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There are over 32.5 million small businesses in the US alone. These businesses account for 64% of the new net jobs created annually. While these statistics are impressive, around 595,000 small businesses in the US close or fail each year. While the rate of new startups exceeds the number of closures, this high level of failure indicates that there is one integral factor that small businesses need to account for.
This integral factor is data. While small businesses generate huge amounts of data each year, they don’t harness the power of this data to make wise business decisions.
The Real Gap
The main problem that small businesses face is the lack of data gathering, interpretation, and implementation. They don’t know about or choose to ignore the power of data. They might also lack an understanding of the term “data science.”
Even if the entrepreneurs know about the power that data possesses, they don’t know if the small amount of data they collect could be of any use to the business. In many other cases, these small business owners only focus their data collection and interpretation on a few domains rather than using it to define the entire picture. So, they majorly use data because of hype rather than a business opportunity.
Another problem that keeps small businesses from leveraging the power of data science is the lack of resources that can help use the data. This includes a lack of data analytics experts as well as technological infrastructure. They also lack tools to maintain data privacy and protection. In this case, it is best to hire professionals like the Mosaic Data Science company who have the skills, expertise, and infrastructure to allow small businesses to make data-driven decisions.
How Can Data Science Help Small Businesses
Before the advent of big data and machine learning, C-suite executives used to make decisions based on the information they were conveyed plus their gut feeling. For big businesses, one’s gut feeling might still work as they have the financial strength to overcome small failures. However, for big decisions, either for large multinational corporations or small businesses, data-driven decisions are a must.
Entrepreneurs are often skeptical about how data might help their small business grow.
Well, for starters, data science is helpful for a wide range of activities, including product launching, customer feedback management, and even increasing business process efficiency. Here are some detailed pointers on how small businesses can utilize data science for success:
1. Understanding the Target Audience
Understanding the target audience is crucial for any business. For small businesses that have just started, assessing the audience’s demographics can help make many decisions.
Data analytics can help identify the segment that will be the best to target for your new product line. Informed decisions can help deliver quick business wins. It also makes sure that the right audiences receive the right marketing messages.
2. Analyzing Client Acquisition Costs
Getting new clients for a business is no easy feat. Many businesses put in a lot of investment to gather customers, only to find that the marketing message was not effective. This means that the money invested in marketing went to waste. It only increased your client acquisition costs.
Data analytics can help implement digital marketing strategies by making use of metrics like cost-per-lead, A/B testing, and pay-per-click. Data analysis also helps gauge the effectiveness of a strategy and reinvest the money into other marketing efforts if the strategy isn’t profitable.
3. Forecasting Seasonal Demand
Seasonal demand surges prove to be quite profitable for businesses. However, if they don’t use analytics to forecast the demand, they could miss out on this opportunity or not profit from it as much as they should. For instance, if a clothing business expects an increase in demand for leather jackets in the winter but hasn’t calculated the numbers, it might overinvest or underinvest in inventory. This leads to an overall loss.
Data analytics can help businesses get a detailed understanding of the seasonal demand so they can enjoy greater profits.
4. Competitive Analysis
Keeping a lookout for the competitors’ strategies is very important to business success. Data related to competitors is a goldmine as it can help businesses to stay ahead and make business decisions proactively rather than reactively.
5. Improving Product Offerings
Businesses operate to solve their customer’s problems. So, it is important that they always keep a check on the needs of their clients and design products that can resolve their problems and fulfill their needs.
At certain times, the business might have a great product idea, but the implementation from production to market requires the help of data analytics. If the business doesn’t use data analytics, there is a high chance of failure that might have a big blow to the business’s finances. Small businesses cannot sustain these blows, which is why they fail.
6. Managing Talent
Talent is a scarce resource. For small businesses, identifying and then securing this talent is very difficult since there are a lot of competitors in the market. 99.9% of US businesses are small, meaning they employ less than 250 people. So, they compete with other firms for a small talent pool. If they don’t use data analytics, they might let go of talent that could be valuable to them. Data analytics can also help small businesses to maintain employee engagement so they can retain talented employees in the company.
7. Understanding Business Problems
Many small businesses believe that they don’t have access to data to understand their problems. However, with the use of publicly available data and their own small database, they can surely identify the trouble areas and make improvements to them.
For instance, a small business can help identify and resolve logistics issues through effective data science.
Small businesses are often faced with more challenges than medium-sized or large businesses. Data science is now become increasingly necessary for all kinds of businesses across different industries. This blog explored how data analytics can help small businesses to stay ahead of the competition, decrease client acquisition costs, and forecast seasonal demand for continued business success.