“Be Data Driven” - that’s what my professor in business school would drum in to us. He would say “because data changes behavior!” He was right of course, he’d had a long career consulting with many businesses and had seen the proof.
So now years on I have seen it with many companies and small businesses. The problem is there’s a certain amount of ignorance out there with business owners around their own data. Much of the data collected by businesses hardly gets examined and is often overlooked.
The problem is twofold. Firstly, many tools collect data in the background with the user unaware that they have access to it, and secondly, owners rarely know what to do with the data even if they know how to collect and access it. This is where business coaches with an expertise in data analysis can help businesses owners find and understand the data.
Find out why these common misconceptions about working with a business coach aren't true.
So why does data matter?
Let’s consider for example you are trying to convince someone that your side of an argument is the correct side. The chances of you being successful based on using anecdotal evidence is probably 50/50 or maybe even less depending on how persuasive or charming you are. However, if you have some objective proven data to back your argument your chances significantly increase to above 90%.
The same is true for business owners, I have shown them how they can grow their business just by extracting and analyzing their data. It can’t be argued with (although some do try but they look pretty silly doing it), and is truly powerful and instrumental in turning businesses around.
The first step in transformation is to identify what data is out there already and then what data might be useful to start collecting. Second is the analysis of the data collected to understand trends, spikes, and anomalies. This analysis will truly let us know what the data is telling us. Here are some of the most important types for collecting:
- Sales data is extremely important. Data like average prices, customer trends, most purchased product, etc. Sales data tells you if you are pricing your product right and if you are fully taking advantage of available margins. Remember pricing should be done on supply and demand not just a straight 1.x estimation so test to see what your potential customers are willing to pay for your product/service. The Law of Contrast comes in handy here, meaning as humans we always react positively to a lower price if the first price mentioned was the highest price, even if the second isn’t that much lower. It’s better to start high and go lower, since it’s hard to come up in price.
- Production data like timings, yields, productivity and efficiency are essential to knowing the internal workings of the business. Is the work being done efficiently? Is the workforce at capacity? Are production costs outrunning margins? These types of data are needed if a business wants to expand. It’s no good increasing orders if your workforce can’t handle the workload, and how are you going to know if they can handle it if you don’t collect and/or look at the data?
- Costs and expenses data tell the picture of where the money is going. We need to understand this to understand the cash flow of the business. Many times I have found huge errors or bad economies from this type of data. Busy business owners get caught up in the day to day and forget to challenge operational things that have been the same for years. Insurance is a big one, for instance on the personal finance side financial advisors say you should re-quote your big insurance costs every couple of years, but most rarely do and this happens with business owners too. Collecting data on costs and expenses helps you see the trends where you have been lazy and your business is suffering.
- One of my favorite types of data to collect is to survey customers where they found the business, i.e. google search, friend, social media, previous customer, tv ad, etc. One of the most important things a business owner can know is where exactly their business is coming from. Was it from a previous customer referral? Or that marketing campaign you did last month? Interpreting this data makes you answer the questions: What’s working? What's not? Do I need more marketing dollars? Do I need to network more?
As a business owner there are many tools you can acquire to help in the collection and analysis of your data. Contact INFIX if you need help with collect and or analyzing your data, your eyes will be opened wide and your business will be better for it!