Do you sometimes struggle to figure out if you’re making the right decision for your business, or even to make a decision at all? Fear not, you may be suffering from data overload and we can help! Not everyone is naturally analytic or data-driven, but an understanding of data analysis for small business can help make the numbers speak to you – rather than you just feel like you’re drowning in them.
You are not alone in this, according to the Global Insights 2018 Demographic Report (Insights, 2018) only 23% (26% male and 19% female) of the population leads with a Cool Blue Energy type (An Insights Discovery Cool Blue energy type is logical, deliberate and likes everything to be supported by fact). The people with high blue energy are the ones that are often the most comfortable with numbers and analysis.
You may have encountered Insights Discovery before, Insights is a company with a global reach that facilitate working together. They do this by teaching all levels of business on how to understand the working and interaction preferences of each individual team member. Their proprietary psychometric tool is based in Jungian Psychology and assigning each individual with a colour spectrum as a key reference to their preferred interaction style.
I was lucky enough to undertake Insights Discovery and Insights Transformational Leadership training in my last corporate role. It was fascinating to see the change in team dynamics that adding a little bit of understanding can make. For the curious ones, personally I have high blue energy and am consciously an observing reformer with strong thinking and analysis skills.
If you’d like to find out more about Insights you can take a look here and even play a quick game to get an idea of your overall colour energies: https://www.insights.com/products/insights-discovery/ .
Why Analytics are Important
As a career analyst I know in my gut that the numbers are important; but also having been a senior manager in the Corporate world I know that they also can never tell the whole story. So take heart if you are not naturally analytically inclined – the numbers are never going to to completely take over. However, that said, if you don’t make an effort to understand and use the analytical tools available to you then you are at risk of missing key decision points, or failing to fill knowledge gaps. Think of data analytics as another tool in your toolbox to use to your advantage.
For example: I hate raking with a passion, but the rake is the best tool I have for getting up the last bits of grass after I mow the lawn. If i don’t rake once, I spend a week sweeping my house multiple times a day trying to remove the grass that’s been tracked in. So I rake, and I dislike every minute of it!
If you’re not collecting and using a selection of data around everything happening in your business you are potentially leaving money on the table. Why do you think all websites (including this one) want you to accept Cookies? They help us find out important details – like how you found this site, if you’re a new or returning visitor and what pages you looked at while you were here and how long you stayed. Now, you may be wondering how all of this information can help me, as the owner of this webpage, so here’s an example.
If I know that you and a selection of other people were directed here by a social media platform, like Pinterest, and that you stayed on the site for a while digesting the content I could use this information to increase my marketing to that target audience perhaps by paying for advertising or increasing my use of a particular Pin Style on Pinterest.
If it’s all too much about the numbers already, fear not! FleeCorporate is now leveraging 15 years of data analysis expertise across big business in multiple industries to launch analytical coaching for business decision-makers who are not numbers people, and you can be among the first on the list.
Your data can be valuable in the decision-making process and should be considered an asset (or resource) of your business.
Want to know more about using the resource-based view and how it can benefit your business?
The data that you can collect (for free) from your audience, your webpage, and your customer’s buying habits can also be valuable sources of secondary data when you are performing Market Research.
- Your data can help you make sure you’re actually reaching your target customer – and drive advertising decisions
- It can help you better understand what your customers are looking for – and might help inform your next product or service offering
- Financial data can help inform whether you’re in the right place for expansion, while workload data can help inform whether you need to automate or outsource more (or less)
- Costing and production-related data can help you identify efficiencies of manufacture, scope, or scale to be targeted, or areas of focus within your pricing strategy.
- Historic sales data might alert you to an unexpected seasonality element that should inform your planning or forecasting. For example, when I worked for a Walmart subsidiary as a supply chain analyst, we were shocked that the sales of tea towels increased dramatically for the first 2 weeks of December – but then we found out it was because parents were using them to make shepherd costumes for their children’s nativity plays.
All of these examples show how data can help refine your decision making – but only if you make use of it. So if you’re part of the 77% of the population who find thinking about data to give some level of discomfort, ranging from a mild eye-rolling to nightmares and breaking out in cold sweats, if you don’t leverage your businesses data you are losing a valuable decision making asset.
