Be a data-driven based business

| November 3, 2017

data-drivenJust a little research into your business can tell you how to boost revenue and profitability. By gathering the right data, and being data-driven, you can identify opportunities, make strategic decisions, and improve business performance quite quickly.

With modern business software, it’s easier than ever to capture and analyse data. It shouldn’t even require you to do any maths.

Business owners are liars, but that’s a good thing

Small business owners and entrepreneurs lie all the time. They tell themselves that everything is fantastic – that they’re solving the world’s problems and having fun in the process – when that’s sometimes not the case.

Being a liar in this way is good. Necessary, even. It helps us bounce back when things go wrong. We can lose a big contract, or our best employee, or run out of cash, and still reassure ourselves that everything is going fine.

The reality distortion field and why you need it

This sort of positivity is sometimes called a ‘reality distortion field’. It’s used by leaders to make people feel like anything is possible. Apple’s Steve Jobs was famous for it.

The reality distortion field gives small business owners and entrepreneurs the belief, confidence and sheer bravado to wake up every morning and set out to build something great.

The dark side of the reality distortion field

However, the reality distortion field can work against you. The constant optimism can become so real that you begin to delude yourself. You start to see everything through a rosy lens and reality doesn’t just get distorted, it gets destroyed.

It’s easy to get caught up in the day-to-day rush of running a business. You often don’t have the time to measure how things are really doing, so you make assumptions and estimates. And when the reality distortion field is in operation, those assumptions can be inaccurate and misleading.

You’ll have an inflated sense of growth, or you’ll underestimate the costs of running your business. When those hunches go unchecked, your decision-making can suffer. Some businesses convince themselves they’re doing great and keep running at 100 miles an hour when they should be making changes.

Data can save you

This is why data and metrics are vital to your business success. The numbers are the source of truth that poke holes in a reality distortion field. A data-driven business is one that keeps it real and makes smart, well-informed decisions. They don’t have to resort to gut feel.

Any business can be data driven. You don’t have to be big. You don’t need expensive technology or mathematicians on staff. There are affordable tools available to extract insights into your business.

An example of a data-driven business

Business data can lead you to make big changes or small changes. But even the small ones can transform your business. It did for a tiny startup you might have heard of called Airbnb.

Today, they’re a powerhouse of tourism with a service that allows householders to rent out space as a hotel alternative. But they didn’t experience explosive growth from the beginning. That only came after they used data to tweak their business strategy.

The aha moment that built a superbrand

When bookings were initially sluggish, Airbnb figured it might be due to the quality of photography on the site. Hosts posted poor pictures of their homes, which didn’t entice guests. So the founders formed a simple hypothesis – “Hosts with professional photography will get more business” – and they tested it.

In mid 2011, they sent 20 photographers to take pictures of host houses. The effect of posting these attractive images was so positive that by 2012 Airbnb were doing 5,000 shoots per month. Airbnb’s founders still say this single strategy was fundamental to their success. And they got there by looking at data and doing experiments to come up with solutions.

The Magic bit

We understand that not all businesses can afford to hire an accountant full time. At a fraction of the cost of a full time finance manager we allow you to see what is happening now and in the future, no matter where you are.  Our approach to our services is bespoke and designed to mix our expertise with your in-house capabilities.  For further assistance or with any queries, please contact Magic Beans on 02895072700, [email protected] or www.magicbeans.online .

 

Source: Xero / Smartbooks

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