Hey, everybody! Welcome to this week's Facebook live about how to make difficult business decisions.
I am in coaching conversations with entrepreneurs and business owners all around the country on a daily basis. I've been under the hood of thousands of businesses and I'm asked one question constantly which is, What is it that makes a business grow? If you could give one piece of advice to a business to help them grow and be successful what would that thing be? I would say that it is the ability to make tough and critical and crucial business decisions quickly and effectively.
Let me explain really quickly and then we'll jump into the tactics of how to do this. I work with entrepreneurs who sometimes get emotionally attached to their businesses. Understandably so, because you've put a lot of energy and heart and passion into this thing. When it comes time to make a hard decision, it can be difficult to do that. Let me give you the perfect scenario.
Let's say you've hired somebody that just is underperforming. You know they're not doing well. They're not taking direction well. They're not producing anything, but you've become friends with this person. Maybe they're a relative. Something has made it emotionally challenging so that you can't give them proper direction, hold them accountable, or let them go. It's in those moments, those emotional moments, that entrepreneurs fail and their businesses fail, because they do what's best for their personal feelings versus what's best for the business.
I don't want to sound like a cold business owner right now. That is not what we're trying to do. Because we go into businesses to change the world to make the world a better place. We want everybody to prosper. We want our clients to prosper. We want our employees to prosper. I get it. But sometimes people are cancerous to an organization. They need to be held accountable or they need to be let go.
So what do you do if you like the person? Those are the kinds of business decisions that I see on a daily basis that are causing people to fail. Here's what you do.
First of all you have to start off by recognizing that your number one job as a leader is to be the one who makes the final difficult decision. You have to be okay with that. You can't pass the buck. You can't refer to your CFO to make it for you or to your business board or your counsel. You have to be comfortable pulling the trigger on things.
“Businesses that are healthy and successful make decisions fast. They learn from them fast. Then they pivot and make more decisions.”
Analysis Paralysis Can Sink Your Business
The kind of entrepreneurs that really struggle are the ones that sit back and analyze for too long. They make spreadsheets and then they write a 50-page business plan on the idea. They run that business plan through statistical analysis. They send that statistical analysis to several advisors and get their opinions on it. They get it back and they sit at their desk for a few more weeks or months. Think about it before they're really comfortable. Then they pull the trigger on something. But by then it is way way WAY too late. The market has shifted. The demand has shifted. The need has shifted. They're behind the times.
This is kind of what it means to be a nimble business. Well, that's being very unnimble. Stiff, I guess is what we'll call it. A big kind of gorilla in the room, stiff kind of business that is slow to make decisions. If that is you? If that's your decision-making process, you can sink your own ship. Simply because you're taking too long to make decisions.
I have seen time and again that entrepreneurs who are willing to make decisions on a split-second basis and watch what happens and learn from that and make another decision. Watch from that, learn from that, make another decision, are the ones that are staying financially viable. Here's why: You don't know what's going to happen until you do something. You can guess all day long what might happen.
The Problem with Traditional Business Plans
This is one of the things I had a problem with when I got my MBA. They taught us to write business plans, and I struggled with business plans because we were expected to write what the market would do once we put our product out there and how people would respond. How we're going to grow. You don't know any of that until you go talk to people. You don't know if you can sell your service until you actually go try and sell it and see if somebody's going to pull out their wallet and give you 100 bucks for the thing you're trying to sell.
Sitting down and spending too much time analyzing can actually be a detriment. I think we're taught that it's wise to slow down and to think and to be logical. Yes, that's true, but in the world of business, it's almost always better to make a decision. Whether it's good or bad, make a decision then learn from it and then make another decision quickly.
Decision-Making Criteria for Entrepreneurs
I'm going to give you the criteria that I've learned from coaching entrepreneurs on how to make difficult decisions. Here's what you do.
Decision Fatigue in Leadership
First of all, understand that you suffer from something called decision fatigue. If your number one job as a business owner or leader is to make great decisions, you have a problem because you're making a million decisions on a daily basis. From how you're gonna do your hair, to what you're gonna have for breakfast, to the clothes that you're gonna wear, to the route you're gonna take to work. All of these are decisions. Decisions cost emotional money and you only have so much of it on a daily basis.
"You have to limit your decision making capability to the most important decisions, because you're the leader."
You want to try and minimize all the other decisions in your life. This is why people who are really successful get help with other areas of their life. They'll get somebody to mow their lawn or they'll get somebody to manage their email or their daily schedule simply because they don't want to spend their decision making power on that. They want to spend their decision making power on what vertical should we go into? Where should we open our next store? Should we increase the price of our product? Those kinds of things, really crucial decisions.
Create Rules for Decision-Making
Number two is when you're going to make a decision and have rules set up before you start. I'm going to give you an example. When I have to make a decision at Ignite Spot, let's say it's a marketing decision and we're going to launch a new marketing campaign, I always give myself a set amount of money that I'm willing to invest. A set amount of time that I'm willing to try out the marketing campaign before I will determine if it's worth pursuing and before I will let my emotions get in the way. My criteria are six months and ten thousand dollars that's what I do with every marketing campaign.
6 Month Rule for Evaluating Campaigns
I always wait until I've invested at least ten thousand dollars in something and I've spent six months doing that marketing system so that I can gather enough data. I can look at the data and see what customers have come in and see if I've gotten the ROI that I expected. At six months I step back and look at it logically.
Entrepreneurs are known for wanting to start multiple businesses. We get a new idea. We run out and we create the website. We get excited and want to launch the next big thing. That's fine. Don't be ashamed of that. You're an entrepreneur that's what you should be doing. However, create some decision criteria around it.
How much money are you willing to invest in your new idea?
Whenever I start a new business or run off on a new venture, I say to myself, I'm willing to invest 50 thousand of my own money and in six months or one year, I'm going to have a hard look at this and see if this business is doing what I actually thought it was If not I'm pulling the plug. No matter how much I love it. No matter how great I think it is. If the data doesn't come in to prove that it was a good decision, I'm gonna pull the plug. That amount of money or that amount of time is small enough that it doesn't feel like it was a major loss. I was able to lose that money and be okay with the amount of money that I lost knowing that I gave that idea everything that I had for that amount of time.
If you want to grow your company, especially during times of pandemic chaos, it's going to come around making decisions. Make a decision today even if you're scared. You've probably got something on your desk. You've been looking at it for a long time. Maybe it's hiring a vendor. Maybe it's hiring an employee. Maybe it's starting a new marketing campaign or opening a new location or shutting down a location. Make the decision and learn from that decision. That's the crucial, key point.
"Make The decision, learn from the decision, do it again and again and again. Those are the people that make the best decisions over time. It is like a law of averages. Go out and get it done. Make the hard decisions and do it with courage."
Courage is the Key to Making Tough Decisions
That's the last thing I want to say. As the CEO of a company or whatever your position might be, you have to be courageous today. You have to go in and you have to be the one willing to have those hard conversations. The one who is willing to say, You know what, we're going to go out and do this thing. I know we're all scared but we're going to do it. You have to have courage. You have to have a spine. That's part of the fun of being an entrepreneur.
I hope this helps guys! Thank you for joining us here at Ignite Spot's Facebook Live. We do this every month and we've been pumping out articles on a weekly basis. If you go to blog.ignitespot.com, we're writing about some incredible things right now from cash flow forecasting to how to build safety nets for your business and all sorts of fun stuff. Check it out and subscribe to the blog. We'll see you guys next month!
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