Just because data-driven decision making is your own personal nightmare, doesn’t mean you shouldn’t do it, and there are ways of capturing the data that reduce some of this pain. But if you really can’t bring yourself to do it, that usually means it’s time to hire a specialist to support you.
Bridge Knowledge Gaps
“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”Donald Rumsfeld
Now, as much as we would love to be able to tackle the things that we don’t know that we don’t know – I’m afraid we’re limited to those known unknowns. But every unknown removed from the table is one that can benefit our business. Data can help with bridging the gaps in your knowledge; or at least the ones that you acknowledge are there.
Understanding Customer Needs
You can actively collect information on what your customer needs by asking them and recording the information. Don’t forget though, some of the best information may come from people who engaged with your initial offer, but then didn’t become a customer.
How can you help them more?
- what other services do the customers need?
- can you develop a product or service to fulfil additional customer requirements
- why did they buy, or not buy from you?
- did they buy from a competitor or forego the purchase completely?
Improving customer experiences
Is there a better way to delivery your product or service to your customers? As an example, I hate courses that are delivered completely through videos. I can only bring myself to watch a video once, therefore I want the information in other formats too. No matter how much I’ve paid for it, a purely video course feels to me like it delivers insufficient value for my financial outlay.
- What else would they like?
- Would they prefer it served in a different way?
- Can you help prevent any failures?
Amy Gallo (2014) Writing in the Harvard Business Review suggests that industry (and study) dependant, gaining a new customer is between 5 and 25 times more expensive than retaining existing ones. Although this paper is now over 5 years old, the 5 times figures are still bandied about the internet. Therefore, even if this is now out of date, it makes sense to understand how effective your customer retention efforts are.
Not only can engaged customers provide repeat sales, but they also are potentially more willing to provide testimonials, refer friends, and tell you if there are points you could improve on your offer.
So, we’re in agreement that data is important for our businesses, but what should we be measuring?
What are KPIs and how can they help you?
Key Performance Indicators (KPIs) are a measure of how well you are performing against your primary business objectives. By understanding this performance data, you can adjust your strategies to improve on areas that are not on target to achieve their objectives or goals.
For example, if one of your objectives is related to the sales value achieved per month, perhaps this target is set in line with your budgeted figure, or you may have assigned a stretch target as a motivational figure perhaps linked to year-end performance bonuses. If you are not checking whether or not you’re achieving this on a monthly basis you won’t be able to react to over or under achievement by adjusting your pricing, advertising, or sales strategy until it is too late to dramatically effect the result.
If your strategic human resources management plan includes performance-related bonuses, then it is extremely important that the achievement or lack of achievement of the relevant metrics is regularly communicated. As these targets are part of your strategy and long term planning then you need to make sure the people on the ground have the tools both to perform, and to understand how well they are performing as well as where their focus should lie.
Defining performance metrics
In order to create valuable performance metrics for your organization you need to know what is important relative to your business strategy. If you haven’t defined your strategic objectives yet and used them to create your budget then that is something that you should seriously consider doing. In fact, if I were you, I’d be stopping here, bookmarking this page, and defining my short, medium, and long term goals for my business before continuing on.
If you need a recap on goal setting or planning for success, have a look here before you continue.
Now that your goals are clear, you’ll want to construct the ideal package of business metrics. This will have both leading and lagging indicators aligned to your now defined business objectives.
Leading metrics are a way of forecasting results by looking at future outcomes and events. This is not as complicated as it sounds – don’t panic! A new product in the pipeline could be a leading sales metric (as it points to future sales performance – after all you wouldn’t be launching it if you didn’t expect it to be successful). Other examples include customer and staff satisfaction, as they can indicate loyalty and retention leading to future sales and future performance (as well as a reduction in the cost that is associated with staff turnover).
Lagging metrics are backward-facing, and therefore look at things that have already happened. As they’ve already happened they’re difficult to change! Things like the sales achieved in the last month or business from repeat customers. Be aware though, lagging indicators are quantifiable but can often be gamed, so make sure you’ve considered how someone could cheat your system to make the numbers look better, especially if there is a payday in it for them!
Things I’ve seen include:
- Selling to marginal customers to increase the sales numbers, but also increasing the returns value.
