Unleash the power of data to make better business decisions
You could be sitting on a pile of gold without knowing it.
Entrepreneurs have tons of data about their finances, customers and operations. All this data can be an invaluable hidden resource that increases your efficiency and profit margins. Some businesses are going even further, using data-driven insights to make key decisions, develop products and create new business lines.
Here is a four-step guide to unleashing the power of data in your business.
1. Start small and find out what you already collect
It’s useful to start small with data collection, especially if you’re just beginning to think about how to harness business data. Try to collect too much data right away, and you could wind up with confusion about how to use the information or inaccurate numbers.
You have limited resources. Even just collecting data can be overwhelming. If you’re starting from scratch, choose two or three things to measure at first. As you gain experience, you can add more data.
In fact, your business is probably already collecting a fair bit of data. For example, you may need data on your finances for tax and banking purposes. You might also collect sales and marketing information, such as customer details and data on internet traffic and social media interactions.
Operational or back-office data is another source of data that’s too often ignored. Consider looking at inventory turnover rates, product margins and employee idle time to find areas of your business that could be improved.
- Read about how to improve the measurement of your financial performance
- Discover how to harness online marketing data in your business
- Learn how to use dashboards to boost your productivity
2. Measure what matters to your customers
To decide what data is most useful to collect, ask yourself what your customers want and how you lose money to competitors. Retail customers may want shorter queue times or better service. Useful data in this case could include wait times, queue abandonment rates and average time to service a client.
If you’re a plumber or electrician, you might want to gather data on service time, travel time to jobs and time spent going to the store for missing parts or equipment.
Also think about data that could help increase margins and reduce costs. For example, tracking inventory turnover may reveal that some product lines haven’t had a sale in months, while others are often out of stock. The data could help you refocus efforts on higher-margin items, optimize restocking rates and reduce inventory costs.
- Read more about market research to understand your customers
- Read more about how to monitor your inventory
3. Develop your data collection process
Once you’ve identified the data you want to collect, take time to develop a solid data collection methodology. How often will you collect the data? Will you do spot checks on your performance? How will you record the data and validate its accuracy?
Again, if you’re just starting, it’s wise to start simply. You don’t want to build an awesome iPad dashboard app if your data is all wrong.
As you tweak your methodology and gain experience, you can progress to a spreadsheet, dashboards and business software such as customer relations management or inventory control systems.
With a greater variety of data and still more sophistication, you may consider creating your own apps or integrating data collection across your business, such as with an enterprise resource planning system.
4. Use data for decisions
As you get comfortable with data collection, you’re likely to see greater uses for the information in business decisions. A retailer could use queue data to optimize cashier staffing at peak hours, better direct queue traffic or offer self-service or mobile checkouts.
A plumbing service can use service time data to optimize training or improve stocking of parts and equipment in service trucks.
Instead of going by hunch alone, data can help you figure out what your next product will be, where to expand operations and how to personalize customer web experiences. It drives your whole business strategy.