Whether it’s the box scores in baseball or the seemingly endless categories of statistics spewed out by Al Michaels during the broadcast of a football game, numbers are a big part of sports. Even though the final score is the only set of numbers that matter, the other numbers and statistics give us a more complete and nuanced picture of the game that was played. What statistics are to sports, analytics are to business. Certain numbers matter more (cash flow) but other numbers can reveal problems and show successes in your dive center.
In the first article of this series, we defined analytics as the discovery and communication of meaningful patterns in data. The data relates specifically to past business performance and is used to gain insight and drive business planning. A number of companies offer services designed to assist small businesses in collecting and utilize data. Focusing on analytics relates specifically to working “on” and not just “in” your business as we discussed in the third article of this series.
Regardless of the specific data you choose to track, how you choose to collect it, and how you decide to utilize the results, here are four facts about small business analytics that you should be aware of (for a more detailed discussion, see 5 Sobering Truths About Small Business Analytics by Dan Norris.
88 Percent Error Rate
A recent study found spreadsheets the popular way to track analytics and their usage is increasing. Do-it-yourself spreadsheets save money and you can customize the format and the information that goes into the spreadsheet. However, the study also found that spreadsheets have an 88 percent error rate. This is due mostly to input errors and faulty formulas used for calculations.
Vanity vs. Actionable
When it comes to collecting and tracking analytics you have to measure what matters. Often, small business owners collect and measure “vanity” metrics such as how many people like their dive center on Facebook or how many people they reach on twitter. In his article Vanity Metrics vs. Actionable Metrics, Eric Ries addresses this issue succinctly, “The only metrics that entrepreneurs should invest energy in collecting are those that help them make decisions,” or what he calls “actionable” metrics. Ries states, “Actionable metrics help us realize we have a problem and point us in the right direction to start solving it.”
Too Much Information
Data available for analysis will soar 44 times over the next decade, aided by the rapid expansion of Cloud services. Knowing what analytics to focus on depends on you and the direction of your dive center. Only you know what numbers drive your business and which ones you need to focus on. Those numbers might change over time. However, the key here is to focus on relevant numbers that tell the story of your business and to focus on problems that need solving. Resist the temptation to track everything.
Work “On” and Not Just “In”
Focusing on analytics relates specifically to working “on” and not just “in” your business. Unfortunately, most small business owners fail to focus on analytics or do not devote enough time to collecting and analyzing numbers. In the third article of this series, we challenged you to spend a minimum of one hour per day working on operational, marketing, and sales processes and procedures that grow your business. Devote a significant portion of this hour each day to analytics.
Remember, regardless of the specific data you choose to track, how you choose to collect it, and how you decide to utilize the results, you need to spend time each day on your analytics. Here are four action steps you need to take:
- Consider hiring a company that specializes in small business analytics; if you decide to utilize spreadsheets to do it yourself, routinely check your numbers and formulas to minimize errors.
- Track “actionable” not “vanity” metrics.
- Focus on relevant numbers that tell the story of your business.
- Build a process and schedule for collecting, reviewing, and analyzing your analytics and stick to it.
This is Part 5 of a five-part series by Patrick Abercrombie on the challenges facing dive retailers in the coming year. See a complete list of the articles in this series or read the series introduction.