4 Examples of How Data Can Make Your Small Business More Profitable
Gone are the days when analyzing business data involved combing through handwritten records on logbooks with a calculator in hand. Today there many reporting solutions that work with your transactional systems -- such as your POS – to make it easier to view the different aspects of how the business is performing. There are also analytics solutions that help you uncover hidden trends and patterns in business data, leading to insights that can help you make smarter, more informed business decisions.
Here are some of the ways that small businesses can use data reporting and analytics to take the guesswork out of managing the business and increase profitability:
1. Discover opportunities to increase sales
How much is the business earning every day? Are you meeting your sales targets? Which products are doing better than others? Are sales better on certain days of the week or seasons of the year? The answers to these questions can be found in your sales data. By tracking and recording your sales, you can have an overview of all information related to sales performance, and analyze it by category, product, customer type, or any other relevant view.
More interestingly, combining sales data with other data—such as marketing spend, or the economic situation, or seasonal events like holidays or the weather— can give you clues on what factors influence your business and the interventions you can do to increase revenues during periods of lower sales, or to take advantage of situations when demand is likely to be high.
For example, if a café owner were to observe that their mango smoothies and brownies sell faster than all other products on weekend afternoons, then these products could be highlighted on the menu or promoted in their digital ads specifically during those peak hours.
2. Uncover possible areas for cost savings
Every business strives to deliver the best products and services possible while managing expenses. Expense data can be mined to uncover areas where you can cut costs and improve efficiencies. Undocumented and overlooked expenses are potential future concerns, so it is best to be proactive.
For example, if labor contribute a lot to your operating expenses, then analyzing labor requirements for low-peak and high-peak seasons can help you determine exactly how many full-time or part-time staff must be on board during certain times of the year. This helps you make sure that you are always operating at peak capacity without unnecessarily spending on labor costs or struggling to hire people at the last minute.
3. Understand your customers better
Who are your most profitable customers? How about the least profitable ones? What are their demographics? Where are they from? How do they transact with you? Having the answers to these questions can help you identify your ideal customer and plan how to acquire more of them, or to sell more to your existing ones.
Familiarize yourself with concepts such as Customer Lifetime Value, which is a prediction of the net profit from a customer or customer segment over the span of their relationship with you; and Cost of Customer Acquisition, which is the cost of winning a new customer. Having this data can help you determine how and where to focus your marketing and sales resources.
4. Carry just the right amount of inventory
Some small business owners take inventory data for granted. The lack of attention to inventory data opens them to inaccurate reporting and undocumented losses. These losses may seem negligible at first but can accumulate in time and eventually create a significant impact. By analyzing both sales and inventory data, you can also more easily predict the most optimal stock levels for certain items, to prevent out-of-stock situations or overstocking which can lead to wastage.
Solutions like imonggo Store by iRipple make management easy by providing insights on inventory in a snap. They are complete and easy-to-use Point-of-Sale (POS) solutions for small businesses with free and premium options and has features like a quick review of inventory’s cost, stock on hand, and out-of-stock count. You can even monitor inventory while on the go through the imonggo mobile app.
As your business grows, there will be more aspects of your business that need analysis regularly. Use all the information and data you can gather to guide you in making better, informed, and wise business decisions.