How to make good business decisions
Most business owners make 100s if not 1,000s of decisions in a week. They often do this unconsciously or based on intuition without taking the time to consider the bigger picture or how these decisions may affect the business or stakeholders in 1 or 5 years from now. What may seem like a good decision now may not be the best choice long-term for your business.
Throughout my journey of going from a self-employed bookkeeper working from home, to building an Australia-wide business employing more than 85 staff, I’ve made hundreds of thousands of decisions along the way. I’ll be the first to say not all of these decisions have been the right one. I’ve learnt to tackle all reasonable doubt before concluding any decision.
When a situation is presented where I need to make a decision, there’s a framework I’ve learnt to follow. Here’s an insight:
1. Is the decision likely to achieve the desired outcome?
Are the projected results from the decision likely to solve the issue? Is it likely to occur or is it just wishful thinking?
Say if you wanted to increase sales and are considering if introducing a new product line is the way to go. Have you conducted market research to see if this new product is likely to be in demand from your target audience, or are you simply presuming there’s a need for it? Although launching new products may seem like a great decision, do your research before to reduce the possibility of being left with boxes of unwanted stock.
2. Is your decision timely?
Whether the decision is right or wrong becomes a little irrelevant if it’s not made a timely matter as the window of opportunity has either passed, or perhaps the scenario has changed in the time it took to come to a decision.
Maybe you have been presented with a marketing opportunity to promote your business at an upcoming event. Whilst this comes at a cost, you’re confident it will bring in some revenue, but it takes time for you to weigh up the cost vs potential income calculation. In the time it took you to dig around to confirm you have the cash available, someone else has grabbed the opportunity and you’ve missed out. This is where cloud-based accounting software is important as it presents you with real-time data which assists when making business decisions.
3. Is the decision transparent?
Has the process of coming to the decision been transparent? Take a step back and ensure that self-interest hasn’t influenced your decision and instead the decision aligns with the overall business goals.
Depending on the scenario, it’s a good idea to involve other stakeholders in the decision-making process. You often become absorbed in your own thoughts and priorities so it’s not always a good thing to make decisions in isolation. Stakeholders may influence your decision in a positive way or at least offer alternatives to consider.
4. Does the decision satisfy both short-term and long-term business goals?
As business owners, we’re often presented with exciting opportunities that we feel we must jump on board with straight away so as not to miss out. Take a step back and do your homework. Consider if the result of this decision aligns with both short and long-term goals of your business. How does it sit with the overall vision of your business? It’s great to take one step forward, but not at the cost of taking two steps backwards a year down the line. Be rigorous when evaluating the pros and cons of the decision. Consider alternatives so that you can be confident that your choice is the right one.
Of course, there’s many more factors to consider when making decision. It’s important as a business owner to acknowledge that not all decisions you make will be the right one. But that’s ok, because you learn from mistakes and know not to make them again. Learn what you did right and learn what you did wrong. It’s all part of running a business and growing both professionally and personally.