The Simple Guide to Making Better Business Decisions

1. Start with the aim

And write it down

Decide on the aim, and write it down. Everything else we do from then on will be judged against that aim.

Seems so obvious? Perhaps. Yet I’ve seen countless decision-making processes go awry because the aim has not been nailed down.

A loose aim can end up morphing halfway through the process. Secondary aims, often insignificant, can end up being added into the mix halfway through without due consideration.

Nailing down your aim is the first key step. We’ll use that aim as the yardstick to measure success afterwards.

2. Decide on paper

Any significant decision will be nuanced and have lots of competing factors. Our human brains are great at focusing on one thing in great detail. But, they are rubbish at dealing with handfuls of competing factors and thinking about them all at the same time.

Writing down the aim in front of you really helps keep decisions on track.

Then listing pros and cons, with their appropriate weightings, will help stop any one factor from taking undue precedence.

The mind cannot weight competing factors all at once

The biggest error we see from decisions is the incorrect weighting of competing factors. Working them through in your mind only can lead to an oversimplified view of everything being equal.

Let’s say I’m going to rebrand my company.

That’ll help get more clients, which is great. It might also confuse some suppliers for a while until all their delivery drivers know our new name.

A pro and a con. But they are not at all equal. Getting more clients is hugely important to the bottom line, whereas confusing suppliers for a short time really does not matter.

Balancing this pro against this con would lead to a very poor decision.

Our human brains cannot think about the whole picture at once. Aims, secondary benefits, pros and cons should all be written down and prioritised in front of you.

3. Effort is proportional to importance (not fun-level)

How important is the decision to the company’s bottom line? That’s how much effort should go in.

But, we have lots of biases that can pull us away from this ideal. We need to compensate for them.

The fun-level bias

Let’s say I’m opening a bakery. That’s probably because I love baking. So it’s easy to spend a huge amount of time on the menu and testing the range of bread. Too much time, even.

Equally important to the bottom line though is my location. Spending day after day on street corners counting the number of passers-by is not so much fun. Nor is researching all the human geography data from my local government. So I don’t do enough research here, because it’s not so fun.

The Perfection Bias

We all like doing the best job possible. But sometimes, that’s a false economy. For some decisions, good enough is the correct choice. The extra man-hours to make it perfect are just not worthwhile.

The Time Available Bias

When you are under pressure it’s easy to make rash decisions “because I don’t have time to do it properly at the moment”. Those poor decisions will likely add more issues to your over-full to-do list.

Equally, when time allows, it’s easy to wallow into unnecessary research and detail. Is it worth all that extra time?

The work needed to make a decision is completely independent of how busy you are. The correct amount of time always needs to be invested.

The Personality Type Bias

Some people are naturally more gun-ho, happy to take major decisions using little more than gut instinct.

Other people cannot sleep properly unless they feel that they’ve researched every possible option to the nth degree first.

Being aware of your own personal tendencies is very powerful, as you can then correct a bit.

The time and effort that goes into a decision should be proportional to its importance to your bottom line. Be aware of personal bias trying to pull you either side of that.

4. Who’s deciding? When to bring in others

It’s always faster to make decisions alone

So, it needs to be worth bringing in other people. Why do I want to ask someone else to be involved?

Do they know something I don’t? Are they likely to make a different decision than me?

Or, am I just looking to share the responsibility in case it goes wrong? Or, perhaps I just like the company?

Make sure you have a good reason that’s worth doubling the man-hours before getting someone else involved.

There’s no such thing as a shared decision

There’s no such thing as a shared decision. Only one person can make the final call.

Your role is to be the decider.

Anyone else involved is there just to help you make the right decision.

Let people know their role

People generally don’t like being asked their opinion, then ignored.

By letting them know at the start that their role is just to help you make a better decision, it removes any chance of offence, as well as freeing them up to bring forth any criticisms they can think of.

Be clear from the start. What, exactly, are you asking them to do?

For Example - The Sounding Board

It can really help to explain your logic out loud. It forces you to explicitly state all those baked-in assumptions you’d kind of skimmed over, and justify if they really stand up.

