One of the key factors determining how quickly a business grows is the ability to make critical decisions e.g whether to invest, purchase another business, reduce staff numbers.
They rank amongst the hardest things that Business owners and management teams will do.
The consequences might be significant, there could be severe time pressure, and there may be a lot of people with an interest in the outcome who want to be consulted.
It’s tempting therefore to simply get it done, and as quickly as possible, so that everyone can move on. But this risks making a decision based upon gut feel, intuition, and the opinion of those with the loudest voice.
Or, to put the decision off, citing perhaps that the time isn’t yet right.
Either path may introduce a significant risk to the business, and a lost opportunity to help it to grow.
To make the right decision it is important to step back and take a careful and analytical look at all the options. Two things make the biggest difference to the quality of the outcome:
- The clarity with which you know what you are trying to achieve;
- The extent to which you can quantify the various options and use data to track how you are doing once the decision is made.
Knowing what you want to achieve
Be clear about what you want to achieve – and express it in measurable terms.
E.g. the decision may be whether or not to launch a new service or product. But the outcome you want might be a bigger customer base and more revenue, or your existing customers trading with you for longer, or both. These are the measurable outcomes.
Define what success is – and what you will measure to know you are on the right track. E.g. more on-line traffic, greater customer footfall, increased sales. And decide what a lack of success will look like e.g. an absence of growth by a certain time.
List out all the key actions needed to make success happen. Be specific e.g. create a dedicated website, develop new promotions, introduce specific sales incentives. And list as many as you can, whether or not you decide to act upon them.
Quantify the options and use data to track progress
Decide what measures you will use with which to track progress. You will have already listed some of these. They are part of your definition for success.
These measures will therefore be critical to the decision process. If you decide to go ahead it is because you believe that you will deliver improvements in each of them.
It is essential therefore that you locate the data that will allow you to track progress, and at the right frequency. Data that’s updated every quarter may not be sufficient. You might want to know what is happening on a weekly basis.
Lay the decision out in the form of a spreadsheet model. You may be clear about all of the above. Nevertheless, a model enforces a vital discipline within the decision process that might otherwise be missing. Each of the factors that will influence your decision, and each of the actions needed to ensure success, have to be quantified.
It may help to identify factors you haven’t yet considered. It will also encourage you to think clearly about, and quantify, risk.
E.g. you might have assumed a similar conversion rate from enquiry to sale to that already experienced. However, because this is a variable in a model, you have to select a value. This will help critical assumptions to be challenged and should prompt a search for any data that will support your choice e.g. a look at other businesses with similar offers to see what they may be experiencing.
The model can also answer the ‘what if’ question. E.g. I have assumed a 20% conversion rate, but what if it is only 10%? And if it is, how much does our enquiry traffic have to fall before we would conclude that things are no longer viable?
The answer may not change your decision. After all, you have an exciting idea and you are quite prepared to jump in and see what happens. But this will give you a heads up about the critical risks. And as long as you have data with which to monitor them you will be in a position to manage them from the start.
Use the information from the model to bring everyone on-board. The outcome from the decision may not be popular with everyone, or it may require a concerted effort from some.
Those involved are much more likely to respond as you need them to if they can see and understand the evidence supporting the decision. And they are much better able to keep things on track if they have timely, accurate and, above all, relevant data pointing the way.