Welcome to the Business Abundance Podcast, providing
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www .businessabundance .online. Hello and welcome
to the Business Abundance Podcast. I'm here with
Rowan and Ian. He's back to talk about data -driven
decision -making. What's your favourite thing
about it, Ian? Data. I just love how people get
hung up on it. I love data, but some people focus
on the wrong data. What would you consider to
be the wrong data? Any data that doesn't move
forward in your business. There's a great book
called, I think it's The Tiger That Isn't, and
it's talking about how statistics and data can
be used to prove anything maliciously. And in
my experience, especially in the early days of
computers, a lot of advertising companies used
data to confuse and befuddle potential clients
into signing up for less than excellent advertising
campaigns. But now people are a lot more educated
and data is a valuable, valuable tool and it's
everywhere. I think data is quite important to
decision making because we often make decisions
based on how we feel or the last thing we saw
or the thing that annoys us or we like the most.
But sometimes when you go back and you look at
a vast quantity of Accurate data collected in
a suitable way. It tells you something different
or it confirms it. So, um, I guess the, the numbers
don't lie. Unless you manipulate them, like I
was just saying. Which can be done, but generally,
well, the numbers aren't lying there. Someone
else did the numbers very, very much so. And
for someone like me, who's more in the creative
realm than in the data driven realm, data is
reluctantly valuable, if that makes sense. I
work on gut and psychology of sales and in the
moment, and then many, many, many times in my
career, I look back and go, well, that was wrong
in regards to data -driven process. If I had
the data and I understood the data at the time,
or even if I was collecting data, which as part
of marketing and A -B split testing is what you
do in an advertising campaign anyway, that is
data. Uh, I just choose not to call it that if
that makes sense. Yeah. Yeah. No, that makes
sense. Yeah. I, I like it just because it, it
removes the personal bias or gut feelings that
you use. Um, I've worked with a number of people
that don't have budgets, but don't know where
their money's going. Um, and then they don't
really know what to do with it. So there's that
sort of data, or if we're looking at their website.
and they think a lot of people are viewing it,
but they're only getting a tiny, tiny amount
of traffic. There's also that because they'll
say, oh, well, I'm getting heaps of phone calls.
So my website must be really successful. But
then you actually look at a tool like Google
Analytics and you say there's only three people
a day visiting, which might be good. Might be
a very highly converting website. Exactly. But.
Yeah, it just gets rid of that, that gut feeling.
Netflix actually did that. They, when they, you
know, House of Cards? I've heard of it. Yes.
So they didn't even release a pilot program.
They just used all the data from Netflix and
saw that people liked David Fincher produced
movies. And they also recognized Kevin Spacey
was moving towards the political dramas. And
they liked the audience like these. So they released.
house of cards with a hundred million dollar
investment without a pilot program. And, um,
that was a massive, massive success. That's,
uh, that's data working for you, isn't it? Really?
Yes. Yeah. It actually attracted millions of
new subscribers for them. So that was exciting
for them. Would you say they've based a lot of
their, their newer show acquisitions on that,
that method? They're obviously the very low quality.
things that come out, but they are very successful
to their target audiences. It's looking at that
a slightly different way. It's, it's interesting
because the pilot programs just data gathering
anyway. So before they'll be going, oh, we think
an audience likes this. This would be nice. I've
got this great idea. And then now let's go see
if people actually like this idea. Let's get
the data. And then if we can get the data that
says, yes, this is great. We'll get the funding
for it. But in this case, Netflix through its
system had the data. accessible for someone to
look at and go, boom, these things are all good.
Let's put those together. And that's enough data
to make the people who are going to make the
investment happy. So yeah, that's the same thing.
That's a different process really. It's a good
experiment for a business that can gamble, technically
gamble a hundred million dollars and trust your
processes, I suppose. Yes. Well gamblers probably
don't serve us. It's an educated guess. It's
an educated investment, which is a business.
Absolutely. It's not just trow it all on. You've
got a 25 % chance success, let's throw it all
on Blackin. It's also, you look at data gathering
20 years ago, you'd have to have a focus group.
