There are many types of statistics. At its core though, statistics is; according to the American Statistical Association; “Statistics is the science of learning from data, and of measuring, controlling, and communicating uncertainty; and it thereby provides the navigation essential for controlling the course of scientific and societal advances (Davidian, M. and Louis, T. A., 10.1126/science.1218685).”
Business Decisions and Statistics
Using statistics for business decision-making is not new. In fact, it’s centuries old. Any time a farmer kept a record of what crops sold at a given price that he then used to adjust his planting the next year, used statistics for a business decision. Today one need only search the database available on the USDA website to access statistics from over 70 years ago. (USDA, 2015) No one can see the future or what it holds. That being said, statistics; if used correctly and with good valid data, it can help eliminate as many guesses as possible to guide the future of a given business.
Let’s say, for example, you are a business owner making and selling a widget. The goal is to sell as many widgets as possible at a price that covers the cost of materials, labor and overhead that are needed to make the widgets. Statistics will ensure that you have enough information to make decisions that will have a positive impact your business and minimize any negative forces that are perhaps out of your control, i.e. gas prices or severe weather.
Perhaps you want to own a bakery. Setting up a system and process of statistical analysis from the beginning will assist in knowing how best to run the business. This includes how many staff to hire and at what wage for how many hours. Or how much food is needed to buy for a week so production can continue to make great pastries. Or what prices to sell the pastries at to not only cover the costs for food,