Truth Bomb: You're NOT as data-driven as you think

Hey there and welcome back for another bite to chew on.

Today, we're talking about (probably) one of the most abused buzzwords in our industry.

"Data-driven"

It's one of those things every founder in the world tells themselves they are…

But once you start to peek a bit under the lid and ask a few questions about how they're using data to make better decisions…

… then you find out they're actually making decisions the same way they choose which ice cream flavour they want.

All based on gut feeling.

And no understanding of data at all.

We talk to many DTC founders - and unfortunately, this is a trend we see over and over again.

On the flip side, we also see that founders who ARE actually super data-driven, like Ben Yahalom, absolutely crush it every day of the week

So in this newsletter - we'll talk about how you can become more data-driven and actually start to make decisions based on data - and not gut-feeling

Let's geek it out!

Step 0: Going from messy data to cleaned, structured, and organized data

One thing is owning a lot of data.

Another thing is being able to understand that data properly

… and a completely third thing is being able to take that understanding of data and turn it into actionable insights

The image above describes it pretty well. Most DTC founders are still stuck in one of the first three levels.

The first step you need to take in order to progress is investing in either a SaaS or employee that can help you gather all of your data and visualize the developments in different metrics.

Step 1: Having accurate data in real-time

As founders, we need to have our finger on the pulse - at any point in time.

We strongly believe that "only the paranoid" survive in this business - and especially in this climate…

And therefore

We can't guesstimate how our CAC is developing per marketing channel…

We can't wait a week for someone to make an inventory report and tell us when we'll run out of stock…

We can't wait a month for a bookkeeper to tell us whether we're NET profitable (after fixed costs) and how our cash flow is looking…

It's just not an option. Period

If you still haven't found a way to get ALL of your data in a blink of an eye - then you need to look into tools such as Finaloop for real-time bookkeeping, cash flow and financial reporting and TripleWhale for real-time marketing data.

Finaloop even offers you a 14-day free trial (no credit required) - so there is no reason not to test it out.

We promise you - it's going to be a game-changer for you. It surely was for us.

Step 2: Learn how to speak "data"

If you dumb it down, then data analysis is basically a process of asking questions and looking for answers in the data.

If you want to learn how to speak "data", then there are two things you need to work on:

1) Your ability to ask the right questions (which will then point you to the correct answers)

2) Your ability to tell whether the answer you've gotten is a good indicator of reality or whether it's just due to pure chance

The first part comes with experience.

The more experience you have within a field - the better you'll get at asking the right questions

But… even if you are less experienced - you can still use curiosity to help you find the right answers.

For example;

How is the development of this metric in relation to this metric, looking at it Year-Over-Year?

How is the LTV of this group of customers (cohort) vs that group of customers?

What is the distribution of orders through Amazon vs Online store, Month-Over-Month and how is that affecting the bottom line?

These are all examples of questions that are super relevant to know.

And you can relatively easily get to these questions if you are just a little bit curious…

Step 2.1: Learn math

Even though most of you (including ourselves) hate mathematics from the bottom of your heart - there's no way of escaping how important it is to learn.

Many founders underestimate this - and as a result, they make wrong decisions that could easily have been avoided.

Let us give you a quick example:

Say you're running an A/B test (which, hopefully, you are)

An A/B test is fundamentally a concept that marketers have stolen from statisticians…

When running your A/B tests - there are a bunch of weird numbers, such as confidence level, P-value, statistical power, etc that you'll need to know…

Why?

Because otherwise, you won't be able to tell whether your test result is actually accurate - or whether it's just due to pure chance.

And therefore - you might spend tons of money implementing a test variant that's actually not going to move the needle AT ALL.

We don't want to be your math teachers, but we want to underline the importance of having a good understanding of mathematics and statistics - so that you can make more of the right decisions.

Step 3: Building a data-driven culture

A data-driven culture starts at the top…

If you, as the founder, aren't using data to make and inform your decisions.

Then nobody on your team will.

Period.

Besides that, you'll need to embrace using data to back up arguments in every decision.

So, whenever a team member suggests that the company should move in this direction, they must back it up with data.

And again - just like anything related to culture, it starts at the top.

Meaning if you accept a decision that somebody on your team has presented without having any data to back it up…

Then you've set the standard right there.

Get pumped for Season 2 of Chew On This

THANK YOU!

If you’ve made it this far, we just want to say “THANK YOU” from the bottom of our hearts for reading along and following our journey

We hope you enjoyed this newsletter and look forward to “seeing” you again on Sunday

All the best
Ron & Ash