As we ease into the 2020s, it’s becoming clear that one of the biggest differentiators between modern businesses is going to be how well they are able to apply data analytics to operations. This appears to be the case in multiple ways. First, the implementation of a comprehensive data operation can help to separate growing companies (LLCs and corporations) from smaller ventures (freelance operations and sole proprietorships). Additionally though, a proper data analytics practice can help some established companies surpass others in numerous respects, and perhaps most notably customer retention.
In the U.S., we actually tend to think of lots of new or growing businesses as being quite small, simply because there are so many of them. We see, hear, and read about independent entrepreneurs and sole proprietorships at every turn, to the point that it sometimes seems everyone we know is at least considering launching a personal business. However, statistics on small businesses from Small Business Trends upend this impression to some extent. According to their numbers, gathered just last year, 69% of U.S. entrepreneurs start their businesses at home — but 35% of small businesses are LLCs, 33% are S-corps, and 19% are corporations, with only 12% remaining as sole proprietorships. This implies that while most of our small businesses do have humble, often one-person origins, a strong majority of them progress to greater levels of complexity, with most making the leap to Limited Liability Company status.
Alongside the potential to better embrace data — which we’ll get to below — there are various benefits for a company advancing in this fashion, and specifically from independent or sole proprietorship to LLC:
State Registration – ZenBusiness’s overview of formally establishing a U.S. LLC conveys that this is largely about registering with the relevant state. It also makes clear that in most of the U.S. this takes only a few quick steps, and can be done entirely online. But the result is that the business can then be listed as an LLC, and operate (from a tax perspective) as an official employer. This sets the company up for growth.
Taxes & Protections – A formally recognized LLC, in addition to having proper tax status for an employer, also does not tend to attract additional taxes the way an independent business or even a corporation can. Additionally, an LLC protects a business owner personally from liability related to assets or legal issues that arise on behalf of the business.
Government Relief – It’s also worth mentioning that in some cases an official LLC will also be eligible for certain assistance programs and benefits that other types of companies won’t be able to access. In 2020, this has become particularly relevant due to COVID-19 and associated relief efforts. Axios’s write-up on self-employment challenges during this difficult time pointed out that certain types of financial relief packages were not available to freelancers or sole proprietors.
All of these are good reasons that small business founders already look to establish LLCs or corporations more often than not. But increasingly, data analysis is entering this discussion as well. Because an LLC is better positioned to attract funding, hire new employees, and generally grow, it is also better suited to invest in a modern data operation. In addition to the benefits just outlined (and in some ways because of them), an LLC owner will, in time, have a greater opportunity to compete via data analytics than most independent entrepreneurs or sole proprietors.
That alone can separate an LLC, and explains how data analytics can help to separate bigger, growing companies from smaller or more independent operations. As to how data operations can continue to differentiate companies from one another at higher levels though, it comes down to what a business can actually accomplish via analytics.
The truth of the matter is that numerous things come to mind. Most evident, for instance, may be the fact that businesses can optimize internal processes by gathering data on day-to-day operations and using it to implement changes in everything from meeting schedules to office layouts. Additionally, as we wrote about in the post ‘How Financial Institutions Are Using Data Analysis for Fraud Prevention’, some companies are using analytics to protect themselves against some fairly serious financial security issues.
Arguably above all else though, data analysis can be used in a larger or growing company to establish better customer retention practices.
Through the use of modern real-time business intelligence & data analytics, companies today can first work to identify target markets. Anything from early sales to intentional market research can be used to collect data points that suggest which demographics are most interested in and/or in need of the products or services at hand. In time, these data points can be organized into a clear picture of where (and with whom) a company is most likely to generate sales. From there, data can continue to play a role in helping the company actually reach out to those target markets. Sales pitches and marketing efforts can be assessed according to the conversions they yield, helping a business to quickly tailor its approach to attract the right customers.
Once conversions are earned and sales are generated, all of the related information can then be retained and further analyzed such that it becomes useful in retaining customers as well. The business will know with extensive clarity what has and has worked on existing customers, as well as what those customers may still be interested in (based on shopping history, conversations, products or services that pair well with past purchases, etc.). Essentially, data analysis allows businesses to create in-depth profiles of customers that make it easier to reach out to and satisfy those same customers moving forward.
Used effectively, this information can help to retain more customers and cut down on abandonment that may otherwise happen during a consumer’s shopping experience. And it can’t be done as well via intuition, creative marketing savvy, or people skills. Those things may work in isolated cases, but a full-fledged effort aimed at all customers requires a modernized data operation.
This is why we’d term data analytics the new battleground of modern business. A proper data operation further separates LLCs and other established businesses from more independent outfits, and then helps those established businesses to compete effectively with one another.
Specially written for LIVEEARTH.com
By: Renesme Jence
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