How Data Can Transform A Small Business
Big data has long been the preserve of big business, with brands like Google, Microsoft and IBM employing whole teams of experts to analyse data in search of competitive advantage, efficiency and ultimately higher profits. But information is power whatever your size, and advances in technology are enabling increasing numbers of small businesses to identify and monitor the signals that matter most to them.
Thanks to the rise of software as a service (SaaS), small businesses can now tap into their data without the need for analysts, a PhD in statistics or a big budget. From customer service to accounting – accurate, up to date information can create opportunities and solve problems you may not even know you had.
Making data analytics work for a small business is about quickly identifying what will be useful and what’s a waste of time. Without the luxury of time to focus on anything but the crux of the matter, start by defining the key factors that the business’s success relies on, then find reliable and simple sources of information to track what’s going on.
This will be different for every business, depending on the mechanisms by which it makes money and incurs costs, not to mention what data can be practically and efficiently collected. Figuring this out can be time well spent if it highlights what’s working and what isn’t – especially if you can get this information in real time so you can make changes fast.
Some areas in which data analytics can help small businesses to nurture profitability and grow include:
For businesses that rely on frequent transactions, such as retailers or hospitality services, sales data can be of particular interest. By analysing information on sales, business owners can not only establish peak trading periods and average transaction values, but also see who the most profitable customers are and what characteristics or habits they have. Knowing this may allow businesses to better tailor offers and marketing to those top quality customers, encouraging loyalty and further sales.
Products and services
Regular profit and loss statements, built in a way that suits the particular business model, can help establish the margins needed on products and services and inform all sorts of operational decisions. From how much something costs to purchase, produce or provide, versus how much is charged to the customer, making it easier to identify the most profitable. This vital information can be used to promote products and services with especially good margins and to scrap or restructure those that are under performing.
Businesses that revolve around selling hours, such as consultancies, can benefit from all sorts of data. It’s worth considering how data from timesheet analysis systems can be combined with monthly accounts and used to inform quotes and forecasts.
Marketing data, such as that collated through coded vouchers or email marketing campaigns can help to gather information about customers, and reveal which marketing strategies are proving most successful. Useful information when it comes to investing in the next activity.
Inventory and waste
By keeping an up to date digital stock inventory and combining this information with live sales data, some business owners are able to identify sales trends and predict inventory needs. Not only does this mean making the most of sales opportunities by ensuring adequate stock levels to satisfy demand, but businesses can reduce waste by not ordering surplus items that are likely to go unsold or spoil.
In at least one important way small businesses are actually better suited to analysing and working with their business data than many larger companies. As data consultant and author Bernard Marr said last year, “Small businesses have the advantage of agility, making them perfectly suited to act on data-derived insights with speed and efficiency.” Armed with insights into exactly what you need to know and accurate information at your fingertips that agility can be put to good use.
To find out how KPMG Small Business Accounting could help free up your time so you can concentrate on business success, request a callback for a quote today.
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