Posted in Blog, Boost Your Brainpower, Entrepreneurship, Intrapreneurship, Lead, Self confidence by Jo North
Better business decisions
The business decisions you make are the stepping stones towards achieving your vision of success. And some business decisions are more challenging than others.
Are you a business leader that has arrived at a crossroads and isn’t sure which way to turn? If so, you are not alone!
When faced with a difficult business decision or dilemma, if you’re like many successful entrepreneurs you’ll probably struggle to think about anything else. After all, the importance of growth-focused business decisions means that they can potentially sculpt the future of your entire business, ultimately deciding whether it has a sustained future or not. The pressure to make the right decision is huge, which is why strategic planning is crucial.
Several key growth-focused business ideas fall into the category of proposals that require serious consideration. Moreover, as I’ve mentioned in previous posts, all business decisions need to consider the risks versus rewards. Given that every company is surrounded by its individual circumstances too, there could never be a single right or wrong answer.
I’ve coached and supported many leaders, just like you, in working through their big business decisions. I’ve also made countless decisions of my own in the thirty years that I have been developing and growing businesses.
Which business decisions require strategic planning and analysis?
As an entrepreneurial leader, you are faced with hundreds of decisions every single day. Every choice you make can influence the day’s productivity, which can also impact your business journey. However, as long as you’re following a business plan strategy and have effective and efficient operational routines, the majority of those daily habits can run on autopilot.
There are several key business decisions that will have a bigger impact than most. Some of the more important questions that you may ask of your business include:
- Should I pivot my business to take it in a different direction?
- Should I invest significant sums of money into scaling the business and taking it to the next level?
- Should I grow the size of your team by recruiting new employees, agency staff, or contractors in a bid to boost capacity and productivity?
- Should I take the operation into the digital world in a bid to reach more people as an online business?
- Should I launch a new product that will require a huge investment of time, money, and effort from my team?
- Should I rebrand the company as to increase the appeal to a far wider demographic and potentially larger audience?
Contemplating those major changes that could potentially alter the company’s fate can feel very overwhelming. However, by adopting the right mindset, using your commercial awareness, and considering all contributing factors, you will substantially increase your probability of success.
Which elements should help form my business decisions?
Take each of the following items into account:
- The current business climate, especially in your industry and geography.
- Current trends and projected changes.
- The status of your brand, including its place in the market.
- The working capital levels that you have available.
- The stability of existing business elements.
- The timescales and financial investments required.
- The competition you’ll face.
- The legal requirements that must be accepted.
- The impact any proposed idea could have on existing elements of your business.
- The potential business strategies that could follow.
Ultimately, then, it’s a case of weighing up the pros and cons of each possible avenue. Only then can you make the right decision and choose the perfect time to incorporate any changes that may be required – whether it be new acquisitions, recruitment, or products.
Making business decisions: science versus intuition
I can’t emphasise enough the fact that in business there is often no single right or wrong answer.
Even if you decide that the idea is a good one, the fact that you’ll have analysed and considered it in detail will allow you to act with greater confidence. Conversely, if you decide that the reality of your proposed idea isn’t quite as promising as your initial thoughts suggested, the time that you’ve put into exploring it more fully before launching will payback many times over. The earlier you find out that a new avenue isn’t viable the better, because you will minimise the cost, effort and attention that you invest in it overall.
There is no fail-proof recipe for business success, but using whole-brain thinking – that is, getting the best from data and evidence (sometimes called ‘left-brain thinking’), intuition and gut instinct (‘right-brain thinking’) will help you to read a new business opportunity with maximum insight and give you the best chance.
Emotions drive decision-making
Humans make decisions subconsciously, based on emotions – how we feel, and how we want to feel. We then justify those decisions to ourselves and other people using logic and rationale.
The metaphor of the elephant and the rider, which you can read about here, illustrates the role of emotions in decision-making brilliantly.
There is no fail-proof recipe for business success, but using whole-brain thinking will help you to read a new business opportunity with maximum insight and give you the best chance. Click To TweetTo sense-check your decision-making, there are some straightforward steps that you can take to bring as much objectivity into your thinking process as possible, by using data and seeking evidence.
Use data for strategic decisions
The use of statistics in business can be dated back as early as the 8th century (1). Data can be used to drive your decision-making to provide insight into the current situation as well as to help create sensitivity and scenario models and forecast the future performance of the business.
