The decisions you will be making about the strategic direction of your business lead to more decisions. Good decisions result from critical thinking—the ability to focus your thinking to get the results you want—a key entrepreneurial skill.
Whether you are defining your strategy or simply figuring out how to solve a routine problem, keep these questions in mind:
- What do you know about the situation that explains what is happening?
- What patterns do you see? What inconsistencies?
- Are you looking at a symptom? Is something else creating these results?
- What can you do to assist the situation?
- What would happen if…?
- Can you propose an alternative solution?
- How would you prioritize your time and actions?
- How would you explain…?
- What data could you use to reach a conclusion?
- What assumptions have you made?
- What are expected outcomes? What’s the worst that could happen? The best?
To succeed as an entrepreneur, remember to guard against making critical decisions based solely on emotion without considering relevant information. You’ll want to be able to analyze the situation, make the decision, and take action with confidence in your decision-making and planning abilities. In the subsequent modules, you will analyze and evaluate how your strategy will affect your business and determine the actions needed to implement your strategy.
In early 2000, Steve Stephenson identified a promising business opportunity: by investing about $100,000 in cutting-edge technology, he could provide his clients with revolutionary new services.
But the timing wasn’t great. Stephenson had just purchased a building and orchestrated the merger of two companies to form Lykins-Signtek Inc., a firm based in Naples, Florida, that works with residential and commercial developers to design street signs, mailboxes, and other specialized items. Facing tight cash flow and seeking to stabilize the freshly merged companies, Stephenson hesitated to buy the new technology. In fact, he waited six months before finally deciding to take the plunge.
In retrospect, Stephenson concluded that the new equipment would have paid for itself over that six-month period by helping him attract more clients and broaden his range of services. Instead, his dithering cost him potential revenue. “I over-analyzed, and then I procrastinated,” he says. “Now I know that instead of beating a dead horse, you ride it. You make a decision and then ask, ‘What next?’”
He now conducts due diligence, collects relevant information, and makes decisions promptly. In 2001, for example, Stephenson boldly purchased another building to house his fast-growing company. He didn’t waver or repeatedly question whether to proceed. Today, he’s more decisive in hiring people, buying vehicles, and making other major investments in his company.
“Now when I have the information in front of me, I act,” he says. Stephenson credits FastTrac with making him more decisive and also sharpening his ability to plan. One of the most valuable tools he acquired is learning to evaluate the actual cost of sales and growth to his bottom line.
He’s currently assessing several scenarios to expand his business, such as opening new branches or buying another company. By projecting the financial impact of each scenario, he can separate emotional drivers from more substantive, strategic factors that guide his decision. “What kills most businesses is under capitalization,” he says. “So I’m asking, ‘If we close this deal, how will this impact my sales and profitability? How much capital will we need?’”
Stephenson knows now to answer these questions up front so he can have a plan in place. Stephenson’s decisiveness has led to better results. His company’s revenues have increased nearly 20 percent a year over the past few years, and annual sales exceed $5 million.