Using facts, figures, number, and actual statistics can enable you to make much better decisions while running your business. I’m going to go through a few pieces of basic information you can collect (and display in a useful way) while running your business that will give you a huge insight into what’s going on in your business. This is just the tip of the iceberg, and I could go into a lot of detail – but I’m going to keep this short to start with.
Too often I hear conversations such as: “Why were sales down in March by 20%?”, with a response from someone else “We think it’s due to changes in the market, and changing requirements of customers”. This response has no data to back it up and is quite vague, where would you start? How could you make an informed decision on what to do?
Regularly collecting data and putting into a report which can be used to correlate the data can greatly help reduce the “think”s and empower you to make effective decisions which aren’t based on assumptions.
If the conversation went something like this instead: “Why were sales down in March by 20%?”, with a response: “Based on the data we have there was a 50% dip in traffic to our website through search engines which correlates to about 20% of the source of all our orders”. With this information you know exactly where the problem is and can already start planning specific strategies to address the exact issue (with the correct reporting, even more details could be gathered such as exact pages losing traffic, which keywords on the search engine lost traffic, etc).
Without the correct data, and it being in a useful format – your business success is like driving a car in the dark with no street lights or headlights. You may be able to see slightly what’s going on, but you are running far from an optimal state. You have to drive very slowly, and you are going to have to guess and estimate a lot.
I’ve put together a bunch of pieces of information/graphs/reports you can put together to get started. Below each example of data that can be used, I’ve put in some reasons and outcomes of having the data available.
NOTE: This is largely modelled around some of the data we collect in our business, so you may need to adjust this to make it more relevant to your business!
Sales & Marketing:
- Number of orders: How many orders are you receiving? When are you receiving them? What type of orders are they?
- This is a basic metric which can tell you the volume of orders coming through, compared month to month or week to week it can be used as one metric to measure your sales performance.
- Value of the orders: What is the value of the orders? What is the average value per order?
- Without value of the order, the number of orders could be pointless.
- Products ordered: How many of each product is being ordered? What are your top selling products? What products do you sell the least of?
- The same as the value of an order, the actual number of each product ordered is usually quite important. Depending on your business, some products may be more or less profitable than other products.
- How did the customers find you (i.e. word of mouth, search engine, a website you advertise on, etc): Where are your customers actually coming from?
- Knowing where your customers are coming from allows you to do things like target the least expensive methods to acquire a customer – as well as targeting your advertising, etc around the type of customers you are already successful at obtaining. Knowing this data can help with your cost per conversion (next one).
- Cost per conversion: How much does it actually cost to acquire each customer via the above sources customers are finding you through?
- Is your cost per conversion sustainable and profitable? Without knowing the cost per conversion, you may be spending money on advertising or acquiring customers that isn’t actually profitable.
- Reasons people cancel, or go elsewhere for a product: Why are your customers cancelling? Why did they decide to go to a competitor instead of you?
- Understanding why your customers cancel or use a competitor may allow you to improve/adjust the way you do something or the service you deliver to retain more customers.
- Traffic to your website: How much traffic are you receiving to your website? From what sources? To which pages?
- Google Analytics is an invaluable tool in tracking almost everything to do with traffic on your website. You can use it to track conversion rates, traffic sources, traffic destinations, how much time customers are spending on your site, etc. Using this information you can make adjustments to your site, your products, order process, SEO, etc to further improve sales.
Profitability & Operations:
- How much do each of your products/services cost to provide from start to finish? Are you actually making a profit on all of them? Including staff time spent on each product, are each of the products profitable? Which are your top most profitable products? Which are your least profitable products?
- This an extremely important one, if you haven’t figured out the actual profitability (including all your operating expenses) of all your products – this is something you should do ASAP. You may be surprised to find which of your products are the most profitable, and you may even find some products you are making a loss on. By understanding the profitability you can understand which products to sell more of, and what cost per conversion would still make the product profitable.
- Budget & Forecast: What is your cash flow going to look like month by month for the next 24 months? What expenses do you have coming up month by month for the next 24 months? What income do you have coming in over the same period?
- Cash flow is king, and a life line to your business. If you don’t have any money in your bank account, you won’t be able to operate your business. It helps greatly when making larger purchases that require a lot of cash, and can give you a heads up when your cash flow may be lower so you can plan around it.
- A survey per correspondence with customer (track staff & team performance in real time): On a rating of 1 to 5, how satisfied is the customer with the response provided? What comments do customers leave when rating the correspondence?
- Your staff are the front line in your company, and understanding how customers feel when interacting with them can help with a lot of things. It can help improve customer service (if that’s one of your goals), or help track performance of individual staff members.
- General customer satisfaction surveys over a greater period of time (i.e. quarterly): Is the customer satisfied with the customer service experience? Is the customer satisfied with the product they are being provided? Is there anything the customer would like to see in the product? Is there anything that can be done to improve the product or customer experience?
- Understanding what your customers think of your existing product/service and what they are looking for can help in producing new products or improving existing products.
The way the data is displayed can play a big part in how useful the data is, here are a number of ways it can be displayed:
- Simple table with the results
- A pie chart for a particular time frame (i.e. month, quarter, etc)
- A line graph to show change in values over a time frame (i.e. a year worth of data in month increments to track progress and changes) – I find this one extremely useful in seeing trends over periods of time and using this to correlate to other data.
- Summary in text form (if you can’t put it into a table or graph!)
What other examples can you provide of business data that has enabled you to improve the way you operate and make decisions within your business?
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