The challenge is often having too much or too little of the right sort of data. I’ve worked on decisions for corporate clients ranging from literally multi-millions of pounds through to tens of thousands for smaller businesses. To be honest, the only difference between the two is the scale and value of the money involved. The importance is the same – a few thousand pounds to an entrepreneur is often a big, big spend for them. The process I use is the same too, because it really works in terms of thinking things through, whatever the level of investment and whoever is making it.
Here’s a step-by-step guide to making better business decisions.
Step 1. Define the questions
The first step is to define the questions that you need, or would like to have answers to, to inform your decision. Without taking this step, any subsequent data analysis is likely to have limited impact on the decision-making processes.
Write down all the things you want to know about your decision, using these questions as prompts:
- What do I need to know in order to make a sound, well-informed decision? Why do I need to know these things?
- What information would I like to have, but don’t know how to get? Who could I ask to help me with that? (If you’re stuck, get in touch with me via our Contact Us page, and I will do my best to help).
- What information would I love to have, but know that I am not going to get? What can I do to get round this?
Step 2. Define your measures of success
Define what success looks like and how you will measure that success in practise. What do you intend to realistically achieve, and by when?
You can ask yourself how achievable these goals seem to be and look at any past performance you may have experienced as an informative comparison.
This may seem early, but please do consider profit margins as soon as you can in your decision-making process. A business idea is only a good one if it enhances your company’s performance.
At this stage I recommend that you use a quick, high-level break-even analysis to take the costs of production, marketing, tax, and sales revenue into account. I love this free, easy-to-use break-even analysis tool here.
Completing your break-even calculations will provide far clearer insights. Simply stating that you need to sell 10,000 units to make a profit is far different to knowing the magic numbers. You will need to do much deeper, more detailed analysis later, but this should give you an early view.
Step 3. Go and get the data together
Collect the right types of data and information from the right audiences. Don’t rely on just one data set or one perspective. You need to see your opportunity from different angles in order to select the optimal route.
Make sure that the any briefs, surveys or other methods are designed to:
- Answer as many questions as possible to the questions you defined in step 1; and
- Help you, wherever possible, to assess how realistic the goals are that you have set in step 2.
Studies show that companies using consumer behaviour insights outperform those that don’t use them by 85% on sales growth (2) and 25% on gross margins. Collecting this data can help you forecast how a new product is likely to perform with your existing clients, or how new demographics may respond to the business, for example.
Look out for growing trends in your industry or for specific products. This can go a long way to pinpointing the right solutions when looking at different product development options. Netflix (3) does this when evaluating content development choices.
Tip: look inside as well as outside your organisation
Please don’t forget, as some entrepreneurs do, any data that exists within your business already. There is usually a lot of untapped, potentially illuminating insight to be found by looking at recent historic sales and profit trends for products and services and doing a deeper dive into segmenting and really understanding your existing customer base. We can be so keen to move ahead to the next thing that sometimes we don’t use the goldmine of information that’s right under our noses.
My final point about this step is to explore timings. Even when a good idea is a good idea forever, insights gained from the right data (5) can offer clarity in many areas, such as the right month or quarter to launch scale the business or the right time to launch a new product. This includes internally – consider resourcing, cashflow, other events – as well as market responsiveness.
Step 4: Turn data into usable insight
Analyse the data by manipulating it in a way that can shed light on the issues that you set out to answer in step 1 of the process. This is turning data into insight. If you’re not great at this, it really is worth asking for some expert help. Remember that a small investment in making the right call now can save you a lot more money in the long run.
Step 5: Interpret the data
Use the answers to those original questions as a form of guidance as to which decision should be made, as well as proactively looking out for any new issues that may have surfaced. At this stage, do your best to put any personal bias, feeling that you know best, and individual beliefs to one side. Listen to what the data is telling you as objectively as you can. You will have the opportunity to overlay your own views later on.
In addition to providing insight that aids you and your team, your groundwork will go a long way to satisfying shareholders and other financial backers if you need to get their support.
Use data in hindsight for descriptive analysis of what happened as well as diagnostic analysis of why it happened. Also use it to gain insight and foresight through predictive analytics of what might happen and prescriptive analytics of how things might be made to happen. Usually, persisting with ‘blind’ decisions that are not supported by any data is truly relying on as much luck as it is judgement.
