As a startup founder, most big decisions fall to you. And much of your company's success depends on how you handle those tough choices. What thought processes are best for making the most informed call—often, at a moment's notice?
Eleven entrepreneurs from the Young Entrepreneur Council (YEC) share which questions they always ask themselves before committing to an answer:
1. What's the Worst-Case Scenario?
The fastest way to evaluate a decision in business is to try to determine the worst-case scenario and then try to assign a probability of that happening. This method allows you to understand what you could be getting into in terms of cash flow, time, distraction and opportunity cost.
In addition, from a holistic standpoint, it helps to try to imagine yourself already in the worst-case scenario caused by the decision and reflect back on your decision to understand if it was worth it. Would you still make the same decision after having been through the worst-case scenario?
2. Is the Risk/Reward Favorable?
All decisions come down to risk versus reward. If the reward for making the right decision outweighs the risks (in terms of probability and expected return), then it is a decision worth making.
3. What Is My Emotional State of Mind?
It is important to reflect on your emotional state of mind before making any difficult decision. Taking a step back and understanding your current emotions and drives can help your timing on when to make a decision, increasing your odds of a favorable outcome tremendously.
4. What Would (Fill in the Blank) Do?
Small business owners often make business decisions based on the mindset of other small business owners. On the contrary, entrepreneurs who are experiencing the most growth will make a decision based upon the mindset of what we call the "big business playbook."
If success leaves clues, we look to determine what other successful people have done in our situation and model their achievements. Instead of saying, "Is this a decision another small business owner would make?" we ask: 'What would Jeff Bezos do? Richard Branson? Tony Hseih? Howard Shultz? Warren Buffet?" (The entrepreneurs we select are the ones most likely to have shared a similar decision to the one we're facing).
5. Will My Team Be Proud of the Decision?
My barometer for what to do has changed. It used to be, "Can I change my mind later and work hard to reverse a bad choice?" But as we have grown our business, what matters the most is our entire team's buy-in. Now, for every major decision, the only thing that matters to me is if a choice I make will create a positive or negative feeling for our team.
6. What Would I Say About This Decision Six Months From Now?
In a fast-paced startup, you're always testing new things and preparing for phenomenal growth that challenges the organization in multiple ways. For difficult decisions, you need to skate where the puck is going. Will this be a critical item in six months? What will have changed by then? The decision is not for now. It's for the future, and six months is a good timeline as a litmus test.
7. Is It Aligned With Our Values?
Does this help us achieve our vision and is it aligned with our values? I test the question against my company's vision and values first—then ask what it means in terms of profitability.
8. Are You Doing It for the Right Reasons?
Emotions including fear, envy and anger influence your decision-making processes. Taking your time to make important decisions can dramatically improve the quality of those decisions.
Over time, the quality of those decisions determines the quality and success of your company. Try to take petty, short-term emotions out of important decisions by consciously asking yourself if you came to that conclusion for the right reasons.
9. Why Am I Doing This?
It is never easy to make any decision that affects a company, let alone a really difficult and important one. I always ask myself why I am doing something, and that usually adds a layer of clarity. When you factor the "why" into the decision, it often makes you realize what the decision is really about.
You may find that the reason was to earn a huge contract, or you may find that it is because it will open up doors down the road. But until you fully understand why you are doing it, you can't have it relate back to the mission of the company and see how it aligns with that mission. When you really understand the mission and why your company exists, you will see how the choice is aligned, and your decision will be much easier.
10. Will It Create a Win-Win Situation?
We focus on creating win-win-win situations for everyone—shareholders, employees, partners and customers. If something ultimately isn't a win for everyone involved, maybe there’s a better option.
11. How Will This Affect the Company Later?
With every tough decision there will be consequences on either side, but I always make sure I ask myself where my decisions will put the company and its employees in one year, five years and 10 years. Forward thinking is always one of the most important factors.
—Daniel Wesley, Creditloan.com