Making strategic decisions is a critical part of running a business. Some decisions you make will only affect you, while others will affect your employees or customers. Regardless of how big or small are the effects of your choices, it’s important to consider all the factors affecting decision making in business.
Keeping Your Brand in Mind
Many businesses make decisions based on how they fit with the company’s strategic objectives, vision, mission and values. Making choices based on the image and brand of your company shows the outside world that your strategies are aligned and consistent. It builds trusts with employees and establishes credibility for your company.
For example, if your bakery business prides itself on making every product from scratch, then it’s critical to consider that when deciding to use a new supplier. If your supplier wants you to use premade dough, for example, that goes against the company’s mission of making all products by hand in house. While the premade dough may be more cost effective, it doesn’t align with the company’s strategic goals.
Learning From Information and Data
There is an overarching impact of the business environment on business decisions. It’s critical for businesses to consider all of the data available when making decisions that affect the whole company. Taking into account internal data such as sales, revenue, forecasts and budgets is paramount. However, external data such as market research, competitive research and economic trends is also vital.
For example, if your hair salon is looking to branch out and offer nail services as well, it’s best to consult both internal and external data before expanding your services. By doing so, you can make an informed decision with a predictable outcome based on careful research.
Considering Cost and ROI
For many businesses regardless of whether they are small, medium or large, decisions are based on opportunity cost and forecasted return on investment. Before you make a choice for your company, it’s vital to understand how much money you will need to invest up front. You also need to know what kind of return you will see as a result of your decision.
For example, if your business is considering moving from a small office in the suburbs to a larger office in the city center, your decision will likely be based on cost and ROI. Moving to a metropolitan area may bring you a higher-end clientele and more visibility for your target audience. However, that needs to be weighed against the increase in your monthly rent and upfront moving costs.
Keeping the Triple Bottom Line in Mind
For many organizations, success isn’t just about revenue. The triple bottom line, which includes social and environmental aspects in addition to financial aspects, is how they make decisions. Instituting environmental policies within the company or focusing on corporate social responsibility helps businesses to make decisions based on the triple bottom line.
For businesses that focus on giving back to the community or establishing sustainable business practices, decisions are made based on how they affect aspects other than revenue. If a business was considering working with a new manufacturer that did not have ethical waste disposal practices, for example, they may choose to forgo the partnership because it did not contribute to their triple bottom line.
Constraints on Decision Making in Business
While it’s important to consider multiple factors affecting decision making in business, there are many constraints to be aware of as well. For many businesses, the major constraint is time. When you don’t have enough time to carefully weigh the pros and cons of your decision or to consider alternatives, you may make the wrong choice. Other constraints include an authoritarian business culture or financial impacts.
Anam Ahmed is a Toronto-based writer and editor with over a decade of experience helping small businesses and entrepreneurs reach new heights. She has experience ghostwriting and editing business books, especially those in the "For Dummies" series, in addition to writing and editing web content for the brand. Anam works as a marketing strategist and copywriter, collaborating with everyone from Fortune 500 companies to start-ups, lifestyle bloggers to professional athletes. As a small business owner herself, she is well-versed in what it takes to run and market a small business. Anam earned an M.A. from the University of Toronto and a B.A.H. from Queen's University. Learn more at www.anamahmed.ca.