How do you make important business decisions?
Do you fly by the seat of your pants and trust your gut? Or are you more methodical in your approach and rely on cold, hard facts?
To be fair, both options have their pros and cons.
Take Steve Jobs, for example. He once said, "Have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary."
Jobs was known for his trusting his gut instincts when it came to making critical decisions at Apple. Instead of reviewing fact-based business data, Jobs used his instincts to make predictions like tablets overtaking the desktop.
On the flip side, under Bob Galvin, Motorola infamously ignored all the evidence that the mobile phone was taking off in the late 90's and instead decided to invest heavily in Iridium satellite phone technology.
The technology was already obsolete and it cost the company millions of dollars.
Does that mean that trusting your gut is better than trusting facts or data? Not necessarily. There will always be times when you, as a small business owner, should trust you number over your instincts.
The Power of Trusting Your Gut Instincts
Before we go any further, I feel that it's important to quickly discuss the power of trusting your instincts. After all, it's age-old advice that can be useful for small business owners.
"Trusting your gut is trusting the collection of all your subconscious experiences," says Melody Wilding, a licensed therapist and professor of human behavior at Hunter College.
"Your gut is this collection of heuristic shortcuts. It's this unconscious-conscious learned experience center that you can draw on from your years of being alive," she explains. "It holds insights that aren't immediately available to your conscious mind right now, but they're all things that you've learned and felt. In the moment, we might not be readily able to access specific information, but our gut has it at the ready."
Richard Branson famously said, "I rely far more on gut instinct than researching huge amounts of statistics," and a majority (62%) of executives say it is often necessary to rely on gut feelings and soft factors.
Going with your gut can help you make effective decisions more quickly. And, that's always a perk when you have to face multiple decisions throughout the day.
The problem with trusting your instincts is that they are subject to natural bias and subjectivity. For instance, if you run a clothing eCommerce site, you may decide to push the designs and wardrobes that you prefer and not what your customers prefer.
In other words, your personal perceptions can sway you to make important business decisions - even for the worse.
Driving Business Decisions with Data
That's when data comes into play. Having facts and hard numbers, like profit-and-loss, sales, and expense reports, in front of you eliminates that natural bias and subjectivity.
Numbers let you know what's working and what's not so that you can make the appropriate changes and adjustments.
For example, if you prefer that you're red-colored shirt is popular, but your sales report tells you that the blue shirt is selling the best, then it's time to start pushing the blue shirt.
Data located within your accounting dashboard can also help you make decisions such as:
However, as Diana Goodwin, Founder of AquaMobile, explains,"If you torture the numbers enough, they'll tell you whatever you want." Goodwin adds, "Raw data is powerful, but when I've had to make big decisions without historical data, I (A) did as much research as possible, (B) talked to experts who had knowledge I didn't, (C) considered what I stood to lose if the gamble did not pay out and prepared to own the results no matter what."
Bridging Your Heart and Head
With an endless stream of data at your fingerprints from CRM systems, financial databases, web reporting, and social media, it's never been easier to quickly compile information to make more informed and intelligent business decisions.
You can then use this information to guide you in the right direction.
However, use all of the data and research that's available to you to confirm your gut feeling and preexisting beliefs. Doing so will give you a better chance to succeed.
What's more important to you? Instincts or numbers?