The Simple Machine of Analytics

When you started your business, you probably didn’t think so much about the mechanics behind the scenes. But the truth is that analytics drive what you do and how you do it. And probably even why you do it.

My Origin of Analytics

My parents opened a restaurant the year I was born. But not until I became a business owner and a parent myself in the same year did I have an actual appreciation of what kind of bold courage that required. (Seriously… what were they thinking?!?!) 

To be candid, my parents had no business opening a restaurant. They are both farm kids from rural Montana. My dad had been an engineer by education and profession to that point, and my mom was doing office work at an industrial linen supply company.

But Dad was driven to be his own boss and had a particular love for pizza. Mom was up for the adventure. And so Li’l Peetzas came to be early in 1976.

The most unique thing about the restaurant wasn’t the menu specialty item—the Peezarito, or the baby on the back shelf (very literally, I grew up on the back shelf)—but that my Dad wrote his own computer programs to track sales and labor and run payroll.

And that’s the origin of analytics as the third simple machine of business.

Listen to Season 1: Episode 3

Data & Analytics: The Driver Behind Your Actions

A running joke in our family is that Mom’s recipes are hard to replicate because her measure is “you just kind of know.”

“You just kind of know” can work for cooking (although it takes more trial and error than I like), but it’s not a sound basis for business decisions, especially if you want to skip that trial and error part. Intelligent decisions require data. 

In the restaurant business, labor and food cost are the primary indicators of survival. To not know those numbers on an hourly basis almost guarantees a space coming up for lease soon.

By knowing these numbers, my parents ran their restaurant for 13 years. They then took these lessons and data insights to their next business venture, which is still going strong.

But it’s easy to avoid the data, or think that only “large” or established” businesses can get analytics.

The opposite is true. Small, lean, start-up, scrappy, “still figuring this out,” and “we’re too busy growing” businesses need data and analytics even more than established businesses. After all, the little guys have less margin for error.

And even when you are established, having this data helps you keep making intelligent decisions—especially when you need to change.

The Need for Numbers

As a business owner, you need to make decisions based on facts, not opinions. Facts and data help you see what is working and what isn’t.

The real value and purpose of having data and analytics isn’t to be a “yes” man and just reinforce that all your decisions are the right ones. The real value is to show you what ISN’T working and where changes need to be made. And then iterate those changes based on if they worked or not.

The FYI on KPI

Fortunately, data doesn’t have to be complicated. (It absolutely can be, but that isn’t required.)

The first step is to define your survival indicators: What are the numbers you control that are directly connected to ongoing operations? In the early phases of business, this might be the number of people you meet in a week or the number of outbound calls or emails you send.

The fancy name for these is Key Performance Indicators or KPIs.

When defining these, be careful not to overcomplicate it. Start with the metrics you have complete control over. Obviously, the number of leads you receive in a week you don’t have complete control over. But you do control the number of ads you run, calls you make, or events you attend.

Keep an Eye on the Data

When you have your KPIs in place and are tracking analytics, at a glance you can gauge the health of your business. You can spot potential issues before they become real problems. You can proactively make changes or adjustments and see what works.

Less trial and error means more certainty and a more direct route to getting your business where you want it to go. Do you know your survival indicators? If not, take 30 minutes this week and define them. Already have KPIs? Fantastic! Double check that they are still relevant. Either way, share them with me on social.