Facts, trends and opinions all play a role in a small-business owner's decision-making process. Whether you're trying to decide the best way to grow your business or you're troubleshooting a productivity problem among your employees, data can provide useful insight. However, these nuggets of information don't appear out of thin air. Instead, business owners need to proactively engage in the data collection process in order to have these details ready for analysis when the need arises.
1. Collect Data as Much as Possible
One of the most disappointing phrases you can hear as a small-business owner is, "We never collected data on that." You might have a brilliant idea about a variable that's affecting sales, but there's no way to quickly confirm your hypothesis if no data exists. The more data you have at your disposal, the more analyses you can run to find relationships between two or more variables. Data also gives you the opportunity to segment your customers for marketing purposes, to reduce costs by not overstocking items and to increase productivity around the office.
You never know when a data point will prove valuable. Data can offer your small business so much value that it's even worth hiring a data analyst to help translate information, to avoid biases in every method of data collection and to provide recommendations for collecting even more data for future analysis.
All businesses can benefit from collecting and tracking their customers' demographics and contact information, sales statistics, brand discovery data, web traffic and usage, lead generation and follow-up results and much more.
2. Focus on Qualitative and Quantitative Data Collection
There's a tendency to think about data only as cold, hard numbers. While quantitative research does provide extraordinary value thanks to its ability to be manipulated and evaluated through tried-and-true mathematical equations, qualitative research reveals the heart and soul of your customer base in a way that numbers can't. It's possible to have the best of both worlds by conducting surveys in which respondents choose from predetermined multiple choice answers, thereby allowing the selection frequency to be analyzed.
For best results, obtain data in a variety of ways. Ask open-ended questions on surveys along with multiple choice queries and demographic-related data collection. When working with qualitative methods in particular, have the same answers or data sets interpreted by different people in order to avoid a subjective bias.
In addition, data should be collected on a regular basis in order to look for trends over time or abrupt changes. Don't wait until your revenue takes a hit to start asking your customers to share their opinions. Make sure it's easy for disgruntled customers to contact you but also get in the habit of sending survey questions to all customers to ensure you receive positive feedback too. Otherwise, you could end up making decisions with distorted or incomplete information.
3. Know How to Prevent Common Biases
Subjectivity isn't the only common bias that can skew your data interpretation and paint an inaccurate picture. Before you get serious about primary data collection, make sure you'll be collecting quality and accurate data by avoiding as many statistical biases as you possibly can. For example, it's important to consider the selection bias, which occurs when you think you're working with a random sample but have forgotten an important variable that connects each selection.
For example, if you sit down at a track meet and ask the people sitting behind you which runner they're rooting for, you'll likely get many repeat answers because fans tend to sit together. On the other hand, if you asked the same question to every tenth person walking through the gate, you would have a much better chance of collecting a random sample and estimating the most popular runner of the day. Beware of the self-selection bias as well, which occurs when you send out an optional survey. The people who choose to take the time to answer your questions are more likely to have a strong opinion about the subject, which can give you a false average.
A recall bias prevents survey respondents from accurately remembering how they felt at a certain time or how events transpired. For example, they might forget having been a little frustrated while searching for a product and may skew their response in a more positive direction. On the other hand, if the questions aren't framed in a neutral way, then observer bias can influence the answers. Whether you're new to qualitative data collection or not, take the time to review common biases and create a collection method that avoids them as much as possible.
4. Beware of Correlation vs. Causation
When analyzing data, one of the major questions you'll be asking is, "Does this cause that?" Do discounts cause revenue to increase? Did a new competitor cause your revenue to decrease? Did that viral blog post cause your web traffic to increase?
Knowing what causes favorable and unfavorable outcomes helps business owners attempt to repeat success or avoid failure. However, one stumbling block that can occur during the process of gathering and analyzing data is mistaking causation with correlation. Causation means one factor (such as discounts) directly affects another factor (such as revenue). In mathematical terms, the cause is known as the independent variable, and the effect is called the dependent variable (its outcome depends on the independent variable).
