Do you have no idea where you’re going to be one month to the next? Or even where you are now? Don’t hide the shame, you’re not alone. Thousands of small business are struggling to get a grip on day to day operations, let alone managing to figure out where they’re going to be, or where they should be. Even if you’ve become a whiz at Excel over the years, it can still be pretty impenetrable to massage much sense out of all those spreadsheets.
You’ve also probably heard about big data or “BI” (business intelligence) and assume it’s for big corporations only.
On the contrary, your data drawn from the products you’ve ordered, the customers you’ve sold to, what they’ve ordered and when,that’s your “big data”. If you can crunch those numbers, you can get some really useful insight into what you’re doing and where the opportunities are. For example, you could:
- Predict inventory levels based on past sales by customer/product/day so you never run out of products
- Figure out what customers may want in the future based on their past orders and send targeted marketing messages to them
- Identify which customers are the most profitable and which ones lost you money through slow payments or bad debts
- Track the profitability of individual projects and quickly spot those that aren’t performing
So how do you start getting your data together and analysing it?
Accounting software is a great way to start. It will help you gain a better understanding of your finances overall, so you know where your business is at any time.
It gives you a “bird’s eye view” of what’s going on, and helps you anticipate any cash flow crises as well as prevent them from happening in the first place. You can instantly view your net position, by year-to-date, last quarter or last month.
One of the key problems for small businesses is unpaid invoices and bad debts. With a dashboard-style overview of all your figures, you can quickly see what’s coming due when. Or how much you invoiced each month compared to how much you received. Not forgetting when your own bills are due: you can see all your inflows and outflows at a glance.
If your data shows a particular customer is a long-term bad payer, you could shorten their payment terms or reduce their credit.
It’s much easier to “see” data when it’s visual. Accounting software does this instantly for you, so you don’t have to fiddle around with Excel sheets to make charts. Seeing a clear upwards or downward trend on a graph is much quicker than looking at table cells of figures and trying to calculate in your head whether there’s an acceleration or not.
As well as your own data there are other tools you can use to analyse the market and predict important trends. Many of these are paid services, but there are some that you can do yourself.
Your website is one way to start. Using a free tool such as Google analytics, you can see who’s visiting your site, what they view and how long they stay. You can also use long-term data to reveal trends that show how changes to your site affect visitor numbers.
Cross reference this with your own sales data, and you can start to get a pretty powerful picture of what’s happening. You may spot that you’re getting more mobile customers, in which case you can try to provide a better mobile experience.
Another source of data comes from polling your customers directly. You could do this through newsletters, to find out what they think about certain products, or what they anticipate their future demand for your series will be. Do this regularly, compare it with your actual sales numbers, and you can see if it matches buying trends or not.
Know that your competitors are either doing this already or will be doing this in the near future. So if you don’t get smart with analysing your own data, they’ll win.
To learn even more about the importance of technology for your business, download our free ebook ‘Keeping on top of compliance: Why your business accounts should be online’.