After consulting thousands of small businesses, we’ve noticed many of them focus too much energy on reinventing their business model and not enough time analyzing what’s in front of them: sales data. By simply analyzing historical transactions, small businesses can develop an informed strategy to build customer loyalty and improve the bottom-line.
Back in the day, sales analysis wasn’t that easy. It usually involved one financial expert spending hours, if not days, analyzing data in a spreadsheet. Now, digital technology has made it easier and faster for any business owner to analyze their numbers.
Adopting an analytical approach in running your business can be a huge competitive advantage since eighty percent of small businesses in the U.S. do not take full advantage of digital tools to increase profits, according to a new study by Deloitte.
As featured on the reality show Emprendedores on Discovery en Español, we helped Primera Taza, a specialty coffee shop in Boyle Heights, CA, grow their bottom-line by analyzing the last two years of sales data. In this blog, we’d like to share the 3 most important insights we uncovered and how they can apply to your business.
How Can You Benefit from by Analyzing Your Sales Data?
Benefit #1: You can improve loyalty and marketing by developing a deeper understanding of your customers
If you’re a small business owner, chances are you have competitors and your customers can do business somewhere else if they really wanted to. Your customers are doing business with you because there is something special about what you offer (e.g. product) or how you offer it (e.g. customer service). With Primera Taza, we were able to identify the consumption behavior of their most profitable and loyal customers such as the frequency of purchases, the time of purchases and what they purchased. These characteristics helped us envision an ideal customer so we can target them through Facebook marketing campaigns.
Want to learn how to set up a Facebook ad campaign? Read How to Use Facebook Ads for Your Small Business.
Benefit #2: You can improve your product or service offering by analyzing your sales
Primera Taza was using valuable real estate on their menu to feature products that were hardly selling!! Based on our sales data and analysis, we took a permanent red marker to cross out all the products on the menu Primera Taza wasn’t selling. At first, Chuy got upset because he was emotionally bound to some of the items on his menu. But after looking at the numbers, he agreed to make the cuts: this will make it easier for the customers to find the most popular and most profitable items on the menu.
Also, sales data is not only valuable to know what you should cut but what you should add to your existing product or service offering. Assuming you know your customer well, you can combine your creativity and sales data to develop new products that will have a better chance to be successful. Business is both an art and a science!!
If you’re run a restaurant, you can use these principles in auditing your menu. Read How To Do a Menu Audit.
Benefit #3: You can increase sales and cut costs by updating your store hours
In life, time is the most valuable asset we have. Two decades ago, hard work was enough to be successful. Now, it’s crucial you use data to work smart as well. In the case of Primera Taza, they kept their store open until the evening yet didn’t make enough money to cover their labor costs during the late hours. Also, we found they made most of their money in the morning when people stopped by to get coffee on their way to work. Thanks to this analysis, Primera Taza decided to open earlier and cut their evening hours to increase the sales for every hour of operation.
Do you need help setting up a digital tool to analyze your sales? Register to the Incubator for assistance.
If you’re not analyzing your sales data to manage your business, you’re literally leaving money on the table. Even if your business is doing well without data analysis, it’s only a question of time for other people to find a more efficient way to deliver a similar product or service. We’ll conclude with more astonishing statistics from Deloitte’s study:
“The top 20% most digitally advanced U.S. small businesses earned two times as much revenue per employee, revenue growth four times as high compared with the previous year, and were nearly three times more likely to create jobs, and have an employment growth rate about six times as high.”