Making decisions for a business is a little bit different than making decisions in your personal or family life. In most large companies, there are professional protocols, safeguards, and checks and balances and they still don’t always get it right. In a small business, however, the small business decision making process often starts and ends with the business owner-in most cases, you. This can make it both simpler and more complicated.
What Does That Mean for Me?
Not every highly-trained electrician, yoga teacher, or photographer can also be an expert in business management. You may be a successful professional in your field and still lack experience with the types of decisions you face as a business owner. Adding to that problem is the fact that small businesses are often more personal than large corporations. You’ve invested your personal time, money, and soul and may not have the safety net that you’d have as an employee in a big company. These can cloud your judgment and make small business decision making even harder.
What Kind of Decisions Will I Need to Make?
Small business decision making includes some choices that every business needs to make and a few that are unique. You’ll have to decide whether it’s time to invest back into your business and how much, you’ll have to find partners, choose your clientele, and decide whether to hire and fire employees. On top of that, you’ll have to decide things that aren’t up for debate in large companies, such as how much you work and how much you want your business and personal life to intersect.
So How Do I Make Smart Business Decisions?
One approach to business problem solving is learning how to make business decisions as if you had the structure of a large corporation. Have a clearly defined process to follow so that you’re prepared before questions arise. This will help you make decisions logically, keep your emotions in check, and feel confident about the results. Here are six steps to help guide your process:
1. Identify the Issue
Make sure you understand exactly what question you’re asking. To do this right, you will have to have your overall business goals defined, as well as the particular situation you’re dealing with. For example, when you opened your business, were you dreaming of becoming the national leader in your field or having the flexibility to spend more time with your family? Those goals are easy to lose sight of but will affect the decision whether or not to expand your business.
2. Gather Information
If you’re trying to decide whether or not to offer a new service, you’ll need to know whether there’s a market for that service, if you’ll need new equipment, and how much that new equipment will cost, what the competition is like, how much other people charge for it, whether you’ll need special licensing, and more. No matter the decision, doing your research is the only way to make an informed choice.
3. Define the Options
Outline all the choices and what exactly they would mean for you. For example, if you’re choosing to hire someone full time or to subcontract some work, write down exactly who you’d be working with in each case, what their skills are, costs, and how much additional work you can take on in each scenario. When you’re not bouncing ideas off of anyone, it’s easy to choose whatever is right in front of you. But this step makes sure you’re doing a fair comparison and don’t forget important details.
4. Weigh the Pros and Cons
Now that you have all the information, it’s time to actually compare them. Do a risk assessment and figure out what you can afford to lose and how much you stand to gain in each scenario. At this stage, solo entrepreneurs actually have an advantage. You’re not responsible for anyone but yourself. Therefore, if there’s one option that will make more money but means doing something you hate, you’re allowed to put that in the cons column.
5. Compare the Results
If you’ve done all the previous steps thoroughly, this should be pretty straightforward. All the information you gathered and the pros and cons you’ve listed easily become a simple cost-benefit analysis. Just add them up, and calculate which option makes the most sense.
6. Create a Plan
Now that you’ve decided what to do, write a clear plan for implementing the decision. This will help ensure that you get all the benefits you expected when you made your choice and allow you to mitigate whatever risks you anticipated. This is the time for taking precautions like buying general liability insurance, talking to a lawyer or accountant, and arranging your budget for the future.
With careful planning and decision-making processes, anyone can make smart business decisions and small business decision making will become a part of your routine.