As entrepreneurs, we make decisions every day. Most of them aren't going to make or break your business, but every once in a while, a decision will have a big impact: a major change in strategy, a sizeable investment, a revision to your business model or a new partnership. These decisions require a lot of thought.
For these types of big decisions, it's best to have a decision making process in place that will help you think through them and make the right choice. Try using these four tips:
1. Be mindful when making big decisions.
Dr. Deborah Davis suggests in a Psychology Today article that we approach big decisions with mindfulness. Take your time with them and accept that some decisions are incredibly difficult to make. Even if you feel like you've made the right choice, you may have lingering doubts.
When it came time to decide whether my wife should quit her job and join our company full-time--even though we weren't yet confident in the company's survival odds--we took a weekend off from our busy schedules, sat in a park overlooking the ocean and talked it out. Taking this step away from everything for a couple of days really helped.
2. Making a decision is better than not making one.
In a recent study, Steven D. Levitt of Freakonomics found that people who make huge life changing decisions like quitting a job, getting engaged or getting divorced were happier than those who took no action, and just stayed the course. So, if you're not sure whether you even should make a decision about something, you'll probably feel better if you do.
A few years ago, I started a company headquartered in Kauai, HI with the intention of making it a fun retirement project (complete with regular "business trips" to Hawaii). Unfortunately, the business proved unsustainable. It was only losing a little bit of money each month and I wanted it to work so badly that I just ignored it for longer than I'd like to admit.
Eventually, I realized I was just avoiding making a decision about this business. Was I going to invest more in it to make it succeed or just shut it down? Once I did commit to shutting it down, I felt much better, even though my retirement "business trips" had been scuttled.
3. Control your fear.
When faced with a decision, take note of what scares you the most about each available option, what the worst possible outcome is for each of those options and if you can recover if that worst case scenario were to happen. If you determine that you can live through the worst case scenario an option may lead to, than you can take fear out of the equation.
In one of my companies, we recently decided to discontinue a service we had carried for a long time because we discovered the return for it wasn't worth the expense of managing it.
The worst case scenario for us would be to lose the customers who were with us primarily for this service, but we decided that even if we lost those customers, we'd be okay and even come out ahead since we wouldn't have to sink more money into managing the service. Realizing that made it easier for us to make this decision, which turned out to be the right one.
4. Have at least 70 percent of the information you require.
Obviously, the more informed you are, the better your decision making will be. But, I don't think you need 100 percent of the information about a given situation to make an informed decision.
Former Secretary of State Colin Powell has said that you only need between 40 and 70 percent of the necessary information to make a decision. I believe this is true. If you have less than 40 percent, you're likely to make a poor decision. If you wait for more than 70 percent, it'll likely be too late to make a decision.
The better prepared you are to make a big decision, the easier it will be to make it and the more confident you'll be with your choice. Follow these four steps and you'll be more likely to make the right choices.