- Skipping key steps to hit timescale metrics.
Using performance metrics for goals and motivation
Your performance metrics should use short, medium, and long terms goals aligned to your businesses strategic objectives. Again, if you’ve got this far without sitting down and having a serious think about where you’re heading and how you’re going to get there, make sure you do it!
Motivation is defined as: “the psychological factors stimulating people’s behaviour” https://www.managementstudyguide.com/what_is_motivation.htm
From the Strategic Human Resources Management perspective, motivation via performance management can be implemented by translating the business’s strategic objectives into smaller, individual achievable goals. The achievement of these goals is targeted for individuals, with its achievement measured, performance rewarded, and a cycle of feedback between the individuals and the organisation.
It is important to note at this point, although we are discussing this purely from the perspective of the use and value of metrics within an organisation or business, that you will often end up with conflicting individual goals. The theoretical purpose of these “tensioned” targets is that the conflict is understood and resolved to achieve both metrics and maximum benefit to the business. However, if this is not explicitly understood by the full organisation a demotivation feeling of being set up to fail through the setting of impossible targets can prevail. Therefore it is important to be transparent about the companies objectives, the metrics, and how they have been designed to interface to deliver maximum value to the business.
As an example: Lets take a look at a business targeting an increased profit figure.
There are several options for achieving this:
- increase our overall sales value
- gain new customers
- sell more to existing customers
- increase our pricing
- decrease our overall costs
- increase our efficiency (generate more value with the same expenses)
- better use of material (less scrap)
- better deployment of resources (labour efficiency)
- increase our efficiency (generate more value with the same expenses)
An example of tensioned metrics for increased profitability might include for the Sales Department to increase the overall sales by 10% year on year, Human Resources Department to keep the payroll the same.
Without knowledge of each other’s goals the sales department might implement a strategy of hiring more people to cold call potential clients (generating sales to satisfy their metric), but increasing the headcount to both handle the cold calling and potentially to manage the new accounts in violation of the HR goals.
If they had worked together, they had the potential to satisfy both of their individual goals and the company’s strategic objective. They might have come up with a plan to sell more to existing customers by deploying individual resources more efficiently within the sales team and satisfying the customer delivery requirements by increasing efficiency within the delivery of the product or service. This would generate achievement motivation in both departments and build cross-functional cooperation, rather than having one department “win” and the other “lose” with the risk of creating functional silos within the business. With the added benefit of the business overall generating more value by achieving the key strategic objective.
To assist with your goals, bear in mind the following recap:
- You know your goals should be SMART – specific measurable, achievable, realistic and time bounded
- Your business should have long, medium and short terms goals
- The Goals are written down and reviewed regularly – keep them on the full company agenda
- Break down large goals into smaller steps and create a detailed plan of how they can be achieved
- Make sure that the departments and individuals are aligned to the overall strategy, and any tensioned metrics are understood and driving collaborative solutions rather than divisive ones.
Using performance metrics to define improvement opportunities
Once your goals are aligned to your strategy, you can start to use the data that you are collecting to define areas of improvement. There are many ways to do this, and it will be dependant on your business and industry, some examples may include:
- Benchmark industry leaders – therefore creating a working group to find creative ways to meet and then exceed what industry leaders are doing. You can’t do this without having baseline data from which to start. I.e. JoeBloggs company has 5% scrap, what can we do to get to 5% scrap.
- Set challenging stretch targets based on previous achievement
- Interrogating your data for areas of peak or trough and look for ways to smooth requirement or output, maybe you have a big spike at Christmas – is there a way you can move some of the requirement earlier? If you make a physical product can you build early and store it to smooth your demand? Or bring in temporary labour? Switch your staff to annualised hours rather than fixed contracts so that they work longer hours during peak demand time and shorter hours when the requirements are lighter? Define shut down periods or encourage holiday leave use during periods of light demand?
Capturing the data
Ok, I now know what I need to know and why, but please, how do I get there?
