Trusting your gut is essential, but a data-driven decision backing up your gut feelings can propel your business.
Companies must rely on up-to-date and relevant data to succeed in a competitive environment. These days, the best managers rely on daily data analysis to help improve their day-to-day operations and strategic decision-making.
You have limited resources and little time to waste when running a startup. Every decision you make must help your business grow. Relying on assumptions or emotions instead of facts and figures means it takes longer to iterate and find the optimal solution.
How can startups use data-driven decision-making to grow?
What Is Data-Driven Decision Making?
In business, data-driven decision-making is basing decisions on evidence rather than what you think might work. While a founder’s intuition and gut feelings are important, the data should reinforce your assumption before making major moves.
There are various types of data-driven decisions, but often future sales are based on a combination of historical data and forecasts. Customer feedback is an additional essential data point for improving your product or service.
Data-driven decision-making is critical for any leader, especially when the data goes against your intuition. It helps you make smarter decisions, reduces the risk of poor choices, and improves your organization’s ability to grow and innovate.
Data-driven decision-making is an approach to business management that emphasizes steering the business based on data, information, and analytics. It’s an approach enterprises have widely adopted across all industries and functions. Data-driven decision making can be applied to all areas of your business, including:
- Cash management: Using historical data on cash flow and other metrics, you can identify trends that may indicate future issues with cash flow. You can also compare your current cash position against budgeted amounts to determine if you are overspending or under-budgeting.
- Rolling forecasts: An annual or quarterly forecast is a significant first step, but rolling forecasts allow you to adjust continuously based on changing conditions throughout the year. This consistent flow of information can help you avoid being overly optimistic or pessimistic about future revenue and expenses.
- Budgeting and expenses: Data-driven decision-making is especially applicable when setting budgets for different departments within your organization. You can also use it to decide how much money to allocate towards specific projects and initiatives based on need and projected return.
How to Incorporate Data-Driven Decision Making to Facilitate Growth
Data-driven decision-making is a growing trend in business. But how can you ensure your data will help your business grow?
Here are some tips to help you make better decisions with the data you have:
Know Your Goals
Knowing what you want is the first step in using data to drive your business growth. It’s impossible to find the data necessary to solve an unknown problem or achieve a mystery goal.
Don’t make the mistake of getting caught up in all the things your company could do better. Establish one goal and focus on that until it’s time to move on.
For instance, establishing a goal of raising profits by 7% before the end of the year is concrete and specific.
Track the Right Metrics
Once you know your goals, you’ll know what data is necessary to get there. For example, if your goal is to increase sales by 25 percent, units sold is a helpful metric to track.
However, if your goal is to increase sales through marketing initiatives, tracking impressions might better suit your needs. Ensure the metrics you choose link directly back to your objective so when results come in, they can be easily interpreted and acted upon.
You can track data for everything. To avoid distractions, it’s critical to narrow your focus and only collect what you need.
Pull it All Together
Once you’ve established your goals and the data necessary to reach them, you can make the decisions required to get where you want to be. Understanding your metrics and how they affect the success of your business will allow the data to work for you and help you stay on track.
If you don’t have an effective way of tracking metrics or measuring success, how can you expect our businesses to grow?
Reach Out to an Expert if You Need Guidance
Data-driven decision-making is a powerful tool, especially for startups.
Although data-driven decision-making has been around for years, advances in technology have made it accessible to businesses of all sizes. However, many aren’t yet familiar with how it works or why they should use it.
It’s a skill that can be hard to learn, especially if you don’t have experience with data analysis. Our expert team at Founder’s CPA can help you get started with making intelligent decisions based on your business’ data.
Reach out today if you’re ready to take your company to the next level!
