Making decisions for a small business can feel daunting. In many large companies, teams follow well-established protocols and safeguards to optimize results and minimize risks. But the small business decision-making process often starts and ends with the business owner: you.
Why small business decision making is hard
Here’s the truth: success in your field doesn’t automatically translate into expertise in business management.
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 decision-making even harder.
The decisions small business owners face
Small business decision-making includes some choices that businesses of all sizes need to make. You’ll have to decide how much to spend on equipment, workspace, payroll and marketing. You’ll have to choose the right partners, clientele and employees.
But you’ll also have to decide things that aren’t usually up for debate in large companies, such as how much you work and how much you want your business and personal life to intersect.
How to get business decisions right
One approach to problem-solving is to make business decisions as if you had the structure of a large corporation.
That means developing a clearly defined process to follow so that you’re prepared before difficult situations arise. This will help you make decisions logically, keep your emotions in check, and feel confident about the results.
Here’s a six-step decision-making framework that can help guide your process:
1. Identify the issue
At the beginning of your business decision-making process, it’s important to understand exactly what question you’re asking. That means defining your overall business goals and the particular situation you’re dealing with.
For example, when you opened your business, were you dreaming of becoming a national leader in your field or having the flexibility to spend more time with your family? These goals are easy to lose sight of but could affect your decision about whether or not to expand your business.
It’s important to set some clear, measurable criteria about what it would mean to find a solution. These will help you stay on track as you move through the next stages.
2. Gather information
If you’re trying to decide whether or not to offer a new service, you’ll need certain information. For instance:
- Whether there’s a market for that service
- Whether you'll need new equipment
- How much equipment will cost
- What the competition is like
- How much other people charge for it
- Whether you’ll need special licensing and more
Say you're trying to decide how to structure your team. You should identify the efficiencies and inefficiencies of your current structure and whether there are any bottlenecks. You'll want to understand your employees' strengths and weaknesses, communication and leadership styles and wants and needs.
After conducting research, many entrepreneurs find that it helps to write out all this information, whether on paper or digitally. The process of writing things down can help clarify the situation and help you make new connections.
3. Define the options
Outline all the choices and what they would mean for you. Keep in mind the issue and the criteria you identified at the beginning.
For example, if you’re deciding between hiring someone full-time or subcontracting out the work, write down who you’d be working with, their skills, what the costs would be, and how much work they would be able to take on.
When you're not bouncing ideas off of anyone, it's easy to choose whatever is right in front of you. But this step ensures you're making a fair comparison and not forgetting important details.
4. Weigh the pros and cons
Now that you have all the key information, it’s time to compare your options.
You may have a complex set of options and have to spend a few rounds weeding out different paths by referring back to your initial criteria. If you get stuck, you may want to go back and see if you need more information.
No business decision is without risks, so it helps to perform a risk assessment to determine what you can afford to lose and how much you can gain in each scenario.
5. Create a business plan
Once you’ve selected a course of action, write a clear business plan for implementing the decision. It should explain how you will solve the initial issue you identified and why you made this choice over other options.
Your plan should also account for risks and uncertainties so that you'll know what to do if things don't work out as expected.
This is a great time to take precautions like buying general liability insurance, talking to a lawyer or accountant, and reevaluating your budget.
6. Evaluate your decision
Don’t forget to look back and reflect on your decision afterward. Did things go the way you wanted? Why or why not? What did you have to adjust along the way? Were there steps in the decision-making process that you could have improved?
These reflections will help improve your process the next time you go through the six steps for making a business decision. Soon, this framework will become second nature.
NEXT helps you stay on the right track
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Get started with a free quote today.