How you capture your data will depend on what your business is and how it’s structured. Some data capture and analytical power may already exist in the tools that you are already using for your business. Some examples of common areas of data that are captured include:
- Website data (Google Search Console, Google Analytics and Bing Webmaster tools)
- Social Media Business Accounts capturing data (Pinterest Business Accounts, Facebook, Instagram etc)
- Customer email and prospect email lists that you’ve captured
- Sales data
- information on the volume, value and seasonality of the sales
- Sales value per customer
- Sales frequency per customer
- Customer surveys and feedback
- What your customers are actively asking for
- Customer reviews and testimonials
- Product manufacturing data
- product cost breakdown
It’s worth doing an inventory and seeing which information you already have available and how it’s captured and stored. There are ways of consolidating information from different streams, but they tend to either be high maintenance or expensive to setup. So it’s really worth making the effort to define what metrics you need to capture to track your goals, strategies and business improvements now to stop the overwhelming feeling.
Choosing the right data solution for you
Now that you know what business goals are, and you have an idea of the high level metrics that can help you in building your business we need to figure out the best way to track your metrics.
There are two ways forward in this quest, you can either build (or have built) a bespoke solution or you can buy something off the shelf. Now be aware, that if you buy an off the shelf data solution it will post likely need some considerable configuration.
Building A Solution
You are likely to end up building a solution or hiring a consultant to build a solution using either a data warehousing facility to store all of your data or by linking extracted data from various sources into a visual front end.
The simplest method will most often use spreadsheet files (like Excel, Google Sheets or Apple Numbers) to both store and display your data. This is suitable for small businesses, without a great number of transactions or complexity – however won’t be sustainable for a larger business or excessive transactions.
An Access Database is often a more appropriate tool to use when constructing databases, but can be a bit of a pig to learn – you’ll probably want to outsource this, but bear in mind that any maintenance or development will be must easier for the person who wrote it… so if you don’t get on or they stop providing this service then you’ll end up paying a premium for some else to unravel your database.
Buying A Solution
There are numerous solutions out there, however they will all pretty well follow one of two paths:
- A combination of data-warehousing and reporting solutions. It may be bundled with some form of business system functionality and there will often be some that are designed or configured specifically for your industry. You will often only buy core functionality and optional bolt on modules as necessary for your specific business requirements.
- A standalone data analysis tool, like Microsoft Power BI allows you or your consultant to bring in information from various sources and combine it on a series of dashboards with data drill-down facilities, so you can look mainly at high level information and only dig into the detail when something requires further investigation. Depending on the information source it can be set to automatically refresh the data display. These tend to also have fairly steep learning curves and most will require at least a bit of coding knowledge.
Defining exactly what you need
Ok, this has all of a sudden gotten scary again, I know, don’t panic! The purpose of analytics is to add value to your business so there is no need to rush into anything. A methodical approach is the best way to make sure that you are leveraging analytics to deliver the best value to your business. So, considering everything in light of your business objectives.
- What do you need to know to generate the most value for your business? – How can you get that information?
2. Build fluidity in – your requirements will change
- Is there any information that you can foresee will be useful to your future plans?
- Is there data that you are aware of that you’re not currently using, but you have?
3. Centralise if at all possible
- Keeping all your information as centrally as possible lets you look for synergies and unexpected relationships that you can leverage.
- Learning one central way of doing things is much easier than trying to learn a few different ones, so follow the KISS principle.
- You will need some ability to change the display and information relationships without affecting your base data so that you can look for new and surprising information.
Acquiring something scaleable
Your business is going to scale, or at least I’m assuming that’s your intention. So bear that in mind when you’re thinking about capturing your data. You want to make sure you get the biggest value add first, but then once you do make sure you’re setting yourself up to keep leveraging the advantage in the future.
Make sure that the value can be extracted from your data by someone else – you can’t do everything yourself, but also as much as you may prefer to completely delegate the responsibility try to avoid falling into that trap. Make sure that you have detailed workflows, and standard operating procedures for everything that you’ve had constructed by consultants or setup yourself. This gives you options to make sure that your scaleable data is always accessible to the business, even if you or the consultant are busy doing something else.
The specialist resource that you may require can be sourced through numerous means – consider consultants or freelancers with expertise in your market, sector or niche; but be careful to protect yourself and your business with non-disclosure agreements and appropriate contracts.
Your network may also have some tools, consultancies or freelancers that they can recommend to assist with the strategy, design and scaling of your data solution.
