We live in a digital world, where data is more important than ever and is getting increasingly so. But what is data? To put it simply, data is all about numbers and insights. In a more practical sense, the right use of data will help you track patterns or test hypotheses in business.
To get the most out of data, you need to first check what the most important data for your business is and how to collate that data to review and improve what you do.
What are the key measures to keep an eye on for business growth?
- 12-month financial goals.
- Customer lifetime value (LTV).
- Number of customers needed to achieve the goals.
- Number of leads needed to win those customers.
- What percentage of leads is quality and what is not.
- Website traffic required to gain leads.
How to use data effectively in your business
Once you know your goals and key measurements at each stage, you then need to work out the sources for the important pieces of data. For instance, we know your financial data will come from your accounting system, and if you’re not using a financial system to keep track of your finances, that should be your first step!
The next area is your customer data which should also come through your financial system, or your CRM (Customer Relationship Management) system, to view how many customers you won each month. Information concerning leads should also be in your CRM system but can also be tracked through Google Analytics if it’s set up correctly.
Google Analytics is the best tool to track website traffic, and its sources, demographics, and locations. You should also note how much time they are spending on your website. Google Analytics can also monitor social media activities, track mobile app traffic, identify trends and integrate other data sources.
Calculating your Customer Lifetime Value (LTV)
Once you know your LTV, you know how many customers you need a year, and how much you can afford to spend to acquire them.
For example, if you’re a yoga teacher, and your ideal customer pays $10 per class for three classes a week, and attends classes for 40 weeks in the year, then your annual revenue from this customer is $1200. This customer typically stays with you for five years, so your LTV is $6000.
If you want to earn $180,000 in the next 12 months, which is an increase of $60,000 from the previous 12-months, you now know you need to win $60,000 divided by $1200 (your annual customer value). To put it simply, you need to win 50 new customers. Now that we know how many customers are needed annually, we can see we need 4.2 customers monthly to reach the target.
How do you track data?
There are a host of tools online that can help do this, but the most widely used is Google Analytics. To start, you will need to set up goal conversions for your business. Tracking the conversion rate of your goals will provide ample data on how your website is performing in specific areas.
A low conversion rate means people are not doing what you want them to, while a high one can show what is working well. It’s important to review all this data on a daily, weekly, and monthly basis so that you can determine what areas of your strategy are working on and what needs to be improved, and then take action until you reach your goals
Regardless of where you are in your digital journey, it’s important to recognise that a more strategic approach to your business lies in collecting data and using it to your advantage.