Usually, persisting with ‘blind’ decisions that are not supported by any data is truly relying on as much luck as it is judgement. Click To TweetListen to your gut instinct
The big, big limitation on data is that it cannot guarantee the outcome. History can inform us on what is likely to happen in the future, but it cannot predict it with 100% certainty. It can only ever be, at best a guide, but it’s a great complement to our intuition.
Data can only ever be, at best a guide, but it’s a great complement to our intuition. Click To TweetSelf-confidence and business decision-making
Data-centric insights can guide us to smarter, more calculated decisions, but nobody knows your business better than you do. The ideas you had and the decisions you took grew your business to its current position.
Knowing how to leverage your self-belief and trust your instincts is essential, because ultimately any big decision requires a significant leap of faith, a driving commitment and sense of confidence that you will make it work – even if that means figuring it out as you go (which it usually does – and that’s ok!).
As entrepreneurs we need a very important type of confidence called self-efficacy. This is our belief that we will be successful in an endeavour, even if we don’t know how. If you’d like some tools and techniques on building your entrepreneurial self-confidence, have a look at my article How to become more self-confident.
Decision-making and mindset
Daniel Kahneman’s best-selling book Thinking, Fast and Slow focuses on a central theme relating to two main systems of thinking and how they can have a big impact on how we make key decisions.
While you undoubtedly use them both on a daily basis, usually intuitively, understanding each these two main systems is hugely beneficial.
The first system relates to the fast, automatic, and often unconscious decisions that we make. These are the simple thoughts that your brain naturally formulates without even thinking, which could include automatic reactions to business ideas. To save time and brain energy, we create thinking short-cuts for ourselves. These are known as “heuristics”. Because they are an often-used short cut, we can often believe that our approach is the “right” one, even when it isn’t!
The second system defines the slow, calculated, and conscious decisions that require thought and time. This includes basic calculations using data as to whether the idea has a commercial future.
If you feel hesitant, even when the data collected suggests that a decision is right, there’s probably a good reason for it. You are picking up other signals from elsewhere that are usually worth paying attention to.
Tune in to how the decision makes you feel
Despite the fact that you don’t want to disregard the data, you also shouldn’t ignore your emotional responses. The key is to know when your self-confidence is just having a wobble, and when the emotion is rightly drawing your attention to a real issue. Only you can know that. Self-doubt could prevent you from unlocking the full potential of your business. Not listening to your gut could also work out to be an expensive mistake. Self-awareness, and tuning into what you’re thinking and feeling are key.
Don’t make business decisions in a vacuum -seek other perspectives
In addition to your individual thoughts, speaking to trusted colleagues, peers, customers and supplier partners can be very useful. They may see things from a different perspective that highlights why the idea might succeed or fail.
For example, it may be that while you think solely about the numbers, they may consider the logistical risks or know of industry news and developments that could alter your decision. On a side note, engaging your staff whenever you can and building an inclusive environment can support your business growth irrespective of what decision is taken.
You know that all of the big names such as Mark Zuckerberg, Richard Branson, and Sir Alan Sugar all took risks. There’s no doubt that drive and passion can help defy the odds. On the other side of the coin, many business owners have pulled out of ideas even when all extensive research suggests that it’s a great idea.
Data insights can only go so far. Don’t be afraid to listen to your intuition.
So, what next?
You already know how important it is to make the right decision.
Being stuck in your current predicament can be frustrating.
When weighing up the risks and rewards of any business decision, try to use both hard evidence and intuition. After all, your knowledge of the industry and the business itself counts for a lot – but having the data to back up your initial thoughts is equally essential.
As long as you enter the process with an open mind, and can be flexible in your approach, you will have your best probability of success. Crucially, though, you need to look at all the new projects and developments you’re working on in your business to maximise productivity and profitability and see where this decision fits in.
I would love to help you to work through your big business decisions, and to make them a success when you’ve decided to go for it. If you’d like a trusted sounding board, mentor, expert advisor, critical friend and cheerleader all rolled into one to help you to succeed, do get in touch. I’d love to help you build the amazing business and lifestyle that you’re working to achieve.
References:
1: https://www.talend.com/blog/2016/12/19/the-role-of-statistics-in-business-decision-making/
2: https://towardsdatascience.com/using-analytics-for-better-decision-making-ce4f92c4a025
3: https://neilpatel.com/blog/how-netflix-uses-analytics/
4: https://digitalcommons.wou.edu/cgi/viewcontent.cgi?article=1004&context=computerscience_studentpubs
