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Suffering from Analysis Paralysis? Avoid Data Overload to Keep Moving Forward


There’s never been a better time to be an entrepreneur. Social media and online advertising have made it possible to reach far more people, with far less effort and investment. Communication tools have streamlined networking and client contact while cloud computing has allowed companies to operate without brick-and-mortar buildings or physical offices. You can set up shop wherever you’re most comfortable and productive, while still delivering high-quality services to consumers and clients.


For all the ease and innovation today’s technology has introduced, it has also brought brand new complexities. One of the most insidious of these is the risk of virtually drowning in all the metrics delivered by our multiple information-gathering tools. All the reports that are generated and delivered on a daily, weekly, monthly, and annual basis undoubtedly have value to somebody, but not necessarily to you and your operations.


While smart business leaders rely on relevant information to guide them, the embarrassment of riches today’s data tools provide can confuse and unnecessarily complicate the decision-making process, making it difficult to know which to use and which to discard or disregard. Instead of being selective it’s easy to fall into the trap of believing that the more information we have, the better. This leads to analysis paralysis: we start out wanting to check on a single data point and end up analyzing every single one.

Analysis paralysis is more than just a productivity killer. Trying to process and use too much data can negatively affect your business’ outcomes, in part because of over-analysis and in part because of the inevitable fear that you’ll make the wrong decision. Studies have shown that the more options people are given, the less they are able (or willing) to make a choice. This is especially true for entrepreneurs who may have only a vague understanding of how specific data points may apply to their own business or business goals.


Key Performance Metrics for Small Businesses

Every business is different, but there are some metrics that are almost universally essential to understand and to track for day-to-day decision making. These include:


Financial Metrics


o Sales revenue – How much money your business takes in from product or service sales over a given period of time.

o Net profit – The amount of money you have after you’ve subtracted all expenses from all revenue. These expenses include interest, operating expenses, and taxes.

o Sales growth – How much your sales have grown in total number of sales from month to month or year to year.

o Payroll – The cost of hiring every employee

o Cost of goods sold – The cost to deliver a single product or service



Marketing Metrics


o Average monthly leads – The number of leads generated each month during a stable period of time. This statistic helps identify anomalies (plus or minus) and can help identify causes and solutions.

o Average lead conversion rate – The number of leads that are converted to sales. Calculated by dividing total conversions by the number of leads and then multiplied by 100.

o Customer lifetime value – The total amount of money a customer will spend on your business during their lifetime.

o Customer churn and retention rate – Churn is the percentage of customers that leave in a given period of time. It is calculated by dividing lost customers by the number of customers you had at the beginning of the time period, while retention is the opposite, calculated as the percentage of customers that you have at the end of a time period divided by the number you had at the beginning.

o Customer satisfaction – Calculated in numerous ways, but most effectively through a one-question survey asking customers the likelihood that they will recommend your product, service, or business.


Of course, understanding what each of these metrics is does not equal knowing how it applies to your particular business, let alone how you should use the information to drive your decisions. It also doesn’t address the many other data points being delivered, or the time that it takes for you to consume the information rather than attending to your other important responsibilities.


How to Address Analysis Paralysis

One of the most effective methods of countering analysis paralysis is to remind yourself of why you need the information in the first place and then limit your attention to the metric that answers your specific question or that guides you in the direction of your goals. Another solution is to set a limit on the amount of time you allow yourself to dedicate to data, which brings us to our final recommendation: bring in another pair of eyes that has a thorough understanding of what the metrics mean and how they apply. That’s where a fractional finance team comes in.


Financial Experts Understand What Impacts Your Bottom Line

You started your business based on your own interests, passions, and skill set. It’s the rare entrepreneur whose tool kit includes the kind of financial literacy that’s needed to interpret all the data that’s delivered to them. That’s why you’re best served by bringing on the Fractional Finance team from PPS Solutions. We’ll take the time to understand your business and clarify your goals, then interpret your metrics in a way that drives savvy decisions. We provide high level, data-driven guidance that frees business owners to apply their talents and do what they love without being distracted or immobilized by analysis paralysis. With our help, you can move forward with confidence.


Contact us today at www.ppsfinance.com to set up a time for a consultation

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