By Bobby Marhamat, COO of Revel Systems
Every year, a startling number of small businesses close down for good. While there is some variation in the reported number of failed businesses annually, best estimates say between 60% and 80% will close within their first two years. Certainly the reasons for failure are as varied as the businesses themselves. But what are the takeaways? And more importantly, how do small businesses thrive where others fail? Perhaps the secrets lie in your data.
Many first time business owners have decided to work for themselves because they have the passion for a particular lifestyle segment, whether it’s delicious food, a great craft beer, or a well made product. For many though, passion is relied on too heavily, and business expertise is seen as a lesser necessity. Without the appropriate tools to understand of what’s really happening in your business, it’s a lot easier to miss the warning signs that spell out danger if left unaddressed.
Benchmarking is one of the greatest tools available to small business, yet all too often owners and operators fail to do so fully or appropriately. Benchmarking is the practice of comparison to a set standard of data over time. While the profits are an attractive data point to track, if you’re only tracking profit, without understanding the components that contribute to it, you’ll have a much harder time understanding why things are changing for the worse when they do.
If you’re not diving deeper into your data, here are some key points to start monitoring to clued into what’s happening.
Total Transactions: Sales might be up slightly, but how’s your traffic? Are fewer people spending more money than they were last month? That might be okay for now, but if you continue to lose customers, it’ll be harder to keep up your revenue.
Average Transaction Size: Again, total sales dollars might be up, but are customers spending less than they were at this time last year? If average transaction size is down by more than a few percentage points, something is happening that you need to research. Have you changed your menu or your product offerings? Has your average item price declined? Customer satisfaction surveys are a great way to collect feedback to find out what customers want, potentially leading them to spend more money.
Inventory Movement: Aside from just collecting customer feedback regarding what they want more of, it’s important to use data to actually see what your best sellers are over time. Does it change or do you have clear winners? Products that take longer to sell are hurting your bottom line. Not only are they taking up valuable real estate, but they also limit your ability to purchase new items as that capital isn’t available to you. If you’re running a food establishment, products that take longer to sell also risk spoiling, ultimately costing you more than they’re worth to you.
Labor: Labor is one of the largest costs for any business, so keeping tabs on any changes can help you ensure that costs aren’t spiraling out of control. Are the labor hours consistent to your need? Over scheduling is a labor waste, but under scheduling can leave your employees overworked, your customers underserved, and you could be subject to overtime costs. While there are times that circumstances will make this unavoidable, managing these variables to deliver the appropriate level of service without creating burnout is a benefit to your business that can’t be overstated.
Making Sense Of Data
For businesses to be agile in a digital era, owners and operators need total visibility and control over operations as well as access to comprehensive and straightforward data to make better, more informed decisions. And now that data is made so accessible, it is key to aggregate the data derived from all business processes to understand your business performance.
But when most companies estimate they're analyzing a mere 12% of the data they have, according to Forrester Research, it is clear that big data is going unused. Thanks to smarter software, data can easily be organized in a consumable, actionable fashion. Before investing in these technologies, it is important to understand why your business needs data. This includes what you want more insight into and where are you seeing anomalies and inconsistencies in you manual reporting. Once these are identified, make your whole business smarter by empowering your employees with data and bringing data decision making into the culture of your workforce.
Another key step towards demystifying data are data aggregator tools that provide a framework for business owners to map disparate systems together through an existing Point of Sale. The impact of the integration is two fold (1) it creates a seamless omnichannel experience for the end user and (2) it provides real-time actionable insights into the processes.
Data driven decision making is key for survival. And to thrive? Make smarter decisions. By accessing comprehensive data, making accurate interpretations, and quickly acting upon these interpretations, you can significantly improve your bottom line and scale your business.
The data will speak for itself, but it is in your hands to listen and make the appropriate adjustments to increase efficiencies and grow revenue. Luckily, it’s easier than ever for business owners and operators to keep tabs on the variables that impact their business. The cloud based POS has simplified this process with a healthy integrated system. Don’t be an avoidable statistic. This is definitely one instance where ignorance isn’t bliss.
About the Author:
Bobby Marhamat is the Chief Operating Officer of Revel Systems, where he specializes in developing and implementing accurate business models and achieving goals through solid leadership and communication. Bobby previously served as the Chief Revenue Officer and VP of Sales at Revel, where he was responsible for the revenue generation processes which includes overseeing business development, marketing, sales, support, operations and fulfillment teams. Bobby also served as the VP of Sales and Marketing at Verizon, as well as the VP of Sales at Limos and the Senior Director of Sales and Advertising Solutions at LookSmart. Bobby holds both a B.S. in Marketing and an M.B.A. in Business Administration from San Jose State University. Bobby also holds a Negotiation Series Certification from Stanford University.
Revel Systems is based in San Francisco with the mission of disrupting and modernizing the state of commerce by providing businesses of every size the tools they need to thrive. Revel works to keep business owners ahead of the game by innovating the Point of Sale market with a quick, intuitive, and secure iPad-based Point of Sale platform.
Image: Revel Systems