When Dealing With Uncertainty: Here’s How To Make Business Decisions
As an entrepreneur or a CEO, you know that one of the only constant things you deal with in business is: uncertainty. Tough decisions are natural and recurrent, and you need to have a strategy behind them. We both get you won’t always make the choice that leads to the ideal outcome, but that shouldn’t stop you from trying. In this article, I will cover how I personally deal with uncertainty and how to make business decisions. I’ll also share a few strategies that you can implement today to improve your decision-making.
Not all decisions are made equally.
There are different types of decisions that you’ll encounter as a business owner. You’ll have to handle daily, smaller decisions and big-time, monumental ones; and your approach can’t be the same for both.
Being Jakt’s CEO, I have to make numerous minor, quick decisions on a weekly basis. Over the years, I’ve learned that you can’t get hung of on being wrong or making the wrong choice (is there even a right vs wrong? We’ll talk about that in the end). You can’t let analysis paralysis or uncertainty when you’re figuring out how to make business decisions stop you from getting shit done. So what do I do instead?
I simply make a decision. Look at the data and result of that decision. And adjust. Then I make another decision. Look at the data and results again. And adjust one more time. And repeat. I cut off things that are not working and emphasize those that do work.
Let’s say you run a financial agency. You have eyed a new sales tactic –FB ads, for example– that you think could work, but will it? You simply don’t know and, the truth is, you simply can’t know. Because, well, if you knew, you wouldn’t be asking yourself whether it will work or not. Then, you could spend three months doing your due diligence, or you could just calculate potential risks (more on this later) and just try it.
So you decide to invest a few thousand dollars –or any amount that you feel comfortable with. Once the FB ads are implemented, you now check and analyze the results: what’s the ROI, is their potential for improvement, what was done right/wrong, etc. And then you adjust: you scale up if it worked, or you shut it down if it didn’t.
And what about crucial decisions?
I’ve been running Jakt for over 7 years and, understandably, there have been a handful of huge decisions I had to make. I’m talking about things that can and will impact the long-term future of my company: “Should I fire this person? Should I get rid of my business partner? Half my team quit in a matter of a month, what should I do?” And so on.
One of the key principles I learned from my coach changed the way I think about this. She said: “if you don’t know—keep going until you know.” It really rewired the way I approach monumental decisions.
When facing choices like these, I like to wait until I KNOW what my choice should be. That doesn’t mean I’m sure I’m right either –just that I’m sure of my decision. I don’t want to make premature, emotional decisions because you can’t take them back. You can’t fire someone and call them up the next day because “you made a mistake.” These are definitive decisions that affect not only yourself but other people and your company as a whole. Only make such a choice when you are 100% sure that’s what you want to do.
“But, what if I’m wrong?”
I have to make dozens of decisions every single day –and I’m sure you do too. I’ve been playing this game for over 7 years and, as you can imagine, I’ve messed up a few times. We all know how important it is to take responsibility and “own” our choices –but I want to go deeper in regards to handling your decision-making mistakes.
In the past, when something didn’t go well –if I lost say $50k or $100k–, I’d beat myself up over it: “oh, I’m stupid. I should’ve known, what the hell was I thinking!” Over time, I’ve rewired the way I go about this. The reality is, if I knew it wouldn’t work in the first place, I would not have tried whatever it was. There are no mistakes: you had to go through them, and there’s just no avoiding them. I’ve also changed my relationship with money, and now I see it as just a tool. Not tying my personal identity to it has helped me make less emotional decisions. And this gave me less uncertainty when thinking about how to make business decisions.
Now, when I make a mistake, my first thought is, “What did I learn?” I don’t get emotionally triggered anymore. And that’s been very freeing for me because I’m much more stable. The entrepreneurial roller coaster is much easier since there are no lows and highs — it’s all part of the fun, just one big game. It did take me almost seven years to finally figure that out tho.
Hypotheticals aside, I set aside over $100k for my personal brand this year. The truth is, I have no idea whether that’s going to have a return or not.
What I do know is this:
- If nothing comes of it, I’ll be okay with it because I am okay with losing that money and it going to $0.
- I’ll learn a shit ton, so I’m not actually losing, and
- If it works I’ll have a great monetary ROI + I’ll learn.
I cannot lose. No matter the outcome: worst case scenario: I win because I learned; best case scenario: I learn, I make money AND I win. When you can only win, there’s no uncertainty when making business decisions–that’s how I think of entrepreneurship. Taken from this view, there is no real right or wrong. Therefore, you can take the weight off always trying to make the “right” decision, or fearing you made the “wrong” choice.
But let me give you another example: last year I lost $75K. I tried something, and it didn’t work. At all. Most people would think I’m screwed or stupid for spending that money. And three years ago, I would’ve totally agreed with you. “You just lost 75K. That’s a lot of money.” And it is. However, what everyone doesn’t understand is what I learned from losing 75K. I got an education that I couldn’t get at the best Ivy League schools.
Now that doesn’t mean that I just throw money around, which leads me to my next point:
Look, I’m an entrepreneur, but I hate gambling when it comes to business. Every decision I make is based on minimizing the downside while having the highest upside possible. It is irresponsible and, honestly, just plain stupid to risk money away with a blind eye.
Yes, I love learning, but I also don’t like losing money (who does) –so every financial move I make has to be calculated. So, on that deal I lost above, I knew going in that I couldn’t lose more than $75K. That was my level of comfort, and I I wouldn’t care if I lost that amount. Well, not that I wouldn’t care, but I knew that losing $75,000 was not going to hurt me either financially nor my business. And when it hits that number, I pulled the plug. Unemotional. Business.
I am very precise on how much I am willing to lose. Basically, I don’t risk money I can’t lose. In any decision, I try to limit my downside while maximizing my upside potential –that’s how I deal with uncertainty and how to make business decisions. With that in mind, if the investment doesn’t work, I’m fine with it. The problem starts when people gamble money they can’t afford to lose. Or when they don’t cover their downside risk, and that’s when businesses go under and people get screwed.
Uncertainty & How to Make Business Decisions– A Takeaway:
- The way to approach a decision depends on its magnitude: for minor decisions, you just make them, analyze the results, adjust, and repeat; for monumental ones, you keep going until you know.
- There are no “mistakes”… as long as you learn. You’re investing in education –you had to go through them. Just make sure you don’t make them again.
- Calculated risks have a low, limited downside and as high of an upside as possible. Don’t gamble money –especially if you can’t afford to lose it.
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