- Tackle the biggest value generator first
- Don’t forget to automate or outsource where you can
- Have well-documented process flows
- Create Standard Operating Procedures that anyone can follow
An Overview of Structuring your data
To help you separate the wheat from the chaff when looking for consultants or freelancers, there are a few things you should know about the efficient structure of data tables that will both help you with organising your initial information collection and weeding out people trying to sell solutions who may not be quite what they seem.
For clear information, you should want everything to be organised in vertical tables with unique row headers. Forget pretty here, we’re after utility. If you can’t name your fields (the columns) uniquely and usefully, create a separate file that details what each file and field name is and what it means – you’ll use this later on when you’re working out how your tables relate together.
Firstly you are going to want to define Master Files – they are files that hold important information. Think about it like this – if you have a list of customers, you want to hold all of the customer’s key information in one file so that if they change their phone number, you don’t want to have to change it in several places!
You will then want to define a Key Field in each master file, something that is unique about each entry. It is common to use a unique reference or number, which you may assign either sequentially or following a method of nomenclature.
Nomenclature is a naming system – it can be anything that you define that works well for you. As an example: I once worked for a company that used metal bars – they named them EXM for extrusion – metal, or EXA if it was specifically aluminium, and the length.So if you needed a 2m steel profile you looked for EXM2000, or if you needed a 2-meter aluminum profile you selected an EXA2000.
Again don’t panic! I’m not suggesting here that you do this right now, just that you are aware that this is the most efficient way to store data. If you data isn’t stored this way at the moment it’s not the end of the world, it is rare that there will not be some form of migrating or translating of data when scaling a business, setting up a business system or starting to use more data analytics.
Data Structure Example:
It is common to structure an Address Book Master that contains both customer and supplier information, as you will tend to collect the same information from both. Depending on the type of customer and supplier relationships you have, you might consider giving each entry a prefix (perhaps C for customer and S for Supplier) or having a separate field that determines whether each entry is a customer or supplier.
Every time you need to look for information related to the customer or supplier – for instance perhaps you are looking for the customer address to send an invoice to, you would be looking for information linked on the key field (the customer number). As you can see in the image, the single entry for the number key in the Address Master is used to link to the customer number in the Sales File which allows the Invoice to pull the necessary data from each of the two files, rather than having to enter all of the customer data manually into the sales file and the invoice each time it’s used. As previously mentioned, it is much easier and less time consuming to change information that exists only in one place – and you also reduce the risk of trying to phone your customer on an old telephone number!
Separating the information out in the early stages will assist you with both reporting and business growth later. Following a structure that lends itself to both analytics and growth later on may seem a bit tedious now; but it will benefit your business later on. So you want to make sure that your consultant, mentor or freelancer structures your data correctly to avoid you having to redo it next time you’re trying to scale your IT solution.
Make sure that you are following appropriate data security, encryption and backups with your data. You are responsible for adhering to data security requirements for the country into which you are selling your products if you’re selling online. And don’t forget about all the randomware, viruses and worms that exist out there. Keeping your businesses information safe and storing regular secure backups of your data in case the worst happens is key to your business continuity and legal compliance.
Where to now??
So, you now know why analytics are important for your business but your next steps will be key. You can start capturing your data at any time, but before your analytics will start to generate great value you need a clear plan of where your business is headed, so make sure that your business’s short, medium, and long term goals are defined.
Then it’s the time to start seeking support with crunching the numbers. So, congratulations if you’ve made it this far and numbers really aren’t your thing!
FleeCorporate is now leveraging 15 years of data analysis expertise across big business in multiple industries to launch analytical coaching for business decision-makers who are not numbers people via our consultancy Confident Costing. Click the link to request more information.
We’d love to know where your analytics pain points are, please let us know in the comments box below!
Gallo, A (2014) The Value of Keeping the Right Customers, Harvard Business Review, 29 October. Available at: https://hbr.org/2014/10/the-value-of-keeping-the-right-customers. Accessed 9 May 2020.
Insights (2018) Global Demographic Report 2018. Available at: https://www.insights.com/media/2202/insights-discovery-global-demographic-report.pdf. Accessed 9 May 2020.