In a data-driven business landscape, leaders rely heavily on analyzing business metrics to make informed decisions. However, understanding the many factors and considerations involved in interpreting these statistics is crucial to an accurate analysis.
Below, 18 Council for Young Entrepreneurs members share their tips to help a leader ensure their analysis of business metrics delivers accurate and actionable insights. Using these strategies, a leader can determine whether the data indicates that he is on track or whether he should be willing to question initial perceptions, change strategic courses, or take proactive measures for future success.
Contents
1. Start with your annual goal
Metrics for a company are all related to the overall annual goal and ideally setting quarterly goals. Most companies measure too much or too little. By not starting from statistics, but from the general goal, you can break down relevant statistics. I use mental models like Occam’s razor to decide what to measure. I eliminate most of the stats to keep tracking simple. – Libby Rothschild, Dietician boss
2. Make sure each team’s stats match broader goals
When analyzing business metrics, leaders should be aware of the pitfall of “local optimization.” This is a state in which departments or teams optimize their individual metrics without focusing on the overall business objectives, or even at their expense. To avoid this, leaders must ensure that each team’s analyzed metrics are aligned with broader business goals through continuous improvement. – Vikas Agrawal, Infobrandz
3. Bring in domain leads to brainstorm
When analyzing various business metrics, leaders need to land the leads from the respective domains. This will help them better interpret the findings and extract appropriate results from the data. Since domain leaders are more aware of efforts that have led to certain results, brainstorming with them can help leaders devise appropriate strategies and action plans based on the results obtained. – Chris Closowski, Simple digital downloads
4. Check your statistics regularly
When was the last time you checked your stats to understand the metrics that really matter? Checking your stats should be as routine as checking your software or subscriptions. One of the biggest mistakes you can make is making decisions based on outdated statistics. Understanding and regularly mapping metrics that really matter is essential to understanding performance. – Matthew Kapala, alphametic
5. Identify and eliminate vanity stats
Vanity metrics may look good on the surface, but they don’t really tell you anything about your performance or provide any actionable insights. It can be misleading to include them in your analysis because they seriously affect the overall results. So beware and drop them from the process before jumping to a conclusion. – Jared Achison, WPForms
6. Be wary of substitution
Surrogacy is the tendency to replace abstract strategy with statistics. To avoid surrogacy, involve strategy executors in strategy formulation, use multiple metrics, and avoid tying incentives to a single metric. For example, obsessing over your Net Promoter Score will pressure the customer service team to prioritize the score over solving customer issues, leading to even more unwanted scores. – Devesh Dwivedi, Devesh Dwivedi
7. Make sure to measure accurate and complete data
Having statistics is crucial, but keeping statistics is of no use to you if the data you report is inaccurate. For example, if you have a metric of three customers a week who convert, that’s great, but if you don’t know how many customers called that week, you’ll end up with inaccurate reporting for that metric. Relying on gut reactions or insufficient data can be harmful. Statistics are great, but data doesn’t lie. – Alex Austin, Right Law Group
8. Pay close attention to gross margin
When analyzing business metrics, employees should always focus on gross margin because the higher this margin is, the more your company can earn from every dollar sold. This metric is important because it reflects improved processes and production, and your company’s productivity translates into sales. Make your sales and production processes more efficient. – Josh Kohlbach, Wholesale Suite
9. Consider the context of business statistics
It is essential to understand the underlying factors that influence the data and to interpret the statistics in the larger context of the business. This can change the way results are viewed by providing a more accurate picture of the company’s performance and highlighting areas for improvement. – Andrew Saladino, Kitchen cabinet kings
10. Determine the ROI on expense items
When you look at expense items, ask yourself what the ROI is on total sales. Professional services often spend time on tasks that don’t really matter to the client or are not communicated. Ask yourself – from the customer’s point of view – what is important, what you are spending your time and money on, and whether the ROI increases the bottom line or the customer experience. – Givelle Lamano, Oakland DUI Attorneys
11. Take external factors into account
Changes in consumer behavior and market trends can all affect metrics, making them appear better or worse than they actually are. By taking external factors into account, leaders can gain a more accurate understanding of the data and adjust their strategies accordingly. For example, a decline in sales may not be due to internal problems, but rather a shift in consumer preferences. – Adam Preiser, WPCrafter
12. Compare your statistics with those of similar companies
Context is important. When you analyze business metrics, you want to compare them to similar metrics (if known) from similar companies, rather than companies outside your industry or that are much larger or smaller than yours. Otherwise, you won’t get good information, and basing strategic decisions on that information can lead your team astray. – Andrew Schrage, Money Crashers personal finance
13. Pay attention to the source(s) of your data
It is important to ensure that the data being analyzed is accurate, reliable and relevant to the specific part of the business being examined. Leaders should consider the methods used to collect the data, as well as any potential biases or limitations in the data set. Paying attention to the source of the data makes it easier to make more informed decisions. – Pratik Chaskar, spectra
14. Use statistics to set goals for each team member
Don’t forget to set micro-goals, or “rocks,” for each team member when reviewing business metrics. These small performance indicators should lead to support for larger business objectives. If you fall short of your points, you can view each team’s stats and determine where you need to improve. – John Turner, SeedProd LLC
15. Avoid analysis paralysis
It’s easy to get caught up in data and statistics, but leaders need to remember that they can’t analyze everything. Focus on the stats that matter most and don’t worry about the little things. This enables leaders to be more agile and responsive, as they can quickly pivot and adapt their approach based on the key metrics that matter most. – Abhijeet Kaldate, Astra WordPress theme
16. Take a holistic approach
Leaders must take a holistic approach. Focusing only on short-term financial metrics without considering the long-term impact on employee morale, customer satisfaction, or reputation can lead to skewed results. Understand the interconnectedness of different metrics and how they collectively contribute to the overall health and success of the business. – Candice Georgiadis, Digital day
17. Don’t be afraid to drop projects if the statistics dictate
It is important to keep in mind that statistics can change based on the situation. For example, if you start a podcast with a goal of getting 1,000 subscribers in a quarter, but you only get 50 in two quarters, it’s fine to end the show and delete the metric. Successful entrepreneurs know that their metrics are vital to determining whether an experiment is worth their time. – Chris Christopher, Monster Insights
18. Work on identifying trends
Business leaders need to remember that data can change over time. In other words, you shouldn’t use a single analytics snapshot to drive your entire marketing strategy. By consistently reviewing the data and identifying trends among your audience, you can make informed, data-driven decisions. – Daman Jeet Singh, FunnelKit
