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Are You Making Bad Business Decisions? How To Avoid This

By Sean M. Hugo, CPA

No business, large or small, likes to believe that the decisions they are making are not quite right. It is true that bad business decisions often have ripple effects that can cripple the overall organization - but, that can be avoided.

Unfortunately, no business will ever be free from decision-making, so it is absolutely crucial to really think through each decision as it arises, and really evaluate what there is to gain from it...and what there is to lose.

A recent article in Fortune discusses this issue, and how best to avoid making bad business decisions. In the article, the author lays out three ways to avoid this:

  • Assessing the financial cost
  • Assessing the productivity cost
  • Assessing the culture cost

Cost-Assessment Analysis

What do all of these points have in common? The need for a cost-assessment analysis. That is what is key in avoiding bad business decisions - it is gaining a thorough overview of what its cost will be for each aspect of your business.

Admittedly, this is not always easy to do, especially when decisions need to be made quickly and on the fly. But there must be some sort of evaluation process in place, even if it is just internal for when these matters do arise. And in that process, these assessments must be considered.

Assessing the Financial Cost

Taking each of them individually, they do very much speak for themselves. Understanding the financial cost of a business decision is usually of the utmost concern, for good reason.

Can your business revenue withstand a potentially bad idea?

When situations do arise where financial costs must be assessed, ensure that you are keeping your financial team (especially your accountant) in the loop. Having a third-party opinion is vital, more so when complex financial costs must be understood. 

Work with your financial team to truly understand what the financial cost will be - both monetary and in terms of resources. Is this a truly viable idea, and can the numbers back it up? Or rather, can your business revenue withstand a potentially bad idea? Work with your advisor to understand if it is a worthwhile endeavor, and what measures can be put in place to protect the business if it does fail.

Assessing the Cultural Cost

For better or for worse, the financial cost is really the only one that can be backed up by numbers, one way or another. The impact on productivity and culture though, cannot be defined as well quantitatively, making its cost harder to determine really. But the true measure of it is based on your team, and that needs to be another big factor in your decision.

  • How will your business decision affect your people and work culture?
  • Will it create problems down the line with your staff?
  • Is it a change that they have good reason to be against?

It might be worth getting feedback - formally and/or informally - from the teams that might be impacted to truly understand its cost. They might be able to provide another perspective that you might not have considered, or can offer additional insight to reinforce your decision.

Assessing the Productivity Cost

This also goes for trying to understand productivity, and working with different teams to get their feedback will also help inform that aspect of the decision. Usually, it is hard to measure the future impact of productivity, but departments might be able to give you a better understanding of what the system currently is, and what is needed to make that more efficient.

  • Will your decision help in streamlining workflow?
  • Will it create more work without adding value?

Juggling a business and its myriad needs is definitely stressful, especially the decision-making portion. However, the best way to avoid bad business decisions is to truly think about its cost, both qualitatively and quantitatively and how this will affect your business.

Using these three analysis as a blueprint, it will become easier to gauge whether the business decision you are making is right, or is it better to avoid it and move on to a different opportunity. To learn more, please contact us by calling our office at 405-759-2796 or by requesting a free consultation online. 

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