Therapists versus CFOs, and taking advice from both
Starting a business requires a whole lot of intuition. The idea that people would stay in strangers’ homes instead of hotels, and even pay for the pleasure of doing so? That must have come from a pretty damn inspired place, if you ask me.
But what often happens very quickly at small-but-successful companies is that, while they do try to retain their intuitive approaches to problem solving, they start letting the data inform their actual decisions. They get obsessed with conversions, marketing metrics, financial ratios, or whatever else makes sense in their context, to keep track of how well they’re doing.
This is not news – data-driven decision making has been around for what feels like forever, yet many entrepreneurs struggle to actually implement it early enough, and run mostly on intuition.
Why’s that a problem?
In the life of an entrepreneur, there are lots of things that feel good – and lots that don’t.
A customer who loves us saying something really nice. A piece of media coverage that says you’re a genius. An influencer du jour wearing your sneakers. Finance Leaders featuring your newsletter, unprompted (blushing).
But then, you have that supplier who’s making it clear he has bigger, better customers to give a damn about your stock being delivered on time. A grumpy customer sending you angry emails. Someone you wanted to hire saying thanks but no thanks.
If you run things on intuition alone, it’s easy to make a lot of mistakes based on how you respond to both the high highs and the low lows. Enjoying the press so much that you spend all your time chasing media opportunities, letting the product development slide in the process. Assuming an unhappy customer is a representative of a whole segment, and deciding to stop marketing to all of them.
Feeling your feelings is recommended by ten out of ten therapists. At the same time, keeping an eye on the data is recommended by ten out of ten CFOs. So what you need to do is both.
How much impact does an incremental piece of press coverage have on traffic, sales, business development, or hiring? What is the cost of chasing it, and what else could be done with that time or money? Is an unhappy customer uncovering a wider issue, or is it just an isolated incident? There is no way to know without looking at the data.
If you currently don’t use data to make decisions, I wrote about starting to do so here. Note the subtle but important difference between “use” and “have” – just about everyone who runs a business these days has quite a lot of data about it, so the problem often lies in not using it to make good decisions, as opposed to just not having it.
There are days when writing this newsletter is a struggle. I need to look at the metrics and remind myself that the average open rate these days is 52% and there are currently 4.8X more of you subscribed than when I started in July. My feelings are both valid, and not the whole picture. Sometimes, the latter is much more optimistic – thanks to you.
Love and cash flow,
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