Most entrepreneurs fail. In fact, only 25% of new businesses make it to 15 years or more. To build a successful business, you have to make smart decisions day in and day out, knowing that a single wrong choice could make or break it.
In other words, good entrepreneurs are good decision-makers. That doesn’t mean they never make mistakes. It just means they minimize bad decisions and learn from their mistakes quickly.
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So if you want to be a better entrepreneur, you need to understand what makes a smart choice, how to get into the right decision-making mindset, and what questions to ask before finally pulling the trigger.
A smart choice is one that is all of the following:
- Objective. It’s based on hard data. It makes financial sense and isn’t influenced by emotions.
- Well-informed. It’s informed by all the available data. Not one source, but many.
- Value- and goal-driven. It’s not only about profit. It also supports your brand values and goals.
If a choice checks all the criteria above, you’re off to a good start. In the next section, we’ll discuss how to get into the right mindset for making business decisions.
To get yourself into the right decision-making mindset, use these two tactics:
1. Reduce decision fatigue
The more decisions you have to make in a day, the more tired your brain will get. So to keep your mind sharp, eliminate as many unimportant decisions from your day as possible.
For example, many successful entrepreneurs like Mark Zuckerberg and the late Steve Jobs wear the same outfit every day because it’s one less choice to make each morning. You can streamline your own routines in the same way. Limit trivial decisions to a single option so it doesn’t take up any of your mental bandwidth.
2. Get into a neutral mental state
These days, it’s hard to shut out noise and distractions. Smartphones, social media, online videos — they all compete for your attention. But if you can lock them away, you’ll think clearer.
You can also try walking, meditating, or looking at a matter from an outsider’s perspective. Anything to get a fresh view on a subject.
Now you’re ready to put your judgment to the test. Ask the following questions to gauge the value of a business opportunity:
What are the costs?
Determine what a choice will cost in time and money. If you don’t have exact numbers, make an educated guess. Then decide if the reward is worth the investment.
And don’t forget about opportunity costs. What will you be passing up by saying yes or by saying no, or by delaying the decision altogether?
For example, say you want to increase your company’s logistics power. You could buy, lease, or rent a commercial truck. Each approach comes with its own pros and cons. If you buy, you don’t have to pay interest on a loan. But if you lease or rent, you could keep more of your money to invest and make greater returns elsewhere.
Do what makes the most financial sense in the long run.
What are the worst- and best-case scenarios?
Next, be prepared for the worst-case outcome. What do you stand to lose, and could your company survive the blow?
But also consider what you stand to gain. Could this decision put you at the top of your industry?
Dream big but stay realistic.
What does your team think?
Don’t be a one-person show. Consult your team on the matter. They might have expertise in areas you don’t.
Even if you don’t have any employees or business partners to ask, consult an expert. This could be a personal mentor or even just business books. Getting a second opinion is always good.
What do your instincts tell you?
At the end of the day, you must make the final decision. Nobody can make it for you. Though it may require taking on some risk, remember the potential rewards.
If you’ve asked all of the questions above, you’ve checked your blind spots and biases. Now, it’s time to trust your intuition, which has developed in you subconsciously through years of decision-making.
Every business decision is a learning experience. Even if it turns out to be a bad decision, you can still learn from it and move on. So focus on the process more than the outcome.
Remember to keep a high-level perspective and never act on impulse. Be honest with yourself. If you can do all that, you’re already a better entrepreneur than you were yesterday!
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