For the Entrepreneur, Knowledge Is Surely Power

If you are just starting out and have been running your business for three years or less, you are probably still the “I do everything person,” or at least you still perform 60 percent of your company’s activities. That’s understandable. At the beginning, resources are scarce and we prefer to do a little bit of everything to save money. So yes, you do everything, but how well do you know your business?

I have had the opportunity to live through three different experiences in terms of incubators and business accelerators, including the last one, a contest. In all of them, the focus was on the importance of knowing your business’ numbers, keeping them up to date and knowing every last detail of purchases, sales and transactions.

I’ll give an example using my business, which is fashion. About four years ago, I offered 18 different products. When I came to Reto Zapopan (an accelerator for entrepreneurs), the first thing we did was gather the year-to-date sales data to determine what were the best-selling products in the past year and more. It turned out that 80 percent of the sales were concentrated in five products. What did we do? We stopped investing in the other 13 products that were eating up capital to invest, warehouse space and causing inventory to accumulate. If I had never recorded the sales by type of garment, colors, sizes and prices, I would not have been able to obtain this data that turned out to be very important to me. I would not have been able to obtain this data that forced us to concentrate on the best-selling models. After six months, we were able to offer the most requested products.

It is important to keep a record of your sales according to type of product or service, modality, color or size, sales channel, age of your customers, shipping city and payment method, among others. Once this information has been analyzed, it will allow you to make smarter decisions regarding changes you could make and investments, such as directing your efforts with digital marketing campaigns.

My recommendation: Stop doing everything and delegate so you can focus on more than the day-to-day operational elements of knowing your business and use the information to your advantage. There are many ways to do this but if you don’t have a dedicated system for this particular purpose, Excel never fails.

But what if we don't have data to start making smarter decisions? Well, let's start gathering it. Don't despair, it's worse to never start. Give yourself at least six months of data collection so you can make a first read or, as I like to say, a scan of your business. The real data, however, will be available a year after that because your business will have already gone through all the sales peaks of the different seasons of the year.

What then should you measure? Here are few:

Number and total amount of sales: How many sales did you have in the month? Which of those were B2B or B2C? What was your average ticket? How much did you sell?

Sales channels: If you have more than one sales channel, you need to know how much you sell through each one; for example: physical store, e-commerce, social networks (in general and for each one), and marketplaces, such as Amazon, ClaroShop or Mercado Libre. Once you know that, also get your profit margin per sales channel because surely a product sold through your e-commerce is not the same as a product sold on Amazon. This will allow you to recognize which channels to put more effort into or on which channels to invest more advertising and even if it’s necessary to close some of these channels and pay more attention to others.

Shipments: Keep track of the cities and/or countries to which your shipments go by making a heat map. With this you will also have tools to know where to direct your marketing efforts or even, if at some point you plan to work with a fulfillment company, in which cities it is convenient to have warehouses or not and why as well as where to open a new store.

Sales by type of product or service: Be as specific as you can. If you sell services, for example, measure the contracting hours and the types of services. And if you sell products, divide them by size, color, flavor, types of products and whether they are men's or women's products. This data is very important, since it will allow you to recognize which products or services are those that move your business and which are those that stagnate it, where to invest more and where to stop investing.

Every business is different and you will know how much you can measure but, as I said before, the more you know about your business, the better you will be able to make decisions or even be prepared for a first approach with potential investors.

Let's start delegating and let everyone focus on what they are good at. As business leaders, we should prepare ourselves to look for more and better opportunities, to offer improvements to customers, suppliers and employees. Above all, let's prepare for the future where information undoubtedly is power.