Data is the new oil (Part 1)
Data. Everyone’s talking about it. Big data. Machine Learning. Data – for the first time – is sexy!
But data doesn’t have to be reserved for the IBMs, Googles and Apples of this world. Every business needs data and it’s surprisingly easy to get it right.
Every business needs data
First, you need data to run your business.
What is data, though? Quite often, it is a number. It can be the price of a product. A sort code. Or it can be a million sort codes. It could be the address of a customer.
Whatever you do, you will be selling something. You might be buying some things first, doing something with them, then selling your products.
At the most basic level, you need to use data to so that people can pay you and so that you can pay people. Imagine you don’t have a bank account number and that isn’t being given to the right people at the right time. You won’t be paid! People don’t always pay on time either so you will need to keep track of that.
Finally, there are your obligations to run the business. You will need to use data to keep track of your revenue, your costs and your profits so that you can meet your legal obligation to pay tax.
The more fun part is how you can use data to change your business
Imagine that you run a run a furniture store. Your target market is your local community. With the right data, you can see if there are certain post codes that you’re not selling to. From that, you can come up with some ideas that you can then test to see if they’re right or not. For example, we’re not selling to that area because we don’t deliver that far. You can then work out if you want to start delivering to that area and assess the costs and the benefits of that decision.
If you’re just setting up your business, changing it might seem a long way off. How can I work out how to get more sales, when I just need some sales? But your business will change quickly. Before you know it, your data will be a mess. You will want to look at historical data but it will be in a range of different spreadsheets and you’ll be spending so long copying and cleaning (i.e. tidying it up) data that analysing it will be a long way off.
Thinking about data early is important! If you’re putting garbage in (poor data) then you will definitely get garbage out (no meaningful findings) when you need it.
Get your data right from Day 1 and you’ll reap the rewards!
So when setting up your business, think of what questions you might want to answer in a years time once you’re up and running. It will be hard to do that at this stage. But try as in a year’s time you’ll be glad you did.
Your sales data will be one source of data for you. From that, you’ll know (at the very least) what’s been sold, how many units, the price and when it was sold.
To get more useful data, you’ll need to collect data on your customers and your suppliers. If you’ve got an e-commerce website for example, that allows you to link other data (like customer demographics such as where they live) to your sales data, you’ll be able to get post code data from this, easily.
There’s one key thing to bear in mind though! Some businesses try and get so much demographic data that it makes the customer feel like they’re filling in a survey not trying to buy something. That’s one way to lose sales. Your job is to help your customer. You can get the help of your customer, but it should not be a hassle for them.
Like everything therefore, the key is to strike a balance. When you’re buying a train ticket with Virgin trains, they ask one question – “what’s the reason for your trip with us”. This lets them work out if their market is students returning home from university, professionals visiting their family or families on holiday. When this data is combined with data on railcard usage, it’s pretty powerful.
So that’s it as an opener.
If you start thinking about what data you’re collecting from your customers from Day 1 you can reap the rewards further down the line. It’s never too early to start thinking about data in your business and when you’ve got no or little data that’s always the easiest time to get these things right!
In the next blog, we’ll take things a bit further and give some practical tips about how you can get your data set up in the right way to give you great data that you can analyse and make better business decisions.
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