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Podcast (10k-podcast): Play in new window | Download (Duration: 20:13 — 18.5MB)
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How Does Entrepreneur Decision-Making Work in Real Life?
Entrepreneur decision-making works in a variety of ways. Some entrepreneurs prefer to gather as much information as possible before making a choice, while others simply follow their gut instinct.
Regardless of your decision-making style, there are some principles you should always keep in mind:
- Action creates momentum – If it feels like you’ve been stuck on the same problem for days or weeks without any progress, then it’s time to take action. The more time spent thinking about how to solve a problem without actually solving it will just lead to frustration and an eventual loss of motivation.
- Test, measure and adjust – When trying out new ideas or testing different solutions for problems, don’t be afraid to try things out quickly and see what works best (and what doesn’t). Use this process as an opportunity for learning so that you can learn from your mistakes while they’re still fresh in your mind instead of later down the road when they might have cost you too much money or time already!
Tactics for Entrepreneur Decision-Making- the Decision Matrix
There are three things that you need to do in order for you to make your own decision.
List the criteria for the decision.
This is the most difficult part because it requires thinking about what matters and why it matters, but it’s also very important because you cannot weight a factor if you don’t know what’s being weighted in the first place. Make sure that all of your criteria are relevant and appropriate for this type of decision and don’t get carried away by making too many or too few; this will help keep things simple later on when calculating weights (see below).
Weight each of your criteria numerically based on their relative importance (so 1 = high priority, 5 = low priority).
To give an example: suppose I’m trying decide whether or not I want my ecommerce website design done by an agency rather than doing it myself. One of my criteria might be “time spent”, since developing websites takes me a significant amount of time every month; another might be “cost”, because agencies often charge more per hour than freelancers do; yet another could be “quality”, since hiring someone else means outsourcing some portion of control over how well my site looks or functions.
The point here is not just listing them—you must think about these factors as having varying levels of importance depending upon which option(s) from our list above we’re considering at any given moment during our evaluation process (e.g., if we had chosen Option A instead of Option B above, then cost would no longer matter as much).
Do the math
After this, it’s a simple question of multiplying and comparing:
In a spreadhseet, you’d have the options or choices in rows down the left-hand column, and the criteria along column headers going left to right.
- for each possible option or choice, you’ll have a score for each criterion
- For each of these criteria boxes, you’ll need to multiple the score by the “weight” you’ve which of multiplying the score of each possible option by the “weight” for has the most weight
- then add up the total score across all the criteria for each decision.
- Finally, look at the relative scores of each decision.
Like most maths, and all spreadsheets, it’s so much easier to see it on an actual spreadsheet!
Ken has created a spreadsheet that does the heavy lifting for you with a structured approach to decisions. Click here for his free entrepreneur decision matrix spreadsheet.
Have 3-Year Financial Forecast! And Measure the Decisions
A key tool for Entrepreneur Decision-Making is financial forecasting. It is imperative that you know where your business is going, so it’s important to have a financial forecast. You need a forecast for the next 3 years – and this is a shock to many entrepreneurs because they don’t even have a one-year forecast. Well start with one year now because without this, there is no lasting success.
A key part of your financial forecast is what Ken calls the “justified revenue forecasts” – every decision has an impact on revenues, so if we want to make better decisions; we need good data around our past performance and future expectations.
The fastest way to go out of business is running out of cash! If a company runs out of cash they are dead in the water because they cannot operate anymore (unless they get additional funding or sell part of their company). So especially coming into challenging economic times, this is non-negotiable.
Ken offers a (paid but inexpensive) course on creating a 3-year financial forecast and spreadsheet that covers this topic A-Z.
How Do We Actually Get to Implement this Stuff?
To get started, you’ll need to overcome the overwhelm that comes with this process. You’re not meant to think about all of this at once—that’s why we’re breaking it down into small steps!
Once you’ve got past the initial shock of having so many options on your plate and feel like they’re manageable, start prioritizing them. Your key initiatives will be where most of your time and energy goes. In some cases, you may have more than one key initiative (like if you have multiple products in development).
However, don’t worry too much about fine-tuning these just yet. Instead focus on getting them launched in a timely fashion by setting launch dates for each one.
Overcoming Overwhelm – Breaking down big decisions
- Stop and step back.
- Break down the big thing into bite-sized pieces.
- Consider each element of the decision individually.
– What are all the options available to me?
– What do I want to get out of this decision?
– Is there a way to break it down into smaller decisions?
– How can I make a decision based on the information available to me?-
Will this decision lead to the outcome that I want?
– Can I make this decision with confidence?
Create Key Initiatives to implement your decisions
- Create Key Initiatives is the key to real progress.
- Every year, you should have 5 key initiatives max. Even 3 or 1 is better if you have a small team or no team.
- For example: Grow top-line revenue, reduce costs, create a private label product, lay foundation for future etc..
- For each initiative have objectives and measures (KPI’s)
That will give you a sense of progress and achievement. For example: Increase average order value by 10%, increase the conversion rate from 3% to 5%, reduce cost per unit by 10%.
If you have a large team or multiple initiatives, it’s important to communicate with them about their roles and responsibilities. Be sure each person understands what they need to do and how they will be measured.
Setting Clear Objectives for Your Initiatives
When making decisions about the future of your business, it’s important to set clear objectives for your initiatives. Your goals should be:
- Measurable. If you don’t know how you will know if you’ve succeeded or failed, then how can you ever describe success?
- With deadlines on them. Otherwise, you will spend years trying different things without ever knowing when it’s time to stop exploring and start focusing on what works best for your business model.
- The more specific they are, the better! Having a goal like “grow my brand awareness” isn’t going to help much—what exactly do I need to do? What kind of results am I looking for here? Instead, try setting some more concrete goals like “I want 10K unique visitors per month by 2020.” This way there is no doubt about what exactly needs doing (and when) in order for me reach my target audience and start generating revenue from it.
To help you set your goals, here are some questions to ask yourself:
- What’s one thing I could do right now that would make me feel like my business is growing?
- What kind of results am I looking for here?
- How can I measure that growth?
The Power of Firm Launch Dates
This is an approach that is common with software or SaaS products. And physical product developers would be wise to share it too.
By using an unmissable launch date, and then working backwards from there, it forces priorities onto each decision made before moving forward into yet another update cycle which will inevitably bring new priorities into play.
Entrepreneur Decision-Making made concrete
Decision-making is an essential skill for entrepreneurs, but it doesn’t always come naturally. We don’t always know which choices are right to make and which ones will lead us down the wrong path. But by following some simple steps, you can improve your decision-making skills and make better decisions that can benefit your eCommerce business in the long term
And remember: decision-making is not an event—it’s a process. The more experience you have making decisions, the better decisions will become for you. Be bold but be structured – that’s the magic combo for entrepreneurial success!
Ken Burke, The entrepreneurNOW! founder and CEO Network is an author, speaker, serial entrepreneur, and mentor.
Ken founded MarketLive, a market-leading, enterprise-class ecommerce software platform used by major merchants that generated $2 billion in online sales. In 2016, he sold MarketLive to Vista Equity Partners. Ken wrote the book “Intelligent Selling: The Art and Science of Selling Online,” in addition to hundreds of industry articles.
He received his MBA in Entrepreneurship from the USC Marshall School of Business, where he was later named Entrepreneur of the Year.