Looking for Business Growth? Data-Driven Decisions might be the answer

Buckle up, this might take a while.

I had this client who did social media marketing, let’s call her Jenny. She was making around $8,000 monthly for a little over a year as a solo entrepreneur but she knew she could make even more money in her business. So you know what she did, right? *cue the drumroll* ... Launched a group coaching program of course, to triple her revenue while working less hours. And lived happily ever after… not!

On the contrary, it was the worst possible timing. She launched it to her email list in the middle of December when everyone was so focused on holiday parties, food, vibes, et. al. No one signed up. Not even in the new year. In fact, because she stopped marketing her usual services, some of her repeat clients ended up working with other social media marketers.

So, what went wrong?

Jenny didn’t have any data to support this move. She never sent out an email blast asking her clients if they would want a group coaching offer. Worse, she never even asked them what they were struggling with in business so she could understand what to offer them.

Though a group coaching offer is great and has tons of benefits to both you and your clients, it’s not always the best decision for your business. As business owners, you need to understand what’s going on in your business and what you are trying to achieve so that you can chart the right course. How do you do that? By looking at the data!

What does 'data-driven decision' mean?

“Data-driven decision” has become such a buzz word (or rather phrase) lately. It can be as complex as you want it to be and it can also be as simple as you need it to be. I opt for the latter.

It boils down to you looking at numerical data (sales, profits, customer retention rate, churn, and so on) and even non-numerical data (customer sentiments, client feedback, general industry sentiments, and so on). Then drawing some conclusions that can help you to make impactful decisions in your business.

Data-driven decisions help to address these three challenges in your business:

1. Not knowing what initiatives to focus on

2. Not knowing what metrics to track

3. Not knowing what targets to set

Let’s explore these challenges some more.

Challenge#1: Not knowing what initiatives to focus on

How do you determine what activities to prioritize in business? Unpopular opinion: it should not be solely based on your intuition.

When my client, Cara (pseudonym for client), wanted to grow her client base, her gut feeling was to expand her design team so that her company could take on more technical jobs. This worked great for her and she was able to get the increase she was hoping for.

About 6 months into working with her new team, business was slowing down, clients started using in-house specialists or working with cheaper contractors, who weren’t offering the level of service Cara was but still met their basic requirements. Cara was floored by this because now she had a team to pay and her revenue was inconsistent. There was a month when she ended up making payroll out of her own savings.

I came in and helped Cara restructure. I gave her the hard facts that her industry was seasonal and though having a team is a great move, perhaps the timing and method of it wasn’t suitable for her stage of business. Looking at the data helped her realize that she was doing a disservice to herself, her clients, and her employees.

To fix this, she did a series of things:

• First, she explained the situation to her team. (Another key trait of a leader is transparency and communication. Employees love that!). Fortunately she hired people who were not only brilliant but also a culture-fit. So they were very understanding of the situation and could see that Cara valued them.
  
  

• Then she was able to amicably transition them from payroll employees to part-time contractors who were paid for work done. This eased her financial burden immensely. It also improved the synergy across the team because a lot of them were parents or hobbyists so they loved the flexibility of not working a regular 9-5 job and could collaborate on major projects. (Again with the cultural fit. She hired people that matched her company’s hippie/boho vibe).
  
  

• Now that Cara knew the data, she realized that she needed to focus on product development. She would revise her service offering so that she could still keep some of her higher paying clients and stabilize her revenue. Then she would create a different offer targeting an entirely new market segment so that she could charge more and grow her revenue. (Who ever said “win-win” didn’t exist)

As an experienced business owner or even senior management, you would have garnered a wealth of experience which allows you to trust your gut in some situations. However, it is unwise to exclude data from your decision making process.

If something fails because you “trusted your gut” and you did not have the relevant data to support that decision, you will have twice the work to do in figuring out where things went wrong and ways to get back on track.

If after assessing the data you decide to trust your gut as a seasoned business owner, then by all means take that risk and hold yourself accountable. You would have been armed with knowledge to make an informed decision. You also would have an anchor point that you can revisit when you need to review your decision or re-evaluate your strategy.

Challenge#2: Not knowing what metrics to track

If you’re a business owner or people manager then you have heard about metrics. They come in all different names and types: success metrics, key performance indicators, key results, ABC, 123… you get the idea.

I won’t be focusing on the specifics. Instead, I will be addressing metrics overall in terms of relevance to business decision making.

