Using data to make decisions isn’t just for big businesses.
August 16, 2018 5 min read
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If collecting and understanding your business data meant you could double your revenue in 12 months, would you do it? Or would you be one of the 60 percent of entrepreneurs collecting data but not using it to make decisions? The largest companies, including Amazon and Google, collect and use data to improve their products and services, serving to increase their revenue exponentially and catapult them far ahead of their competition.
David Selinger, a former Amazon employee, discussed lessons he learned at Amazon involving collecting and using data inside the business. The most effective CEOs, including Bezos, use data, not emotions, to make decisions. A willingness to allow the numbers to guide you, even if they are contrary to what you thought was true is key in order to see progress and growth in business.
Many small-business owners I’ve worked with have said using, understanding and implementing decisions based on data are for big business only. Wrong. You can do similar things for your business, even though your business is much smaller than Amazon. In 2016, as a solopreneur in a service-based business, I eliminated a revenue source and doubled my total revenue in the following 12 months. That sounds like clickbait, but it is true and a function of me trusting numbers and making decisions to act based on the data I collected. In order to do this, I had to understand and continuously measure three types of data.
1. Analyze expenses and revenue monthly.
Look at how much money you’re making and how much money you’re spending.
I added the amount of money I spent on overhead for my office (rent, utilities, insurance and supplies for the office, like toilet paper and paper towels in the bathrooms) to the amount of money I was losing by clients that did not show for their appointments (which was fairly consistent each month). This became the amount of money I was spending to have an office. I compared that amount to the amount of revenue I was bringing in. I determined having an office was actually not beneficial to bringing in revenue, as I had the ability to meet my clients in someone else’s office for one contract.
Not only were the overhead for my office and the money I was losing on my no-show clients important to evaluate, I was also wasting time. When my office lease was over, I sold the furniture and decided to drop a contract that forced me to have an office. I kept another contract with agencies that allowed me to travel to see clients in someone else’s office.
2. Get granular on customer data.
Look at all of it — anything and everything you can measure.
It is important to track all customer data — how many sales you make, the types of transformations your customers are having using your product or course, and the experiences you provide before, during and after the sale are only three examples. These data allow you to make changes as you have customers enter and complete your programs or services. Along with helping your customers transform, you also gather data to help sell your products to future clients (as a testimonial), for example. There are plenty of software programs that can help you track these data in a manner that is easy and efficient.
3. Create systems for each repetitive task in your business.
Look at your systems and evaluate them monthly. Determine if the systems are efficient for you and if you want to continue to use them.
To be the most efficient, there should be a system for every task you regularly complete. If you are packing physical products, this could be a specific assembly line that is repeated each time. In my practice, I have a system with daily folders to schedule and hold paperwork for appointments. I also have a system for completing reports, sending them out and preparing invoices to be paid. This system has been refined many times over the past five years and will continue to be refined as I find more efficient ways to work.
The best part about data analysis is the ease with which you can perform it. Most people see the word data and believe data collection and analysis will be difficult. There are no fancy math formulas or expensive software to use (unless you want to). There are only positive things that can come from you understanding your business through numbers, giving you the ability to make logical decisions to improve your work efficiency, your ability to serve others, and hopefully increase your revenue similar to — or far surpassing — my results.