Data-driven business decisionsSmall business owners often grapple with defining how to increase profit margins. Intuitively entrepreneurs generate ideas for business growth.  Sometimes they work.  Sometimes they don’t.

Rather than trial and error, try data-driven methods for business growth decision making. Here are seven tips for transitioning from a gut-feel business model to proactive planning processes.

  1. Recognize – it is NOT your business.When was the last time you shopped and purchased your product or service from your business?  You and your employees own and shape the company, but decisions should be made from the perspective that your business is the customers’ business!
  2. Turn data into information. Numbers isolated on a financial report speak volumes when combined with relevant context and analysis.  Compare current stats with previous years, industry trends and economic conditions to inform company planning.
  3. Depersonalize decision making. Simply put, don’t make decisions about you (the executive or business owner) and what you think. Get competitive data and bring your customers’ voice to the table.  Benchmark progress through the customers’ perspective.
  4. Proactive versus reactive planning. Business sustainability rests on decisions that anticipate consumer behavior and industry innovation.  Reactive companies eventually exit the marketplace.  Proactive companies lead and set standards.  Proactive decisions involve:
    • Well defined goals,
    • Process improvement,
    • Efficient use of resources, and
    • Dynamic staff or business partners and inclusive, forward-thinking leadership.
  5. Create “If-Then” Infrastructure. Studies show that companies with if-then planning adjust quickly to unexpected circumstances. In a constantly shifting business environment, businesses with contingency plans that include “If X happens, we will respond with Y action,” don’t waste time wondering what to do next.  If-then infrastructure examples include:
    • If we get more than 100 responses to our Facebook coupon, then we will hire a part-time associate.
    • If business declines by 10 percent for more than three months in a row, then we discontinue services that generate less than a 25% profit margin.
    • If I am in a meeting, then I will allow voice mail to collect my messages.