How To Make Smarter Business Decisions

Tips to consider when developing a better decision-making process

According to Forbes, about 543,000 new businesses start every month, but even more than that shut down. Further, only one half of small businesses stay open longer than five years. The decisions that business owners make are often the key factor upon which their businesses succeed or fail -- especially the big questions impacting growth, finances, hiring and firing, technology investments, and long-term plans. 

Making smarter business decisions requires careful deliberation with a clear head. That can be a challenge when all the responsibility is on your shoulders and the situation is changing quickly. We have put together tips and advice for you to consider in order to gather better information and make smarter decisions. 

Track your time and your budget
Nearly every decision you make could impact your resources on hand, whether it be time, money, or material goods. Therefore, you need to maintain a record of your resources and expenditures. While it may be good to make bold moves, you don’t want to bite off more than you can chew. Accurate tracking can help you make smart moves that fit in your budget and your schedule. QuickBooks is one example of accounting software that can help you run your business and manage your company’s overall financial health.

You can use QuickBooks to track sales and expenses; view financial statements, such as profit and loss reports; pay your employees and track their time, manage vendors, create annual budgets and more.

Use the 80/20 Rule
You may have heard of the 80/20 Rule. This is the business theory that says in general, 80% of your profits will come from 20% of your efforts. How does that help you make decisions? As you spend more time running your small business, you will discover who your best customers are, what your employees are best at, and what activities generate the most revenue. You can use profiles of your top customers to create marketing that attracts more people like them. You can make many decisions with the 80/20 Rule as a guide. 

There’s more to learn on 80/20 from several authors.  But while this can be a helpful guide, it’s important to not be too set in your ways with 80/20. Your industry and your local market can change quickly. You don’t want to miss out on an opportunity because you’re unwilling to try something new because it doesn’t appear to be an “80-type” customer opportunity at first sight.

Identify the right time to make decisions
Some decisions are made once, after a long period of consideration. Others have to be made at a moment’s notice, without much time to prepare. But every business owner will almost certainly make important decisions on a regular, predictable basis. 

There may be a certain time of day, or certain day of the week, that is best for you to make difficult decisions. Through research, scientists have determined that the morning hours may be the best time for people to be analytical, and the afternoon hours may be better for creative brainstorming. Once you have identified the time periods where you feel most confident in your decision-making abilities, try to keep them free of other obligations.

Develop a prioritized timeline for decision-making
To keep from being overwhelmed, it’s important to prioritize the decisions that need to be made. If the deadline to make a big decision is still a ways off, it is fine to focus on the day-to-day and on gathering more information for the big decision. Writing a one-page business plan for the year can help you prioritize important decisions. 

Learn from smart and experienced people
A mentor or business partner has probably made many of the decisions you are facing and could provide invaluable advice. To meet other people you can learn from, consider joining a chamber of commerce, industry association, or small business networking group. It’s important to remember that choosing good mentors and networking with the right peers can be key to your success; a good friend or family member may want to help, but they may not be the best person to get advice from. 

You may also be able to gather great insights from your employees. They have had their own successes and learned from mentors at previous jobs. By promoting an open exchange of ideas in your workplace, your employees may feel more comfortable expressing past experiences and their own thoughts.

In addition, your small business advisor spends every day helping local small business owners like you. He or she can offer tools and advice to help you do everything from managing your finances better to growing your professional network. 

Gather quality information and inspiration
Some successful small business owners get a formal education in their industry before starting their business. But other successful owners start with education in a completely different field, or with no formal education. Book learning and learning by experience are two different things. 

Many entrepreneurs have strong instincts for business. Whether you call it “common sense” or “gut feeling,” these instincts develop over time. As a small business owner, you will learn by doing. But you can also learn from those who have done it before.  

The learning process is never over for entrepreneurs. Everywhere you look, there are “small business experts” trying to sell books and promote websites. But it is up to you to apply discernment and sort the valuable information from the noise. Your professional network can help you find the best information resources. When you do find an expert with genuinely helpful advice, the other resources they recommend will often be valuable as well.
The information in this article has been obtained from sources deemed reliable; however, we do not guarantee its accuracy. This information is not intended to be legal, investment or tax advice and should not be relied upon. MB Financial Bank, N.A. and its affiliates do not provide legal or tax advice. You should review your particular circumstances with your legal and tax advisors. Member FDIC.