Data has been a hot and trendy term over the last 5+ years. It’s talked about in many ways. Most often, people associate data with terms like “big data,” “AI” and anything technology related. For small and midsize businesses, the term “data” could mean all sorts of things. The one thing that is often missing within this view on data is how a small business can gather its own data or use outside data to set a plan, go down that course, and pivot/maneuver through as new data points come in. There is now a whole sector of data analytics companies that provide services to businesses seeking a competitive edge or just trying to understand their environment.
While these types of companies are great, not every business can either afford or justify the return on investment (ROI) to hire a data analytics company. The good news is that you don’t have to give up on utilizing data or begin to analyze data if you’re on your own as a business owner or key decision maker. Our firm, SMB Compass, has been a big proponent of data and how it benefits our business. Our founders developed some basic principles that we’d like to share with other businesses.
A simple and direct plan
As with any project we take on, the key aspect of success is driven by the plan put in place to execute the project. We find that the simple and direct route works best. From an initial point of execution you can develop a much larger framework or structure of any original plan. So how does one go and start a plan to use data as a way to strategize and flourish? It begins with applying the principle of simple and direct. Let’s say you’re a company that manufactures dry-erase boards and you’ve seen a steady decline in sales over the last 3 years. A simple and direct plan to figure out how to use data as a tool would require a couple of small steps. The first step would require you to identify what you’re seeking to understand and how data can achieve this. The second step is what data is currently at your disposal or could be acquired at for a nominal amount.
The third and final step is to collect this data and then ask internally what the numbers mean. In some cases, there’s no definitive conclusions to be made or in others where there’s inconclusive data you may make the mistake of stretching just to have a conclusion. It’s important to note that the answers aren’t always in the data and that at times, it’s a combination of the numbers and intuition based on experience and other qualitative factors. Let’s dig deeper into each of the steps to help build a plan on how to use data as a benefit to your business.
Why you would use data, and how to interpret it
In the first step discussed above we highlight that it’s important to identify the reason to analyze data and what the ultimate outcome of going through such an exercise would have for your business. We have had multiple similar exercises over the years to use data to our advantage. Each exercise has revolved around a particular business problem or challenge we were seeking to overcome. In order to know how to fix the problem or answer a big-picture question, we set out to find what the numbers were really telling us.
One such example we’ve gone through is when we ran into an issue with our website conversion rate process. Our invoice financing page and our invoice factoring page had much different success rates. We were noticing, significantly, that our invoice financing page had less conversion rates than our invoice factoring page. We decided to take a deeper dive and understand why this was happening. We started by identifying what we sought to answer. Our question posed was, why is one of our product offerings producing better conversion rates than another product offering? Now that we had our question, we were able to identify what data points we could look for to potentially answer our question.
How to properly collect or acquire data
For questions that are less pressing, it’s important to prioritize and focus on solving problems that have the most impact. In our case discussed above, we knew that the man hours to collect data would be minimal and the problem we had, while it was not necessarily going to put us out of business, it represented a 10% gap in revenue. For us, our website and CRM systems track all data and thus the collection process was going to be seamless. In general, for any business it’s important to identify sections of your revenue generating process that allows for data points to be collected effortlessly.
What to conclude from the data gathered
The conclusion that you’ll make from the data gathered is the most crucial step in this process. As with any process, if the beginning has its flaws, the whole thing will be flawed. When concluding, it’s important to review the question you initially posed, the data you’ve collected and how it’s been collected. It’s also crucial that any decision made or conclusion made has its own checks and balances to unsure that you’ve analyzed the data appropriately.
In our case, after putting together some numbers that directly compared our invoice financing page and our invoice factoring page, we we’re able to identify our difference in conversion rates. Our website at the time had a questionnaire form that varied from product to product. This questionnaire happened to be shortest and simplest for invoice factoring just due to the nature of the product. We concluded that it’s short and easy to answer questionnaire was the reason we had better conversion rates from our website. We decided to apply this to our invoice financing page and after a couple of months we noticed that the conversion rates had started to reflect similar numbers to our invoice factoring page. In order to make sure we just we’re seeing to a random uptick or there was another factor at play we compared other key data points like total visitors to each page and the quality of visitors to make sure we had the right conclusion. On a regular basis we analyze some of the pivots we make based on data analysis and try to constantly understand how else we can look at data to help us solve problems.
Any business can apply our basic principles on how to apply data into their business to help them solve both big and small problems. All visibility that can be achieved through this process will help you further understand your business.