As you may have come to realize, I will illustrate with a story…

Once upon a time, in a far away suburb, there lived an ambitious bright-eyed bushy-tailed entrepreneur who we shall name Jessica. Jessica had a furniture restoration business and was making good money. She even had a few employees in her small business to assist her with restorations, procurement, and logistics. Most of her customers were local to her city and she had a few out-of-town sales from Facebook Marketplace and her website.

Jessica was having a challenge managing her cashflow. She knew her business was making money but couldn't feel it. She even tried increasing the amount of projects she was doing to make more sales but she couldn’t quite put her finger on this issue of not being able to feel the profits.

When Jessica and I worked together, it became clear to me that she was not tracking the right metrics. All business owners look at sales and profit but there are other metrics that you might want to track at different times depending on your goals and your strategy.

I found that Jessica didn’t measure her services as separate business lines. Because of this, she was unable to clearly see the profitability of each service.

She had three main business lines:

1. Affiliate marketing and brand sponsorships she did as a content creator,

2. In-store sales from selling furniture she restored through a local shop she had a partnership with,

3. And lastly she took on custom restoration jobs where people would pay her to restore their old furniture.

Now here is the tea...

• Content creator: Working on sponsorships with brands was tedious because it was time-consuming to flesh out the details of the engagement. So, she decided to take on less brand sponsorships and focus on other business lines instead. Although it took relatively long to get her earned affiliate commission, she decided to continue since these were products she used in her business anyway. Though she didn’t earn as much from affiliate marketing as she did with brand sponsorships, it didn’t require extra effort to keep it going.
  
  

• In-store Sales: This was a decent portion of her income. However, it took at least 60 days for her to get paid because of the store’s refund policy to clients. So she needed to wait until the refund period had passed for her to get the net proceeds. Also, she had to constantly work on new projects which often led to burnout. If she didn’t provide furniture to showcase within a given time, the store would give her space to another small business and she would still have to keep her financial commitment to the partnership. Knowing this, she decided to renegotiate the partnership and agreed to supply them with a set number of pieces for the month. That way she could manage procurement of old furniture and have a fixed deliverable to alleviate burnout.
  
  

• Custom Projects: Though she did these less frequently, she found that this contributed the most to her revenue because they were priced higher. She was also able to secure 50% upfront and the remaining payment on delivery. This business line was a lot more predictable in terms of receiving payment. She also realized that she had a lot of interest in this service from potential clients. Jessica shifted her focus to marketing her custom projects more to a high-income clientele within her city and neighboring cities while increasing her price.

Jessica now had a clear picture of the money her business was making, how it was being made, and could chart the way forward to achieve her goals.

Every business is unique and will need to track varying metrics at different stages based on their goals and strategies. Looking at the data will help you to know what you should be tracking and how to make more informed decisions to grow your business.

Challenge#3: Not knowing what targets to set

Whew! The other two challenges were a mouthful.

Business owners and senior management know all about targets. So I will keep this brief (hopefully).

*cue corporate jargon* Circling back on my last story about Jessica. When she analyzed her numbers and her client sentiments, she realized that most of her revenue came from custom projects even though she had been lowballing her price. As I mentioned before, she started marketing her custom projects more within her region so that she could take on more clients at higher prices.

But how will she know what revenue to expect?

She needs to have a target. But not just any target, a target that makes sense for her business based on her capacity and resources. We determined that Jessica was not operating at full-capacity. Given the changes she was implementing, we realized that she had enough resources and capabilities on her team to double her revenue over the next year from custom projects with the new pricing. Even when factoring in time-offs, and down periods.

Let me interject here and say that stretch goals are great. They really do, well.. “stretch” you in a good way. However, especially when you are making a major business shift, it is important to have an achievable target (not too low, and not impossible) so that you can measure and determine how to stabilize your income going forward.

Back to the story…

Jessica was only able to set this target because she was now tracking the right metrics and she was looking at the data! (I’m sensing a theme here).

Set your target like Jessica - the more informed Jessica. The only way to do that is to ensure you are looking at the data and using it to make decisions.

Let’s Wrap Up

Firstly, let’s give a round of applause to Cara and Jessica for being the main characters in this epilogue - without whom these valuable insights would not have been so adequately conveyed. *applause *

Let us not forget what they taught us:

1. Don’t make business decisions solely on your gut feeling

2. Analyze both numerical and non-numerical data in your business and industry and use them to inform your business decisions

3. Hire help when you need it

If you're done duct-taping your business together and ready for systems that actually support you — we’re here for it. Whether it’s smarter planning, cleaner processes, or building a team that just gets it, we help service-based businesses run smoother (and saner).

Curious? Check out our services (click here). Let’s make your business make sense.