Why Your Small Business Needs To Understand Analytics

With so many small companies failing, they need to turn to analytics


If you look at small business studies, you will see that after 4 years of operation, around 60% of newer businesses remain in operation. Which isn't that bad, except for that fact that among the 40% that fail there are numerous situations where a lack of analytics was a key reason for their departure from the marketplace.

Clearly, then, there is a need for as much analysis as a company can afford to help drive strategy and boost operations. The question, then, is what type of analytics are germane for the bulk of the small businesses striving to get ahead in the marketplace?

Here are some types of analytics that can make a difference in your bottom line- making it easy to see why your business needs to understand analytics in order to grow:


Return on investment has long been used by larger companies to justify moving forward with projects that may be able to save them time and money. The idea is that if the overall cost of applying a new strategy or way of doing things ends up being less expensive or providing more benefits, then you will end up with positive ROI and your project is worth doing. From the perspective of a small business, ROI is a type of analysis that is not expensive or difficult to apply to projects. The key is to ensure you are accurate when you break down each part of the processes that you are measuring. The more accurate that you are, the better your analysis will be of the changes that you intend to make.

Without ROI applied in your business, it can be the case that you end up with hidden costs that override the benefits of the new project at hand.

Marketing targeting

The majority of small businesses do well generating leads and customers via their bricks and mortar presence and the internet. But when it comes to getting new customers, there is a sales funnel that can require that you expose a lot of people to your product before they come into your establishment ready to purchase. If you have never figured out how much it costs for you to bring one sale ready customer into your business, then you are probably not doing as much analysis as you need to. By way of example, in a competitive market, one language school system was spending almost $10,000 in marketing and sales costs to bring one new client in to purchase their services. They later went out of business, not because they didn't know this or have any sales training, but because it was fairly unsustainable for them to have to spend so much.

Which brings us to the point that if you want to cheat the sales funnel and target people that are likely to purchase your products, it will cost some money to purchase data that contains target audiences pre-filtered. A danger for small businesses that do not do enough analysis is to not spend the time that they need actually defining the attributes of the customer that they are looking for. Those businesses can end up with a problem seeing a true return on their program investment because mistargeted clients are simply not as inclined to respond.

Payroll taxes

One of the banes of the existence of small companies that have limited resources is to figure out the accurate amount of payroll taxes that they need to pay for employees. In the past, it almost required a degree in accounting to be able to consistently meet government requirements to pay in a timely fashion. Of course, if you do not pay payroll taxes on time, the US government is only too happy to levy large fines that can sink your business. One alternative, that has always existed, is to use a payroll service that specializes in ensuring that your payroll taxes are always calculated accurately. The fear of getting it wrong caused these firms to balloon in size over the past few decades because if there is a problem, firms can normally avoid penalties by relying upon service agreements that limit their liability.

Recently, however, small business bookkeeping software companies have entered into the field. They started offering payroll tax packages that were developed alongside IRS and local state requirements. The net result is an ability for small businesses to analyze their payroll needs in advance. Then, with no surprises on the horizon, they can use their normal bookkeeping software to pay the obligations electronically. The shift does move liability back to the small business- but in practice, if you are willing to do some analysis, you can save money and manage your payroll taxes more efficiently.

Small businesses are the backbone of the American economy. Without enough analytics being done during the course of everyday operations, they cannot compete as well as they could if they applied the resources necessary to move forward. As Steve Jobs once said, "leadership is being able to articulate your vision." If your vision is cloudy, your results will reflect that.


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