As a small business owner, you probably hear the term “better business decisions” on a regular basis. But what do those decisions actually look like – and how can you be sure the choices you’re making are the very best ones for your organization?
Entrepreneurs face multiple decisions daily. These range from the simple and seemingly innocuous (like whether to hire more help), to the complex and far-reaching (like how to best allocate marketing funds).
Big or small, however, a good decision-making rule of thumb is that:
- Choices founded on knowledge and reasoning can lead to long-term profitability, while
- Choices founded on unsound judgement, emotion, or incomplete information have put many a company out of business
Every decision you make involves some level of risk that can affect your company’s bottom line for better or worse. But the fewer variables they involve, the easier those decisions are to weigh and put into action.
Identifying and Utilizing Your Areas of Influence
In business, as in every other area of life, there are things we can control, and things that we can’t. Making a point of differentiating between the two not only keeps us from feeling overwhelmed and distracted, it saves a lot of stress and frustration.
Let’s say you’re thinking about opening a new branch. There are any number of criteria that may affect your decision. But in truth, certain influences - while important - will always be beyond your control. And they should take a back seat in your decision-making process, as a result.
In this particular example, such influences might include the possibility that:
- an unknown competitor will move into the territory,
- your suppliers or service providers will change their terms or policies just as you open your new location, or
- the economy will take a turn for the worse
In each of these cases, there are steps you can - and should - take to help protect your business, but what happens in the end will largely be out of your hands. Certain business risks can be mitigated and prepared for, but can never be done away with completely.
At the same time, there are significant decision-making factors that do lie within your area of influence – and that’s where you should focus your time and attention.
Here are some examples that might apply to the opening of a new branch:
- understanding the costs associated with supporting another location,
- researching your potential market size,
- assessing your available resources or loan eligibility, and
- forecasting the new branch’s revenue and expenses
Rather than relying on guesswork about the future, practical decision-making factors like these can be evaluated by examining facts and analyzing the financial reality described in your accounting records and reports.
Creating a Decision-Making Strategy
Better business decisions are informed business decisions – and they stem directly from relevant and timely information. The more disciplined you are about which criteria you use to form your decision-making framework, the more streamlined and productive this process will be.
Every business decision is essentially comprised of analysis followed by action. And that’s why many companies’ decision-making strategies are based on preset procedures that help them make big choices more efficiently.
Creating a tried and true practice for evaluating risk and executing decisions can prevent your organization from getting bogged down by indecision, or coming to desperate or impulsive conclusions. Here’s an example of one such process that may inspire you to establish your own.
5 Steps to Routinizing Business Decisions
- When appropriate, turn to key team members, your mentor, or a small business consultant to help you make pivotal choices. The more knowledgeable and objective perspectives you can incorporate into your decision, the more successful its outcome is likely to be.
- Take the time to consider every option, and make sure you’re exploring facts - rather than making assumptions - as you work your way through each alternative and its forecasted impact.
- Turn your conclusions into tangible goals. Taking action on your analysis can only be accomplished when that action is given a specific direction based on intermittent, time-sensitive steps.
- Implementing your decision may require a combination of personal involvement and delegation. In either case, be aware that accountability plays an important role in transforming business verdicts into desired results.
- Have a process for regularly monitoring, reviewing, and adjusting the strategy you’ve devised to execute your decision. Employee and management feedback, financial reports, and data analysis software may all prove useful along the way.
Once you’ve done your best to set up and follow a solid decision-making process, try not to sweat the choices you make. Hindsight is – and always will be - 20/20. The most any business owner can do is make the best possible decisions for their organization based on the information available to them.
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