You'd have to sit down and have preview screenings.
You'd have to have a studio audience in that
situation. You end up spending the same amount
of money anyway, if not more and a bit more of
a gamble because One producer over here has got,
or a writer has got an idea that they think the
whole world is going to resonate with and it
turns out the whole world actually thinks you're
a moron. Whereas here's a ream of actual observable,
not anecdotal, observable data that says this
is a good idea. And that's kind of the few modeling
days and process -driven marketing days that
I've... I've worked with you guys with, and you
sit down and it just makes sense without turning
this into an ad. It's just let you sit down and
it's not my realm of sitting there and going,
well, if you do this, this, and this, this will
be the outcome. And 99 times out of a hundred,
if they apply what you've suggested, what you
said is going to happen, happens. Yeah. Well,
looking at it from a small business point of
view, data -driven decisions. Well, you're not
Netflix. You don't necessarily have all that
information available. There's a lot of information.
Um, you've got census data and you've got other
things that you can do and you can, you can measure
your current business and see what's happening.
We, um, find that people have a lot more success
when they look into something and they can see
that stuff's already happening and they fit in
with that. Like you pretty much guaranteed to
get work in that case. You don't actually have
to be that good because there's such demand or
you're in the right place. Whereas you can have
a great idea. And if you don't have the numbers
behind it, it's just very hard to get up and
running. Um, and that's one way to look at it.
So if you're starting out, um, we had someone
the other week do a modeling day, which she just
mentioned. So just strategy of how they're going
to run their business. What's the, what's the
business plan? What's the business model, how
it's going to work, how it's going to stack up.
And, um, they've been working in another business
and fundamentally they're going to do the same
thing. It was a successful business and price
it a certain way, which we don't show everyone
prices, they work. And the first thing we did
is just sort of put their numbers together as
what their expenses are going to be and their
wages and whatnot. And that's pretty easy to
forecast, right? Did all that. And then we looked
at, well, how many hours can they work per year?
And then it pumped out a number of how much are
they going to make based on how they're pricing.
Because we had all that information to do the
projections and they were going to lose $100
,000 a year. Copying existing businesses was
successful. So obviously that wasn't going to
work. So we had to then figure out what changed
to that. those numbers or the data that would
actually make it happen. And then so we did that
and then that we had to change what sort of work
they were doing or how they were looking at it
and a bit of a make a bit of a niche. Um, so
it's an interesting case there. Well, one is
you've got to get the right market and the right
data, but then you've also just got to make your
model stack up just cause everyone else is doing
it doesn't mean for you it won't. Um, and they
were just trying to copy a much larger business.
So they had scale to cover expenses will be smaller.
It doesn't didn't have the scale, so it couldn't
make enough money. So yeah, it's interesting.
A lot of people don't like the numbers and algebra
sucks and whatever. We're never going to use
that. But it's very important. You don't need
to look at them every day, but you need to know
that what you're doing stacks up. Well, sometimes
the numbers put a mirror in front of you as well.
Yeah. That's why people don't like the numbers.
I can speak from experience. That's why I don't
like the numbers. I just want to do that. That
feels good. That limbic. I just, this is the
idea that I've got and I want to do, I want to
follow my idea. And I've lost count of how many
times Rowan's looked at me and said, well, you're
an idiot. Why would you do that? Sorry. I need
to be nicer to you. It's what I need though,
because you know how I communicate. Yeah. So
with the data, I guess we talked, we said before
the right data. Um, cause people can measure
lots of things and it doesn't necessarily mean
it's important. Like Facebook followers and how
many likes did my posts get? Um, Or how many
people followed by TikTok? Oh no, TikTok is banned
in the States. It's back. It's back. How many
reviews have got all these things? So, you know,
like if you have a million reviews and they're
all five -star, you're tracking that and that's
your goal, but you only get referrals from a
doctor who sends you work to you because you're
a specialist. The reviews don't matter. You're
getting the work from doctors that know you and
refer to you and they're not going to look at
your reviews. You're just going to meet them.
pass it on. So, and whereas for a lot of businesses
reviews would be a good thing to look at. Um,
and then Facebook followers having 10 ,000 might
look really good and that might be successful
Facebook campaign. Um, or, you know, whoever's
running it, that might be fantastic, but if they're
10 ,000 followers that don't matter. from somewhere
else or. Look at my graph. Look at the graph
of the interactions and engagement you've had.
