In business, as in life, the ability to make smart decisions at critical moments can make all the difference to the outcomes you receive. Whether your preference is acting on instinct, or carefully weighing up the pros and cons before making a decision, it doesn’t really matter.
What matters for small business owners is understanding the key steps in business decision making and having the ability to critically evaluate the available options and determine which is the best path to take.
Four benefits of making better business decisions
1. Good decisions last longer
If you make an ill-considered decision, sooner or later you will need to return to that decision and course-correct with another, better-considered decision. However, if your initial decision was carefully and strategically thought through, then it’s unlikely that you will need to backtrack and make a better decision to replace the one you initially made.
2. Good decisions consider both internal and external factors
When making critical decisions about your small business, it’s important to take a holistic view of your company and its current state. To help ensure you make good decisions, all external and internal factors should be weighed up before you act.
3. Good decisions reduce conflicts of interest
Through transparency and stakeholder buy-in during the decision-making process, questions or concerns after the fact become much less likely. This is what you want because it keeps your company and employees focused and can reduce the chances of employees moving on.
4. Good decisions generally work out better overall
The final motivation for making better decisions in your small business is simply that they can move your business closer to solving the problem at hand, which collectively can edge your business closer to achieving its goals.
Six steps for making better business decisions
So, with all that said, let’s dig into some practical tips that you may consider introducing to your business moving forward.
1. Understand your target audience and your market
How well you understand your target audience and the market you are selling to will go a long way to determining how successful your small business will be.
Customer intimacy has become an in-vogue business term in recent years, and for good reason. It’s the term given to the practice of learning as much as possible about your customers, in order to accurately cater to their specific wants, needs, and desires.
No customers means no business, so the more you know about your customers, the more likely you are to be able to not only meet, but exceed, their expectations. Understanding your customers requires that you engage them, which you can do through customer surveys, email marketing, social media, content marketing, and by picking up the phone and calling them. When you understand their motivations, frustrations and goals, your business will be able to better solve their problems.
2. Reduce the risks to your business
Building a successful small business takes a lot of grit, passion, planning, smarts, and above all hard work. As a business owner you may encounter many risks and challenges while running your business, all of which means that protecting your business by reducing its risks via business insurance* is certainly a smart small business decision.
Recommended reading: Identifying and Managing Business Risks
3. Set clear objectives and have KPIs
Before you make any major decisions in your small business, be crystal clear about the goals you are trying to achieve and track your progress towards those goals with the help of clearly defined key performance indicators (KPIs).
Some examples of KPIs for small businesses include:
- Financial metrics, such as sales, earnings, or profit margins;
- Metrics on your customers such as retention rates and satisfaction rates, lifetime value, and acquisition costs;
- The number of returning customers versus new customers; and
- Non-financial metrics, such as the employee turnover rate in your business.
Using metrics such as these can be helpful for defining and setting the goals your business may aim for. And when it comes to business goals, they are most effective when they are realistically achievable, very specific, and completed within a specified timeframe. Once you set your goals, then you can get to work on achieving them.
4. Make data part of your decision-making process
Today there are many datapoints business owners can look to to help make better informed decisions. Many common business goals centre on increasing sales and earnings, retaining customers, and reducing the cost to acquire new customers. Data can play a pivotal role here in providing such customer insights as:
- what products or services perform well, and when;
- which pages on your company website are most visited;
- how many times a customer will make a purchase from your business in a set period; and
- how much they typically spend per purchase.
Such data can be used to identify trends that can help inform your future business decisions.
5. Explore strategic partnerships
Strategic business partnerships arise when two individual business owners join forces to expand their brands, which generally complement each other in some way. Co-branding opportunities can add value to your small business by increasing your brand awareness and creating brand trust.
6. Learn from past mistakes
No-one is perfect, but we can all learn lessons from past mistakes if we keep an open mind. If a mistake occurs in your business, flip it on its head and make a learning opportunity out of it. Consider what caused it, what went wrong, and what you could have done differently to influence the outcome for the better. Embracing change can be a great way to learn from your past mistakes.
As a small business owner, making smart business decisions can be the key to growing your business long-term. Just as critical is how you reduce the risks to your business. To learn more about how to do just that, visit the BizCover website or call the BizCover team on 1300 920 864.
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