Many of the business owners I speak to run their business based upon their beliefs or a gut feel. This can lead to poor decision making, costly mistakes and missing out on opportunities. A data-driven business is one that keeps it real and makes smart, well-informed decisions based upon fact and information.
Any business can be data driven. You don’t have to be big. You don’t need expensive technology or mathematicians on staff. There are affordable tools available to extract insights into your business.
You collect business data every day without even knowing it. By taking the time to review this data you to make significant changes to your business performance. Small changes based upon insight and fact can lead to huge benefits.
How you can be a data-driven business
It’s not hard to be a data-driven business. It’s just a three-step process:
- Decide what you want to measure.
- Get the data.
- Review and act on the findings.
1. Decide what you want to measure
With modern business software, you can measure just about anything in your business. Generating business data won’t be a problem. Your biggest challenge will be in deciding what numbers are actually relevant.
Think about your business goals and work backwards from there. If you’re focused on increasing revenue, for example, you’ll need to look at:
- what drives your sales
- the mix of products you offer
- your conversion rate
Tying your business goals to measurable numbers is probably the hardest part of running a data-driven business. These numbers will be your key performance indicators (KPIs). An accountant can help to choose KPIs. In fact it’s one of the more important things they can do for you.
Just make sure that:
- you keep it simple – tracking too many KPIs is hard work and it makes decision-making difficult
- they’re relevant to your business goals – when a KPI improves, it should indicate you’re getting closer to achieving a business goal
2. Get the data
Getting business data used to be expensive. You had to hire consultants or use expensive technology. Now small businesses can get the information simply by looking inside their business software.
- Accounting software knows your income and expenses.
- Point-of-sale software knows where your revenue came from.
- Inventory management software knows how stock moves through your business.
- Workflow management systems understand how much it costs to execute a project.
- Time-recording software knows where your wage spend is going.
For example, job management software like WorkflowMax will measure the number of steps it takes to convert a sales prospect into a paying customer. With that information, you’ll know which activities you need to start doing today to generate new sales tomorrow.
Accounting software like Xero will automatically record the number of days it takes for a customer to pay your invoice. This allows you to take an average and predict when accounts will be settled – so you can budget and manage your monthly cash flow.
These are just two examples of how common software packages can help you become a data-driven business. You might be surprised at just how much business data you already have at your fingertips. An accountant can help you pull all that data into one place and convert it into graphs and charts so you can track KPIs visually. You shouldn’t have to do any complicated maths. It’s your accountant’s job to make it easy to review KPIs.
3. Review and act on the findings
It’s no good tracking KPIs if you don’t act on the information. Schedule monthly meetings with your management team and/or accountant to review the business data. Set goals. What do you want the KPIs to say at your next meeting? When you get to that meeting, check to see if you’ve succeeded. If not, ask why? If they’ve surpassed expectations, see if you can figure out how you did it.
Data supports your decision-making but, even more importantly, it keeps you accountable. It focuses you on what’s important in your business and makes you answerable to those things. Use your accountant as a sounding board. They’ll do more than help you set and measure KPIs. They’ll also help you:
- reconcile KPIs with your overall business budget
- come up with realistic goals
- develop strategies for improving KPIs
- figure out what’s going wrong when you miss your goals
Find an accountant that supports data-driven business
If you don’t already have an accountant, look for one that knows how to use technology to set up a data-driven business. We can help you make the transition to being a data driven business. We can get you set up on xero, identify your KPIs and how you can automatically collect the data you need to measure and monitor them.
Speak to us today, book a FREE No Obligation review of your business and we can show you the best way forward.
If you would like to discuss your business and get a fresh perspective on how we could save you time, money and make being in business easier, call us today on 9380 3555 or use the book a meeting button below. As cloud specialists and Xero Gold Partners we can help you harness the power of modern technology to get a better understanding of your business, create efficiencies and put you in control!
Related blogs
5 Simple Apps To Track Your Business Expenses
My top 10 tips to setting kick arse goals for the new financial year