That's very, very important, Ron. Yeah. So, but
for some businesses that might be exactly what
you want. Um, so sometimes it's not measuring
everything. It's just measuring a few key things
that, that mean you're, you're doing well or
you're going to do well. Um, and then the second
part to it is just making sure that your data
gets correct. So it's coming through a system
in a clean way, which means it's accurate. Question
then, how would you, how would you identify what's
the important data to be collecting for a given
business? It's quite simple really for me, but
it's probably, we're talking about everyone's
business has been quite broad. It does make it
a bit harder to explain. Um, but it's breaking
it down into the fewest numbers that makes sense
that you can measure. Yep. Okay. So if the numbers
you can't measure, there's no point because you
can't see where you're at against it. So for
a retail business, it probably comes down to
how many transactions you had, what are the average
sale and what's the margin. Yep. That's probably
the financial ones. So it's not necessarily your
expenses. It's not necessarily measuring how
many people you have through the door. They're
probably important as well. But if you're just
looking at an overall what's really going to
make sense, we can either get more customers
and that's great. Or if that's not good, when
we get more customers, we need to look at our
margin or our average sale. So we need more average
sale. So you've got three sort of different areas
you could, you could focus on. Whereas maybe
a trade -based business, it's how many hours
do we have available? How many we're billing
to clients and how much money do we make from
those hours? Whereas people might look at a million
different things around the outside, which might
be something you drill into. But if you were
just looking at how long does it take for us
to see a customer, how long they're waiting,
that's probably not an indicator of improving
in any one of those numbers. But if one of those
numbers aren't doing well, it might be because
of that particular thing. I think just try to
keep it as simple to understand as possible that
when you're, when you're looking at trying to
make a decision, you can clearly change things
and go, that would make a difference. And then
you go look at that area. KISS, keep it simple.
And it might be as a... as I only have some bigger
ones that you look at and then an admin person
might have some different ones, but you try to
keep a pretty simple relation. And then maybe
the person who's in charge of sales or quoting,
they have conversion rates. How many quotes are
you sending out and how many are you winning
and how much money are you getting from it? That
also leads into simple actions as well. So if
you've got simple data without trying to make
it sound too simple, but obviously. The simpler
it is, the easier it is for someone to understand,
then I've got an action that I can take that's
going to affect the numbers. Yep. And it gives
you a bit of a chance to empower people to say,
here's your target for the year. I want you to
get 2000 participants in this program. It doesn't
matter how they get them. It's matters that they
get them. So they've, they've, they know what
they need to do. They know what's happened in
the past. Um, they have a bit of support and
training, of course, but you're not saying, okay,
well, I need you to do this and we're going to
measure that. And then we're going to do this.
We're going to measure that. You're saying. see
how you go, and then you might find that they
fail, you might find that they do it a better
way and other people can implement that in the
team next year. So it's just sort of, you can
break it down to different levels and it's not
over measuring, but it's just making sure everyone
has something simple and easy to understand.
And it's so much easier now when you can automate
a fair bit of that data collection. Yeah. So
that's talking about key performance indicators
with data, but again, it's just setting stuff
that you can measure and Make sure the data going
in. So if it's the people doing the accounts,
they're not putting them in twice, or they're
not putting in the wrong account, or they're
not entered when you're looking at the data.
The point that you're looking at the data is
correct and it reconciles. Or when you're looking
at the sales figures, it's not, you know, got
a whole bunch of times where you've have put
four options in for a customer. So you put them
as four quotes for four amounts. So it looks
like you've quoted four times amount of work.
