How the founders we work with are making good decisions in tough times

Our role at Realise is to roll our sleeves up and support founders and business owners commercially, financially and emotionally. We talk to dozens of leaders every week on a range of issues, giving us an informed sense of the wellbeing and commercial challenges this group face.

The coronavirus crisis has stopped everyone in their tracks and our founders along with everyone else have been forced to ask, ‘what are we going to do next?’

Surviving the crisis means making good decisions under pressure.  The choices you make over the next few weeks dictate whether businesses survive or thrive. And, as a leader, it is fundamental to work on the quality of your decision-making process.

In business, there are people with differing abilities, from elite to ordinary performers. Give one hundred business leaders a challenge and there will be a wide range of solutions and outcomes. It doesn’t necessarily follow that IQ sets them apart; the people that succeed have developed a particular set of skills and learnings and applied these in a better way than their peers.

So, what have we learnt about good decision making from the leaders we support and, crucially, how can you get better at it?

It’s important to give yourself every opportunity to make a good decision. Here are steps and behaviours that we have noticed lead to better results.

1. Identify the problem or issue that needs a decision

Sounds obvious, but it may not be. Our good performers spend time asking smart questions around the problem to identify the root cause.

The solution to cash running low might be more aggressive debt collection. But the root cause might be poor service, which leads to slow payment or poor product-market fit resulting in slower sales or poor margin control. Find the root cause, be honest about it and then analyse the decision around this.

Identify a clear outcome and then “chunk down” the decisions required to achieve this -- it’s difficult to tackle large, amorphous challenges. Here’s an example:

Outcome: We will deliver the same level of profitability in Q1 of 2021 as Q4 of 2019 by delivering a redesigned set of digital propositions, supported by new digital sales channels.

Supporting decision (extract):

• Decide on the value proposition – move fast to carry out research with existing and new customers and other stakeholders on this VP (including pricing)

• Decide on where the ‘new’ business will position itself (if different) – move fast to research competitor offerings

• Decide on our team roles – reassess capabilities of the team and organise training in relevant digital skills and ecommerce solutions

• Decide on the numbers (financial, sales volumes, pricing etc.) - build a financial model that shows sales, margins, overheads and cashflow returning to pre-Covid levels

Leaders that perform better spend time setting powerful outcomes and keep it in front of them (and their teams) at all times, like a lighthouse beam guiding them to safety.

2. Collate information to make the best decision

If there is one thing that really sets good performers apart, it’s having a handle on their numbers. Intuition is important in decision making but it needs to be complimented by robust, relevant data.

You should be able to consider the impact on sales, margins, overhead, cash and other relevant metrics (such as, AOV, ROS, ROAS, LTV, churn, CAC and CPA) based on scenarios that lead to your desired outcome.

As a minimum you should have good cashflow forecasting. The better and more accurate this is the better your decisions -- and your confidence in making them -- will be. All our best performers have invested in getting accurate, timely historical and forecast information. It’s the petrol a business runs on!

In addition to internal data, the good performers seek other inputs to help make the quality of the decision even better. Employees and customers can provide crucial context. Ask them, do research and get them to test ideas.

Don’t forget advisors and experts. They are normally ready to give a view without charge (if they don’t, change advisors) and they will have seen similar situations. Getting this information doesn’t mean you have to tell them all the details of the decision you’re debating.

3. Give yourself the time (and headspace) to think

A lot of people make decisions when they’re under pressure in a meeting or completing another task. You have to give yourself the time to make a good decision. That may mean putting thinking and planning time in the diary. It should be a process, like doing your accounts.

Generally, we see founders and business owners take soundings from a range of sources, then find a time and place that’s right for them where they can “get their head straight”. They then come back and check their decision in the data to see if it makes sense. Some use a simple model of checking business (commercial) fit, financial fit and people fit.

4. Don’t ignore intuition and values

Where we see founders ignore their intuition and, particularly, their values it’s harder to execute on the actions underpinning the decision and their energy declines. Those around you also know that the decision doesn’t feel right.

This is a significant inflexion point when you can and may have to reinvent your business; you might even have to walk away from it. Whatever path you take you need to believe deeply in what you’re doing.

5. Analyse your options and develop a path forward

Evaluating your choices starts by creating simple pros and cons lists. This provides a structure and helps elaborate on potential outcomes. It is also useful to list what you can control and what you can’t to help decide where to focus your energy and as one founder said, using a sailing analogy, “leave the uncontrollable on the wave behind”.

It’s important to get other people’s input. Speak to a small number of people that can offer different perspectives: family, friends, experts, a mentor. Sharing the problem and some potential solutions you’ve been looking at provides the context they need to add value.

Their perspectives will help build up the picture around the different options. Hopefully, they will challenge any bias you have too – which is particularly important when decision making is emotionally charged.

Don’t be afraid to disagree with their feedback. Debate their position and find out where it’s coming from. Failure to understand their perspective can leave blind spots in your decision-making process.

Look at strategies people in your industry have used and take inspiration from tangential examples. Borrow with pride – there’s often no need to reinvent the wheel.

Time and time again we see business owners make great decisions by asking good performers what they do and doing the same thing, often improving it. It seems obvious but it’s not; it takes confidence to ask, persuasion to get your team doing something different and persistent execution to make something new systemic.

6. Act on your decision

It’s a cliché but do something or else you’ll do nothing. If you do nothing then things might resolve themselves, but it’s unlikely. Resolve to put your energy into the decision you’re making and give yourself a kick up the backside.

Energy is a vital resource at this time. Learn what this means for you. Often the difference between the outcome of two similar leaders making the same decision is energy – don’t run out of this fuel.

At this point, it’s important to be realistic about the resources you have available. If you’re not a highly numerate person, don’t try and build a financial model. If you don't have people to execute the project, find the resource or rule out that path.

We are all different; the factor that drives success in our community is hustle. Wherever you have gaps that will stop you achieving your outcome, hustle and fill them. Find the finance, digital or ecommerce person and get them to help for free or at a price that works for you, barter, call in favours – do anything to make that decision a success.

7. Review your decision – feedback is everything

Once you make a decision, constantly check in to see whether you are on track to deliver your outcome or whether you need to tweak your approach. All businesses (even small) should have a regular management review session where you take a step back and review decisions. It’s a healthy process and don’t worry if you do think of something better – just keep that energy high and execute relentlessly.

If you make a bad decision, know when to move on or get away from that area. There’s no point in worrying about it the whole time. Even if it fails, you failed fast and you can get into the habit of learning from it.

8. Grow as a leader

It takes mental strength to make good decisions in a crisis. Steps you take now may decide what happens to your employees’ livelihoods or the pot of cash you’ve put aside for retirement. There’s no doubt this will cause significant emotional stress.

Are you continually finding yourself under mental stress at work? On a scale of one to 10, how stressed do you feel when you finish for the day? How would your partner rate you?

If you’re suffering, you need to identify that and improve your situation. If you want to help the wellness and health of your business, you need to sort yourself out first.

In a broader sense, what do you want in your business and your life?

If you want to grow a business to a certain size or exit point, you need to improve how you run the company. It’s inconceivable that running a kitchen table startup will be the same as running a 100-person company. If you want to grow, by definition you’ll have to grow yourself and building your process for good decision making is a great place to start.

In short, be decisive and put your energy into your decision – you need to back yourself to succeed.

Want to talk through your options? Book a 30-minute exploratory chat with Richard.