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The right business decision

  1. The right business decision
  2. As a small business owner, you are faced with a multitude of decisions every day. If it’s just you managing your business, all decisions, risks, challenges and work rest completely on your shoulders. There’s no one else to share the burden with, bounce ideas off or sense-check whether a key decision is the most appropriate one for the future of your business. Multitude of decisions
  3. Although this feels exciting at times, it can also become overwhelming, as developing and running your business on your own might eventually lead you to start doubting your own judgement. Wrong decisions can damage your business, and they can sometimes be traced back to how they were made. The fault, however, may lie in the way the mind works, rather than in the decision-making process. In other words, how the mind works can sabotage your decisions. Multitude of decisions
  4. If you’re pondering an important decision, be aware of the disproportionate weight that the mind gives to the first information it receives. If this information includes details such as initial impressions, key words or data, these will sway your judgements. Assume that you are budgeting for next year and have no knowledge of branding costs. How do you answer the first and then the second question? . - Is the cost of rebranding a business greater than £2,000? - What is your best estimate for rebranding your business? The swaying detail
  5. Most possibly, your answer to the second question was an amount greater than £2,000. This is because the terms ‘greater’ and ‘£2,000’ established points of reference in your mind which influenced your thinking, thus directing you to a higher figure. This approach can be used in subtle and elaborate ways to influence complex decisions, as explained by Daniel Kahneman in his book ‘Thinking, fast and slow’. The swaying detail
  6. Prior to making important business decisions, always view a problem or scenario from different perspectives, using alternative starting points and approaches, rather than going with the first thought or line of information. Since the way a problem or opportunity is posed can influence how you think about it, reframe it in various different ways and consider how your thinking changes for each version. Also, do analyse and consider the problem or opportunity on your own before consulting others so as not to be influenced by their ideas from the outset. So, what can you do?
  7. Then, keep an open mind and seek opinions from a variety of people. When consulting them, do not include your initial thoughts and considerations so as not to influence their thinking. This will enable you to gain real fresh perspectives. If your decision is linked to a business negotiation, think through your position before you read the other party’s proposal so as not to take a starting position which has already been influenced by their intended outcomes. So, what can you do?
  8. In business, as in life, loss aversion leads our minds to favour minimal or no change to our status quo. This links to the desire to protect our ego from damage, which, in turn, further strengthens our attraction to the status quo. Detaching from the status quo means taking action, and when we take action we take responsibility, while also opening ourselves to criticism and regret. We may thus look (even subconsciously) for reasons to do nothing, which is a safer and more comfortable course. The status quo attraction
  9. When making key decisions for your business, choose the status quo only if it’s indeed the best choice. Maintaining it just because it’s comfortable or safe may not necessarily enable you to avoid losses. If you think that your decision may be being biased by your (unconscious) preference for the status quo, refer back to your business objectives and assess how they would be served by the current situation. Are there any aspects of the status quo that are acting as a barrier to your objectives? So, what can you do?
  10. Furthermore, ask yourself if you’re unconsciously exaggerating the costs and risks of changing from the status quo. Question whether you would actually choose the current situation if it was simply another option. Also, examine the status quo alongside all alternatives in terms of their present and future outcomes. Finally, if you sense that your indecision is being fuelled by too much analysis, thus encouraging you to default to the status quo, be brave and go for the decision that your business needs in order to grow and succeed. So, what can you do?
  11. As a business owner, you cannot avoid making decisions, and the mind cannot avoid being biased by the wide range of information that it considers. This means that it may, at times, hinder you rather than help you reach the right decision. Being aware of this is important in addition to being clear about your objectives, while also defining all possible alternatives, accurately weighing their costs and benefits and keeping an objective stance during the decision-making process. This will enhance your competence and confidence in the decisions you take. The right business decision
  12. The right business decision