You’ve probably heard that using data to make decisions leads to a successful business. But the truth is it's not the data. Data is everywhere and it’s abundant.
You don't just need more data.
Instead, it’s efficient data that really drives you to make the best decisions for your business. Data is efficient when collected correctly, consistently, and comes to you in a form you can use.
Yet a Harvard Business Review study found that while 62% of businesses now invest heavily in data collection, only 38% have a sufficient strategy to use that data.
Furthermore, a 2021 CIO study found an astounding 94% of businesses say they're still in the planning stages of using data, despite the fact they've been investing in and collecting significant data for years now. This demonstrates a disconnect between data collection (which isn't cheap) and putting that data to use to make better decisions, drive revenues, cut costs, improve cash flow, and grow the company.
Many businesses lack the correct financial mindset to achieve these goals, but efficient data can change all that.
Decisions Are Based on Accurate, Up-To-Date Data
First of all, you need to make sure you're collecting the right data. You identify which data you need to collect based on your goals.
Efficient data helps you achieve them. But you should also work backward from the goal. Through this process, you'll identify what data you need to collect to understand how you're performing related to that goal and what's happening along the way.
Track progress toward a goal through metrics. Metrics are measurable indicators showing if you're on the right track.
With efficient data, your decisions can be centered around reaching your goals and making choices that improve your business. No more following gut feelings that keep you up at night wondering if the move you made was sound. With efficient data, you know it is.
It's in the numbers.
Secondly, you won’t have to worry about sifting through out-of-date or useless data to make the right decisions. Because you have a consistent, automated system to collect and present data, you know it's always up-to-date.
Because we don't have to tell you, it's always better to pivot in business as obstacles arise rather than spending most of your time reacting to events that have already happened. Many small businesses are stuck in this loop of putting out fires, so they lack the resources to become forward-thinking. Efficient data changes all that.
It's critical that companies define how they use data and put a process in place to improve decision-making through it. You need a system to detect patterns, learn from them, and steer the company in the right direction.
Efficient Data Helps You Create Stronger Goals
As mentioned, the data you collect should be centered around reaching your goals, so the more efficient data you collect and use within a strategic data plan, the better you understand what's working and what isn’t to get you closer to where you want to be.
When you set out to make new goals, you’ll be able to rely on your efficient data to guide your goal-making process. Once you’ve reviewed your data, you can look for areas you’d like to improve.
Let's look at how this works in a real-world application. Based upon industry benchmarks, you determine you're spending a lot more on customer acquisition than similar businesses. So you seek to determine why. You use efficient data to understand customer lifetime value (CLV), so you know:
If those higher customer acquisition costs are justified
How you can lower them without sacrificing CLV
Who your highest value customers are, so you can dedicate more resources toward attracting and nurturing that target audience
Where to spend to attract, convert, and increase CLV among this audience
How much money should you spend to get the right ROI
What should your customer acquisition cost goal actually look like? You started out with an industry benchmark that told you that you were overspending. But by using your own first-party efficient data, you recognize why your spending is higher and how to use that greater spending in the most effective way to deliver a higher ROI.
Through efficient data, you can set SMART goals because the data reveals what realistic goals look like for you, not someone else.
Efficient Data Leads To Efficient Processes
When your data is providing you with essential information, you can rework your processes to improve other areas of your business.
You’ll be able to see efficiency leaks and correct them.
For example, when reviewing data, you notice one of your team members is spending a lot of time figuring out payroll. This may push you to use an automated payroll service so that employees can spend more time working on more important work.
Small businesses can also use efficient data to learn how their customers interact with their brands online to deliver a more cohesive experience that generates the same kinds of loyalty and greater profits.
Efficient Data Leads to a More Engaged Team
When your decisions are based on data, it’s easier for your team to see what you are doing and how it fits into the bigger picture. They get objective feedback more frequently and in some cases may even be able to access it themselves to confirm they're on track.
This maximizes personal responsibility and ensures employees that management is using objective measures to evaluate their performance. Because they can see that performance in-between performance reviews, employees can correct course and take charge of their careers.
In the current worker shortage that many companies face, this kind of data transparency gives employees a sense of empowerment that they're looking for in the modern employer. Efficient data shows employees they're partners in your success rather than a means to an end. That distinction makes a difference in both recruitment and retention.
With more use of data, your team is motivated to continuously improve their numbers, knowing they play a role in the success of the business.
Working with an Accounting Partner Leads to Efficient Data
It's clear. You don't just need more data. You need efficient data.
To make sure you don’t miss the mark with getting efficient data, turn to a trusted accounting partner. SIMPLY Financials PLUS will work with you to create a data strategy that focuses on your goals and tees you up for making decisions that drive your business. Contact us today to learn more about the importance of efficiency in your data.