Businesses now have access to more data than ever before. But what good is all that data if you don’t know how to use it? If you have siloed, unused data, it is probably costing your business money and missed opportunities. This is why Data-driven decision-making is critical.
Data-driven decision-making (DDDM) is the process of using your data to make decisions that align with your business goals, objectives, and initiatives.
It’s not just about making decisions based on gut feel or intuition. It’s about using the available historical information to find key patterns and trends that can be extrapolated for your business’s future growth and success. And then making sure you have the systems in place to track whether those decisions are successful.
To gain deeper insights into what is happening in and around your business, it is crucial to track the right metrics and understand how they support your operations and growth. This is a continuous process that requires you to develop three core capabilities: data proficiency, analytics agility, and an inherent sense of curiosity.
Data proficiency helps you understand and use data. Analytics agility allows you to quickly and easily analyze that data. And a sense of curiosity encourages everyone in your organization to ask questions and constantly look for ways to improve.
The thing is, data tells a story, but only if you know how to read it. Interpreting the trends of transactions, expenses, and other vital bits of information always shows much more than amounts and line items. Here’s how to use it to grow:
Set Goals and Objectives
The first step is to begin with where you’d like your decisions to take you. What are your business goals? What do you hope to achieve? Once you have these answers, you can start setting specific, measurable, achievable, relevant, and time-bound (SMART) goals and objectives.
Doing so ensures that everyone in your organization is working towards the same objectives. It also allows you to track progress and determine whether your data-driven decision-making is effective.
- Some examples of SMART goals include:
- Increasing sales by X% in the next quarter
- Reducing customer churn by X% in the next year
- Growing web traffic by X% in the next month
- Increase your cash reserve by X% in the next six months
- Add X new products or services in the next 12 months
- Lower your tax liability by X% in the next fiscal year.
While most of these can be quickly monitored by your in-house talent, lowering your tax bill by utilizing all the deductions and loopholes available to your business is best done by tax experts such as Phillips Business Group. A tax expert will help you read and analyze your business’s data and identify saving opportunities you must have missed.
Use Directly-Tied Data Points
You’ll then need to start collecting data that is directly tied to your goals and objectives. This data will come from a variety of sources, including your financial reports, tax returns, social listening tools, CRM software, customer surveys, website analytics, social media metrics, and more.
But not all metrics are important, so you’ll need to focus on the key performance indicators (KPIs) directly tied to your goals. For example, if your goal is to increase sales, then your KPIs might include conversion rate, average order value, and customer lifetime value. Irrelevant metrics like web traffic don’t matter if your conversion rates are dismal.
If your goal is to reduce customer churn, then your KPIs might include customer satisfaction scores, Net Promoter Scores, and customer loyalty.
You should also track leading indicators, which are metrics that tend to precede a change in your KPIs. You don’t want to wait for months to see if your efforts are paying off. By tracking leading indicators, you can make course corrections along the way.
Some examples of leading indicators include:
- Number of new qualified leads per month
- Website traffic from organic search
- Emails sent
- Meetings booked
- Free trials or demos requested.
These leading indicators will give you a good idea of whether your marketing and sales efforts are working before you see a change in your KPIs.
Get Reporting on What Matters
A list of bulk transactions or even multiple metrics isn’t really that helpful. You need to be able to see what’s happening at a granular level, understand why it’s happening, and then take action. That’s where reporting comes in.
The best way to do this is to use a data visualization tool that allows you to see all your data in one place and then slice and dice it to find the insights you need. By creating engaging visuals in the form of charts and graphs, you can more easily see relationships and trends.
The idea is to look for patterns and trends in your data so you can make informed decisions. Are certain products or services selling better in certain regions? Are there certain times of the year when your sales are higher or lower?
Spotting these patterns and trends is essential if you want to make data-driven decisions that grow your business. The better the reporting, the quicker you’ll see if what you’re doing is working or not, allowing you to make course corrections along the way.
With access to improved data about their market and customer base, businesses can now review and assess their performance on an ongoing basis. This is essential if you want to make data-driven decisions that grow your business.
But reviewing your data and making decisions based on it is not a one-time event. You need to make it a regular habit if you want to see real results.
The best way to do this is to set aside time each week or month to review your data critically. This doesn’t have to be a long, drawn-out process. A quick, 30-minute review should be enough to spot any significant changes or trends.
And if you’re using a data visualization tool, you can quickly and easily see what’s happening without having to wade through mountains of data.
But what are you looking for when you review your data?
First, you want to see if there are any changes or trends in your KPIs. Are they moving in the right direction? If not, why not?
You should also look at your leading indicators to see if they’re heading in the right direction. If they are, then you know your efforts are paying off, and you can continue down the same path.
But if your leading indicators are heading in the wrong direction, then you need to take action. This is where data-driven decision-making comes in.
By looking at your data regularly and making decisions based on what you see, you can course correct along the way and ensure that you’re always heading in the right direction.
Phillips Business Group for Data and Analysis
Data-driven decision-making is not a goal in and of itself. The real goal is to use data to make better decisions that grow your business.
And that’s where Phillips Business Group comes in.
We are data-backed, customer-first tax specialists that help businesses make sense of their data and use it to make informed decisions that grow their business. We’re here to help you understand your data, spot patterns and trends, and make decisions that will lower your tax bill and help you grow your business. Our 85-point process reveals tax-saving opportunities, and our team provides guidance on how to take advantage of them.
If you’re ready to take your business to the next level with data-driven decision-making, book a free tax assessment discovery zoom call with us today and let us show you what we can do.