As your startup business grows, you’ll be generating all kinds of data. Probably not Big Data like the big boys, but still enough to swamp you with information such that you can no longer see the wood for the trees.
Firstly you’ll probably be collating statistics about your website, using for example Google Analytics. This service has grown over the years to include a myriad of historical and realtime analysis tools including information about where people are located who visit your site, what kind of device they are using, what search terms brought them to you, and which pages caught their eye for the longest time on your site.
Then, if you have a Facebook page or Twitter account, you can receive information about the number of visits, number of retweets, who’s following, who’s stopped following, how many people you’ve reached, and so forth.
And yet, important (and fascinating) all this data might be, it is rather detached from the nub of the matter; how much money is your business making and how are the sales doing? This financial data is often the bit that is overlooked by the eager entrepreneur, and in many ways the recent years of dotcom web 2.o phenomena have fuelled this trend. Many high profile Internet and technology startups have generated value from eyeballs rather than dollar bills, and so social media data becomes more important than financial data.
But, as a small business owner with limited time and resource, you will need to decide what data to collect, what data to analyse, and most importantly what data to act on. Without care, this task can either be wholeheartedly ignored during the day-to-day firefighting, or an action that occurs sporadically when you happen to log into one of your accounts and stumble across the analytics page.
My advice is to include key data analysis as part of a monthly exercise alongside the review of your management accounts. To some, the suggestion of a monthly review of management accounts might come as a shock, but many entrepreneurs do this almost unconsciously. You will probably have a fair idea of your bank balance each month, but now is the time to structure this appraisal a bit more methodically.
So, on reviewing a monthly profit and loss, balance sheet, sales forecast and debtors aging list, that is also the time to look at some other key data; how many website visits, where are the visitors from, are the important (sales generating) pages being visited, and what is the conversion (from visit to closure of a sale) rate like.
By making a specific effort like this, on a regular basis, you are (to paraphrase Cliff Stoll) turning data into information, information into knowledge, knowledge into understanding, and maybe in some cases understanding into wisdom. More importantly, you are also being selective about the data you analyse with a goal in mind so that you can drill down into something useful for your business. By doing this regularly, an important aspect is to look back at the earlier data and see if things are improving each month, each quarter or each year, and most significantly try to understand why.
Each business will benefit from studying different kinds of data beyond the financial data. If you make widgets, you’ll want to look at the inventory, order book, manufacturing process data and quality control. If you run an e-commerce site, you’ll want to focus on your web analytics and conversion rate. If you run a marketing agency, your social media footprint will be important. And so on.
Finally, it is also beneficial to encourage your colleagues to do the same. As a business owner, you can’t be analysing all the data yourself into the future. Once you have decided what is informative, delegate the analysis to someone appropriate fro example in finance, production or marketing. This will then free you up to move on to the advanced level of data analysis which is to spot trends across these reports: did the increased marketing effort that led to more Twitter followers result in more website conversions and higher sales, and did that rush cause the mid-month quality control issue because you started a night shift?
In this day and age, your business activities will be generating a lot of data. Some aspects you will be choosing to measure, others will be being collated in the background by default. The key is to step back and think through what you want to do better understand from all that data and put a bit of focused quality time into to studying it. You’ll learn a lot more that way than trying to just amass data or gleefully ignore it.
Startup as you mean to go on is due to be published in 2017.