On the other hand, correlation occurs when two [dependent] variables have a linear relation to each other, but it's not necessarily causal. A third, independent variable may be the "cause" behind both dependent-variable movements. For example, rain causes the creek to rise and the pastures to get muddy. The rising of the creek and the muddying of the pastures are correlated, but it would be incorrect to say the mud causes the creek to rise or vice versa. Correlation is often mistaken for definitive causation.
In the business world, you might run a radio ad that causes your web traffic and foot traffic to increase, but you cannot decisively conclude that the web traffic caused the foot traffic or vice versa without additional data.
5. Use Technology to Your Advantage
Thanks to technology, you don't have to know everything about data and statistics in order to crunch the numbers and draw conclusions. Use data analysis software to turn raw data into statistics that are easier to interpret. In fact, you may already have access to a lot more data than you realize thanks to your current project management, customer relationship management, content management and marketing tools. These often have built-in analytics that help you make sense of the data collected and stored within the tools themselves.
If you have a WordPress website, for example, you can see some statistics about page views on the dashboard. However, a far more powerful option is to connect your website to Google Analytics and Google Search Console to track user acquisition, user behavior, search queries that help people discover your website and much more. Virtually all social media platforms also have built-in analytics that can display your audience's demographic details, track post engagement and help you determine which of your posts prove most popular. Another example includes email marketing software, which will tell you the open rate of your emails and how often people click your call-to-action buttons within, allowing you to craft similar emails in the future.
Use tools like Zoho Survey or Google Forms to create free online surveys and easily organize the results. Distribute them to your online customers for quick feedback. If you need to cater to a super busy audience, try a simple poll app like Poll Junkie or Easy Polls to ask your audience just one or two questions. In short, if the data doesn't already exist somewhere, you can easily collect it with surveys, polls or even face-to-face interviews.
6. Organize and Store Data Effectively
Data doesn't organize itself, especially if you're collecting it via open-ended surveys or face-to-face interviews. In order to easily make sense of the data, it needs to be well-organized and stored in a way that would allow another team member to find a particular data point in the future. Start by creating a spreadsheet to organize the results of a specific survey. If you are able to download a data report from an existing tool, take the time to make the spreadsheet look more readable: widen the columns, bold the headers and sort the data by the most important variable.
Next, develop a folder hierarchy system for organizing all your reports. You might create main folders for each department within your business, additional subfolders that narrow down the type of data and a final folder representing a specific time period. For example, you might have a hierarchy like Marketing > SEO > Traffic Acquisition > 2020. Next, develop a naming system for all of your files so that you know exactly what time period is covered within, from where the data came and any other pertinent information.
If you store your data on a hard drive, be sure to regularly back it up. Losing data means losing months of hard work and the opportunity to make an informed decision in the future. For best results, back up your data to a cloud-based storage service, like Dropbox or Google Drive. Cloud-based storage also makes it easier to collaborate with employees, contractors, consultants or agencies.
7. Consider Selling Your Data
If you're serious about asking research questions and collecting data, you might be sitting on an untapped revenue stream. It's legal to sell data as long as you're the one who generated it and you have permission from individuals to sell their personal information. You can monetize your data by selling it on a marketplace or selling it directly to other companies as secondary data. If your data is high quality and reliable, you could potentially make enough money to pay for your ongoing data collection and market research.
8. Hire a Data Consultant or Analyst
Finally, there's no shame in admitting that you feel a little overwhelmed by the different types of data collection and analysis. As a small-business owner, you're often faced with trying your hand at every aspect of business management until you develop the budget to hire an expert. Do your best to collect and analyze data from the very beginning of your entrepreneurship, but plan to hire a data consultant or analyst to create more strategic data collection methods when your budget allows.
A data consultant could give you a competitive advantage by revealing insight that will allow you to increase your revenue, so consider it a cost-effective investment that will pay for itself. Alternatively, if you plan to hire an in-house marketing expert, look for candidates who have a data analysis background since data often informs marketing efforts. In short, you don't have to go through the trial-and-error "growing pains" phase on your own. Whether you hire a consultant, a short-term independent contractor or a full-time employee, bolster your business with a data professional.