Many factors go into making a good business decision. If you’re not careful when making one of these decisions, you can cost yourself more than initially planned. History has shown us that a great business decision can make or break a business We will discuss how you can make better business choices by considering risks, internal and external factors, getting input from others, business goals, and analytical data before deciding what action to take next.
What makes a Good Business Decision?
1. You’re Comfortable with the Risks
To make good business decisions, you must identify which type of person you are: Are you comfortable with taking on high levels of risk? Or do you prefer not to take chances at all? If so, then try mitigating against those risks through insurance policies or other financial instruments; however, if not, perhaps avoid making big decisions altogether until you’re more confident in your ability to assess and accept risk.
For example, let’s say you want to start your own monetized YouTube channel where you teach people how to cook healthy meals but don’t know much about SEO or getting views. In this case, your risk tolerance would be low because you would not lose much money initially, maybe only time.
Conversely, what if you started a monetized cooking YouTube channel without knowing SEO but spent your entire $10,000 savings on food supplies, equipment, and a video editor. Would you be comfortable taking the risk all you have on a business that you know very little about?
2. You’ve Considered Internal and External Factors
Internal factors are factors within a business that the organization can control. These are financial resources, physical resources like equipment, and human resources like target audiences and employees.
An example of how internal factors can affect your business is if you want to start a business selling t-shirts but don’t have the financial resources (or don’t want to take on debt) to do so. A situation like this might make you consider another profession or business idea that doesn’t require such high startup costs.
External factors are any other conditions that affect your business and your ability to generate revenue. They may include economic, political, social factors, etc.
An example of how external factors can affect your business is if you open a shoe store during a recession when people are less likely to buy luxuries like shoes.
3. You’ve Gotten Input from Others
When making a business decision, many people can help. You can talk to your employees, customers, and suppliers. You may want to consult an expert in the field.
One way of getting input from others is to conduct a survey or focus group. You can ask for feedback on your business plan or get customers’ opinions about certain aspects of your business.
You can also hold a brainstorming session. A brainstorming session is a meeting where you invite people who can help you make decisions and share ideas. You may want to have a brainstorming session with your employees or other business owners.
4. Know what success looks like.
If you don’t know what success looks like, how will you know when it’s time to celebrate? This is especially true if your business is new and there are no clear metrics for success. If you’re launching an app that tracks the number of users who download and use it within a given period, those numbers will tell you how successful your product is.
But let’s say that’s not the case—instead of getting downloads and active users, your focus is on making money with advertising or subscriptions. In that case, success might mean having enough money in the bank to pay everyone’s salary for two months or more; or maybe it’ll mean breaking even. Whatever “success” means for your company, write down a definition, so everyone agrees on what they’re working toward as they move forward with their projects at work each day (and year).
5. The Decision Aligns with Your Business Goals
One of the most important considerations when making a business decision is whether the decision aligns with your company’s goals. If you know what your company is trying to achieve, you can use that as a guiding force for all future decisions.
It’s also important to consider how any given decision fits with your mission statement and values as an organization. Your employees need to understand why they do what they do and why it matters, so it helps if each employee’s job description aligns with their values and those of the larger organization.
An example: A tech startup lives off software designed for small businesses. Their customers are primarily small businesses, so their software has been designed specifically for them (and not large corporations). The latter have chosen them because of their commitment to serve smaller companies first. One day they decide they want to develop an app that will allow them access to larger markets but then realize that this goes against everything they stand for—the product would alienate all their current customers.
6. You’ve Utilized Analytical Data
It’s important to be armed with data when making a business decision. Data can come from hard numbers, market research, or personal experience. They are all the valuable information that can help you determine whether a potential business decision is worth pursuing.
Example of how to use analytical data: You’ve recently developed a product that you believe will be profitable. You have tested it in the market and found that people love it. You’ve also researched your competitors and determined a gap in the market for your product.
Making the right business decision can be tough. We hope our guide has helped you make informed and successful business decisions. By keeping these tips in mind, you’ll be able to take advantage of any opportunities that come your way!