

    Tonja Wheeler

  2. Well said. Often, people want to repeat what other people do without thinking if it's a good idea for them.