Small business owners don’t have truckloads of time to collect data and meaningfully analyze it. But, you expose yourself to unnecessary risk (and eventually spend more time and money) when you don’t regularly budget analytics into your schedule. Certainly, a full-service accountant might (eventually) alert you when your books show positive or negative trends that affect the ventures that you’re considering. Better yet, why not learn how to conduct your own analysis so that you know right away when you need to take action?
Between your company’s books and other information, plenty of data is available for your review. This article will not turn you into an analytics wizard, but it will provide introductory guidance that can help you recognize which types of data are valuable and some tools that can lead you toward wiser decision-making.
Definition of Data Analytics
In a nutshell, data analytics looks at the quantitative and even qualitative information that can help drive your business decisions toward the best outcomes. The data can apply to anything, from Industry trends to the numbers that you maintain in-house. This includes things like your financials, best-selling products or services, customer behavior and even whether your website is hitting its marks.
While certain types of data apply to virtually any type of business, your industry might have specialized data, as well. For example, a tax preparation business might be extremely interested in its client audit rates. This data would identify whether it needs to create better accuracy safeguards or hire more people to attend tax audits — or if the audit rates are so low that the business should consider patenting and even selling its methodology. The decision-making sky’s the limit when you can identify valuable data.
Common Types of Data Analysis
To make the best decisions, you should make a habit of keeping informed about information from your business and also update yourself on information from the outside world. Here are some examples.
The information that comes from your company books can help you track and control expenses, know when you can afford to buy new equipment or hire more employees, help you retain the right amount of inventory and more. Once you set up the books, the time spent keeping the numbers up-to-date provides a daily opportunity to monitor where you are so that you always know where you’re going. Run a few quick reports, and the information is easily at your fingertips.
How is your gross profit margin for any given product or service that you sell? If you subtract total costs from the price charged and divide the answer by that price, you get a percentage that tells you if you need to charge more or less. Similarly, your net profit margin (calculated by taking the entire sales of your company for some time period, subtracting total expenses and then dividing that result by total revenue) presents a good picture of how your company sales are doing overall.
You also want to monitor what’s happening with your customers. Check out the number of customers that remain with you over a given period, and also track how many new ones you gained — and old ones that you lost. Compare this information with company activities (such as sales) over the same period, and you’ll learn a lot about what to do — and what not to do.
Whether you want to introduce new products or services, or if you’re thinking about raising prices, you lower your risks by performing a predictive analysis. One source of base information is to see what your competitors are doing. But, your own customer data can tell you a great deal about how they will behave if you make changes. Of course, if you sell online, you probably have access to more information than you realize from your website.
Customer order histories provided from a good point-of-sale system allow you to monitor the buying behaviors of specific customers, but they also help you spot seasonal and other trends that are bound to continue — unless you take action to even out the low spots. I know of one Chicago area bicycle shop that grabbed a thriving winter business by offering cross-country ski and boot rentals for use in a nearby forest preserve.
Whether you are an avid reader of general and business news journals, or if you only have time for the ten-minute summaries that run on all-news radio stations, understand that news is data, too. You may discover new buying trends that apply to your business — or upcoming new regulations that require advance planning. Either way, news updates should be a daily (or at least weekly) event.
Useful Information From Your Website
Your company’s website can provide a wealth of information beyond tracking online customer shopping behavior. You can find out if your website is generating enough interest based on how many visitors you have, whether they came directly or via a link from another website (which could help you find valuable informal business partnerships, or at least cause you to reciprocate), and more.
Perhaps the best known source of this type of information is Google Analytics , which is available for free, with paid subscribers obtaining even more options. By tracking the behavior of site visitors, you get to see which of your pages are most popular so you can refine your marketing strategies accordingly.
Of course, there are other paid and free analytics options. At ChooseWhat, we also like the HitsLink service, which provides a higher-level alternative to the more limited information that Google Analytics offers for free. An online search for Google Analytics alternatives 2018 can reveal other potentially-valuable tools, as well.
Data Tells an Important Story About Your Business
The time you spend delving into analytics can be invaluable to your business. If you understand data about your company and its industry, then the information can read like an informative guidebook that helps you write successful future chapters.