Why businessmen use statistics?

Business deals with numbers and with numbers comes risk. There are several reasons as to why a business can fail, but for sure there is no business that runs today without the count of numbers and without a risk-return calculation process. Some might call it financial analysis and other finance related terms, but one should carefully note that these financial terms and financial jargons all have a common backbone – statistics. Statistics gives all the means that are required to calculate the risk for any business and also makes data comparison simpler and more efficient. Statistics helps to interpret numbers better and gives a clearer picture of the scenario. This is very much needed for all sorts of business people as they continually need to know where they stand and how they are performing in the market. Only a statistical analysis can help you to do that.

A very popular analysis done by all businessmen is forecasting. Using time series analysis one can forecast and predict the outcome at a certain time or for a certain period of time. Thus statistical tools help you not only to summarize business data and draw conclusions from them, but can also make reliable forecasts that can allow an efficient business planning and boost up the business as a whole in the long run.

Visualizing and a plain summary of the data is what we call descriptive statistics and the forecast for a given period of time is what we call inferential statistics.

When using statistics in business we generally consider samples. Now a sample is different from the population in the sense that a sample is a subset of the population. However choosing the correct sample is extremely important as it can help in prediction. At the same time a wrong sample – if chosen – can end up in having wrong results and thereby wrong inferences. Defining a variable is very important as they have operational definitions. In statistics a single word can have many meanings and so it is the case with any such functional subject. Thus before carrying out the work it is essential to define variables and pre-set goals.

An important aspect of any business is marketing. Marketing as a myth is known to be the God of any Business. However marketing too, just like anything else, depends heavily on statistics. Statistics help in market trackings, making mixed market models.

Right from the sample study to the final product and commercialization, statistics helps you to keep track of all that is being done and plan what has to be done. Statistics is thus a major part of any business. If the statistical area for a business is down, its market efficiency is very badly reduced and does not perform in the best desired way. Business models have to be dealt very carefully as there is a lot of monetary value attached to it. If not analysed in the proper way nuisances can be created, eventually resulting in a disaster for the business itself. This is why exactly businesses use statistical models. Just working on financial terms does not do all the work that is required.

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