Yeah, just making sure that you actually got
something set up to make sure that data is clean.
Most CRMs can do that. Most, if you're using
it properly. Yeah, they track it. Or, you know,
you're putting it in differently to me. So I
put my, I put my, what I'm going to charge the
client and I'm going to put in my costs. So it
has a margin. You're just going to put in what
you charge the client because that's what they
care about. So then your margin is always going
to look bigger than mine, but effectively it's
the same. So it's just having, making sure that
whatever process people will put in the data
in it's giving you the report. and you check
the report that it's actually correct. Yeah,
it's like on Google Analytics when the conversion
or the goal is set at a particular, like they're
clicking on the about us page instead of actually
converting to the contact page. That's a good
example of that. Correct. And then if you don't
know too much about the data, you look at the
dashboard and go, oh, we had a hundred conversions.
Brilliant. Fantastic. Yeah. Yeah. Spot on. So
CRM for some people who might not use a CRM customer
relationship management software. Yes. Which
pretty much ordinates what your salesman used
to do with their notepad and their diary. Yeah.
Your contact lists and then all your interactions
if you're using it effectively. So we've got
two ways we can use, how most people can use
the data. But yeah, before you do something to,
this is what should happen and this is what I
can see. And then I'm doing these actions and
this is what I expect to get out of it. It does
that out to what I wanted to do. And then on
the other end, what happened? What did I get?
Um, and if I changed that, what would, what would
that do? So we can then say, okay, in the case
of we need more customers, we look at that and
we go, yep, we're going to do a campaign of ads.
We expect that to increase our customers by 10%.
And that will be a great result. Um, and there
are some businesses we're increasing the customer
by 10 % would be a bad result, um, cause it doesn't
have enough. Yeah. Or the margin's wrong or whatever
it is. So, okay. In that case. Well, we're not
going to do an advertising campaign. We need
to make more money, but it's not going to be
through more sales. We're going to have to reduce
our expenses or we're going to have to sell more
profitable products. I think one of my favorite
stories in that regard is, I heard you talk about
builders and the way that they work their cashflow
and sometimes taking on more work can be detrimental
to your cash flow and the numbers. I've seen
you, it's hard to explain. over audio, but I've
seen you model it out visually on a spreadsheet
and just changing this number over here on the
right, you're bankrupt in two years. Like the
taste of interface. Yeah, and you can do that
because you've got the projection, the budget
that works it out. Yeah, when we worked this
thing out for the person the other week, I think
we looked at how they normally price, which is,
well, how they're going to, but how everyone
price is, which is an hourly rate and then marking
out materials. And it was a difference with just
one person working in the business of $200 ,000
net profit. Between four different jobs, they
priced exactly the same way. If they did that
job all year, which probably the biggest variance
I've ever seen, but it was four examples of possible
jobs they would do. And that was the variance.
And if you don't have the right setup, you don't
know how to do it. You just, you don't know what
you're doing and it's not your fault, but that's
where sometimes you can get a bit of guidance
advice to help you get the right. trail setup,
the right systems, make sure the reports are
correct and make sure that you're actually looking
at the numbers that mean the most. So imagine
if they just followed their gut and hadn't sought
advice. Two years down the track, why have we
lost so much money? What's going on? Yeah. 100%.
Because you feel like you're busy. Yeah. So just
using the data in that case, save them from...
reinventing the wheel and going down the wrong
path. So that was really good. But data, I think
it's pretty good. Um, you can be very creative
and like the data says one thing and you can
sort of skew it around the edges if you want.
And that's your bells and whistles and how you,
how you market things, I guess, like you're saying
people use the data to say this and the data
to say that. Um, but fundamentally you need the
numbers to make sense. And if you don't have
that, then the rest doesn't matter. Yeah, I don't
even have any more to add. That pretty much wraps
it up. Yeah. If you do want a bit of a, an idea
of different tools you can use, I'll list them
in the, in the show notes. I'll just list out
a heap that work for finance or marketing or
workflow. But yeah, otherwise we'll see you next
week. Bye.