For Example - The Hole Picker

“I want you to pick as many holes in this idea as you can. Be as nit-picky as possible.”

It’s a great way to see if you’ve really thought of all the cons. Also, you’ve given them permission to find flaws in your idea. If you ask someone below you for help, they might not feel comfortable in finding fault without such explicit permission.

For Example - Specific Opinions

It’s rare that a generic “what do you think of this” will help. Be specific - what logic would you like them to help you test?

Bad Example: “What’s the best location for my bakery”

- there are a thousand factors here, combined with a thousand options. That’s too generic.

Good Example: “Here’s my list of pros and cons of the location. Are there any I’ve missed?”

- that’s better, much more specific

Plan for Diverging Opinions

Two people run a business and have a 50% stake each. The business plan should cover how to cope when they have different opinions on the best route to take.

It is much easier to do this in advance and in the abstract. Sorting it out at the time when there’s a specific case with entrenched opinions can be a recipe for business failure.

An example plan - divide out the areas by experience level right at the start

“I’m great at tech, you’re brilliant marketing. So anything tech I’ll make the final call, and anything creative, like logo / language, is your department to decide.”

You should divide out all areas, so everyone’s clear who gets the final call.

5. Better data means better decisions

Love it or hate it, solid data is key to making good decisions.

100% sure that’s the right way to go? Well, if it’s so clear there should be data available to back it up.

It’s easy to be biased by a tiny sample size of hearsay, or by who shouts the loudest. The data might just tell you the silent majority are a far larger market.

Plan and collect in advance, or set up to fail?

Website tracking. Job application forms. Man-hours used per project.

For decisions in such areas to be done well, you’ll need to plan in advance to collect the data, so it’s there and ready when you need it.

It’s not just about turning on the data collection, though. It’s about deciding what to collect.

An example I love is in recruitment. CVs, I find, are a pretty poor indicator of a person’s fit for the job role. People cover different topics, and you end up comparing apples with oranges. Job application forms offer much more insight - everyone has the same questions with the same character limit. Now, you can directly compare your candidates. We have chosen the best data structure for our needs.

No excuses

Collecting data is hard work. And, it’s rarely the type of work most business owners enjoy. Be aware of excuses, to skip this critical stage, from creeping in.

For example, my new bakery. Going through the accounts of all my rivals, to see if I can learn lessons on location - that’s not fun. So, I find excuses for why I don’t need that data. But, like it or not, that data is publicly available and required to make a good decision.

Side note - how to get rivals accounts

Accounts for limited companies are public documents that you can get from the relevant government.

You can get accounts for Irish business from the CRO here, and they cost €2.50 each.

You can get accounts for UK companies from Companies House here, and that’s free.

6. Balancing multiple criteria

Let’s say I’m picking the location for my new bakery.

Can I get supplies into the shop? How’s the footfall on the street outside? What’s the rent like?

These are all considerations when picking the location, but by no means equal.

Step one - setting red lines

The first job is to put down any red lines. If something fails, a red line means it’s out. It doesn’t matter how great it is on the other factors.

For example, I need to be able to get supplies to my bakery. If the nearest place you can get a vehicle is 800m away, that’s not going to work. You cannot compensate by having cheap rent if it’s not possible to get the bags of flour to the building.

Step two - weighting the factors with a Decision Matrix.

My location choices have passed all the red lines. So now I need to weight the factors. Having a high footfall is far more important than the ease of deliveries, so my scoring needs to take that into account.

I mark each factor out of 10, then multiple that by its weighting to get the final score. Taking into account that footfall is far more important than the ease of deliveries.

I’ve decided that location footfall is twice as important as cheap rent, and ten times more important than the ease of deliveries.

Location Option 1 :

Location Option 2:

By using the weighting, I can see that Location option #1 - Grain Street - is the best option, despite it being behind on 2 out of the 3 factors and borderline in ease of deliveries. The excellent footfall more than compensates.

This system is called a Decision Matrix. This is a great article if you’d like to read more about using a Decision Matrix.

There are other systems as well, though we find a Decision Matrix works well for the types of decisions that us small businesses are taking.

7. Bias compensation

We all have an inbuilt bias, that’s normal. The trick is to be aware that our judgement is not always objective, and making sure we are compensating.

