Time and time again I see business owners get overwhelmed and have no clue where to start when thinking about how to transition to a data-driven business. The thought of dipping your toe into this big wide water of data science can be overwhelming.
When you first think about where to start you realize the sheer number of data points you can capture.
For example, say you are wanting to start to get some insight into your taste in books. You could use a third-party solution like Goodreads or Likewise or similar. Alternatively, you can customize the data points you want to capture by building a do-it-yourself option.
You can capture everything from data points related to the book itself (title, genre, length, plot points, etc.), the author (name, gender, race/ethnicity, other books they’ve read, etc.), your reading journey (data started, date finished, time spent reading, how many sessions of reading, etc.), what you thought of the book (star rating, summary of what you liked/hated, a full review), and so many more. Additionally, you have an option for how granular you want to capture this data. Do you want to pull specific quotes from the book or just have an overarching note about the plot? You have near infinite options for what you can capture and how you want to capture it.
The sheer possibility is paralyzing.
When thinking about this possibility related to the data points you can capture, it is understandable why many businesses do not capture any sort of data or metrics. Or if they do capture some, they’re only capturing bare bones metrics.
In general, I err, on the side of capturing more data is often better than capturing less.
However, capturing today is infinitely better than capturing tomorrow.
In order to predict our future (which is often the goal in data science) we must understand our past. However, in 98% of cases, we don’t have access to the data of our past unless it has already been captured. We cannot retroactively go back and capture data about our past. So we need to start building that history of data as soon as we can by capturing and recording data in the present.
Every day that you are not capturing these data points is a day that you are losing one of your most valuable resources: your data.
So if you need to start capturing data today, what do you start to capture? You need to at least get the ball rolling by capturing something. I like to think about the basic data points you can capture in a few segments.
Revenue
First off, you wanna capture metrics related to your income and capture them as granularity as you can get them. You can always summarize granular data, but it is impossible to get the granular data if you only capture the summarized data.
More specifically, instead of capturing daily or weekly sales, capture data on every single sale. This will allow you to summarize the data in whatever way you desire later when you want to glean insights.
You want to capture what was sold, when, to whom, for how much, and anything else that could be relevant in the future and is relatively easy to capture. You also want to capture the number of unique customers answering how many unique people are purchasing from the business.
Many of these can be captured using an invoicing software, payment processor, or something similar. When you look to be intentional about capturing this data, make sure your payment processor or invoicing software is capturing the data you would like and ensure it is easily accessible and exportable. If there are additional points you would like to capture, you can initially do it by hand in a spreadsheet or database.
Expenses
Once you have captured the core points around income, you want to understand the other side of the profit equation: expenses. Likely, you are keeping track of the expenses of your business for accounting purposes. But we can also track these expenses for the purposes of analyzing our data to improve our processes and strategies.
You want to capture general expenses, such as labor, tooling, materials, professional development, etc.. These can help you determine the margin on each of your products or services. This is key to understanding how to price things to turn an effective profit.
In addition to the general operating expenses, you should really focus on capturing granular data related to advertising and marketing expenses. Much of marketing and advertising efforts are spending money to make money. However, you need to ensure you are in fact getting a return on advertising spend. Ideally, you should track each campaign, the amount you spend per campaign, the number of new customers that can be tied directly to that campaign, and how much each customer spends. Down the line, you can use this information to drive more effective marketing campaigns.
You also should capture expense data related to specific products and services. Capture the cost of specific materials or tooling that goes into the production of the product or service. You can also capture metrics around the labor needed to produce the product or service.
Once you have a good understanding of expense metrics, you can begin to have a sense of profit.
Customers
In addition to metrics specific to revenue and expenses, you should also capture metrics directly related to customers. This will give better insight into how to best target new customers and keep current ones happy.
One key customer-specific metric is attribution. These are data points that answer the question “Where are my customers coming from?”. Answering this question is key in the space of digital marketing, as it can help determine what marketing strategies are effective.
Attribution can be captured with a cookie-tracking tool like Google Analytics for your website. Google Analytics will tell you from what website people visited your website. Are they coming from Google search? From social media? Particular ads? Google analytics is incredibly powerful in determining attribution and even better, you can add it onto your website for free today.
In addition to attribution, you want to have some sort of identifier unique to each of your customers. Commonly that will be an email, username, or perhaps an anonymous user ID you implement on your own. This will help to track customers over time to better understand the specific customer journey your customers go through. You can also get a sense of customer behavior. You need unique customer IDs to determine how people move through your website and how they interact with you. This information is invaluable when developing data-driven customer personas, helpful in marketing efforts. These personas and customer-specific data are also useful when determining which new products to create or services to offer.
Product
Every single business (hopefully!!) has income, expenses, and customers. So every business needs to capture metrics related to those three. However, every business makes their revenue differently. But you want to capture data on the actual revenue generating product or service of your business. We’ll go over a few examples to give you some ideas on what to capture for your business.
If you have a physical product or product, you wanna capture different data points about your different products. For example, say you are selling different computers. You want to capture what are each of the different products? What displays and monitors are being sold with what processors? What are the specs for each computer? What are the different Stock Keeping Units (SKUs)? You wanna capture as much data as possible on each of those products.
If you live in the space of digital project products, such as eBooks or courses, you want to capture many of the similar data points as you would physical products. Say you sell eBooks. You then want to know what are some key traits about each of those? What is the target audience for those? What is the purpose for those? Are they longer? Are they shorter? What is the number of pages on an eBook? What are the channels you’re selling these things through? You want to make sure you capture as much data as you can on your individual products
Another space we can think about is a SaaS (software as a service) product. One thing unique to SaaS products is we wanna also keep a keep track of usage. Are your customers actually using our product? How frequently are they returning to utilize the product? And how are they actually using it? Are they using it for everything that you intended them to use it for? Are they only latching onto a few different features?
If you sell services, you can capture data points related to the experience of the customer when they receive those services. How effective is the service you are selling? What is the service you perform and how does the customer interact with you when you are performing the service?
Capturing these metrics related to your products and services can help you tailor your products and services to your ideal customer.
TLDR; When you feel overwhelmed with what to capture, capture the basic data points related to your revenue, expenses, customers, and product or service. This is a good first step of beginning to be a data driven business.
What are your thoughts? Are there other things that you think that need to be captured that are a hundred percent absolutely necessary? Are there things that you think are not necessary? Shoot me an email if this resonates or you’d like to talk more about it.
