The Importance of Data-Driven Financial Decisions

Imagine we are a company implementing a data-driven approach to our sales and marketing strategy for the first time. We ask our analyst for an analysis of our revenue and marketing efforts over the past two years and a projection moving forward. What can we expect to get back?

Obviously, we should expect to get a properly built model in return. Whether it is created through Excel, Google Sheets, a financial analytics platform we purchased, or machine learning - the keys are it must have used historical data, used that data to build out assumptions for the future, and then forecasted off both.

Most importantly however, we should get a story. Tell us where we currently stand and what trends have occurred in the past. Then tell us why they happened. When presenting your forecast, tell us why you expect this to happen next. And finally, give us what key levers we can pull to impact that forecasted future and give us recommendations on course of action. As a small example, we should get this:

“Our sales were highest in Q4 the past two years because companies were resetting their budgets for the next year and decided to purchase our product. Our marketing efforts this year were more effective than past years because we began improved targeting of specific customer types. We have forecasted a lower Q1 next year with the current growth rate and a seasonality component in Q4.

We have found this specific ad type, on this platform performs best in gathering leads. We’ve also found certain customer types perform best in our marketing funnel with much higher close rates. We should start allocating more marketing dollars here, which should increase quality leads. We should target heavier this customer type. With these changes, we can expect an increase of X customers, Y revenue, and Z marketing ROI over the next two years.”

This is where the true benefit of a data-driven approach is born. What decisions can we make and what changes can we implement now to improve our future outcome? The value of analytics is not just the model, it’s true purpose is the insights it can provide.

At Compass CPA, PC we help to implement data-driven decision-making with our clients. With start-ups, it is critical that decisions are made rapidly and accurately. We are your partner that becomes integrated within your team and assist with the key strategic decisions to help the company grow. Our goal is to become experts on your financial data and extract the critical insights and indicators needed to encourage that growth.

Please contact us at [email protected] and let us be a part of your story.