Emotional vs Logical Decision Making

Most decisions are made emotionally, then justified using the logic part of our brains.

For example, I see a swanky ad for a brand-new mobile phone

My emotional brain sees it and says

“oooooohhhhh… that looks awesome… I want it”.

Kudos to the marketers.

Then it passes over to my logical brain to find the excuse to buy it.

"I’ve been looking for a while now”…

“The battery really is starting to go on my old phone”…

“The contract is nearly up so it won’t cost me much”…

The logical brain is here to justify the purchase. But the real decision? That was made by our emotional brain first.

In business decisions, we need to compensate for the emotional brain leading us astray. If the reasons I tell people are just cover, maybe I’m making a poor decision.

Optimist Bias

Most entrepreneurs are built-in optimists, especially when it comes to their own business, their own market and their own products.

That’s not a problem, as long as we are aware and compensate for it. However successful you think it’ll be, you should probably pull it down a notch or two.

If I think it will probably work, then it might work.

And if I think I might work, it probably will not.

Confirmation bias (or wanting it to work blindness)

The extreme form of the optimist bias that start-ups are particularly prone to. A huge, overriding desire for it to work can blind people completely from logic.

Confirmation Bias is a tendency to favour any information that supports our prior beliefs. We’ve already convinced ourselves our idea is a great one. Anything that agrees with that is taken as fact. Anything that says the project will fail is dismissed as false.

We all have a subjective view of the world, that’s normal. We just need to be aware of our bias and make sure we compensate for it.

8. Don’t put off hard or stressful decisions

Some decisions are just difficult, unpleasant and stressful. Making them is the job we sign up for when running companies. Putting them off will not make them any less stressful.

But during that time, whilst you are waiting to decide, your brain will not be able to focus on any other job. All other tasks will be poorly done at best.

Some decisions are large in consequence yet have very limited information to decide on. And, some are just unpleasant. Deciding to let someone go is never nice, but such things need doing.

By putting off the decision, you are damaging your productivity for all the intervening time. It’s often better just to get the decision made, then at least your brain is free and clear to get on with other tasks.

Don’t procrastinate around difficult decisions. Once all information has been collected and thought through, there’s no advantage to putting off that difficult decision.

9. Testing your Logic

The last step before the decision is set in stone

Test against the Primary Aim

I cannot tell you how many times I’ve seen decisions be made that fulfil all sorts of secondary aims that popped up along the way but don’t fully meet the original, primary aim.

Give your Subconscious Time

We’ve all heard the statistics of our subconscious being about a gazillion times more powerful than our conscious brain. It’s great to give it time to chew on the more complex and nuanced decisions.

Myself, I love this system:

• Firstly, I’ll do all the work on a big decision.

• Then I’ll do something else - a completely different task, go for lunch, get some exercise. Anything to get my conscious thought away from that decision and let my subconscious chew on it for a while.

• Then I’ll go back through all the reasoning behind the decision again.

• If I change nothing, then the decision is made. If I make changes, I’ll then repeat the process of doing something else for a while, then do another lap.

Only when I’ve done a fresh lap through, and made no changes, will I make the final decision.

10. Record for future reference

The final task is to record your major decisions for future reference.

To Learn Lessons

Whether it worked out brilliantly or terribly, it’s great to be able to look back and check if our reasoning was up to standard and see what lessons can be learned.

To protect against the “grass is greener” syndrome

I’ve seen businesses pogo-sticking back and forth over the fence. The other side always looks greener, so they jump, but then the original side suddenly looks no so bad after all and back they jump.

Only by recording the logic - the reasons why the original side was left in the first place - can we protect against pogo-sticking back and forth.

11. Final thoughts

It doesn’t matter what system you use, as long as you use one.

There are countless ways to improve business decision-making. These are just some techniques that have helped us and our clients over the years that we’ve been running businesses.

Whether you use these techniques or completely different ones, it doesn’t really matter.

What matters is to have a consistent system that you use in your business decision-making. In other words, don’t shoot from the hip.

Only by having a formula, that you follow, can you iterate the process of improving how you make your major decisions in your company.