Updated: Jun 10, 2022
Here are my top 4 decision-making tools and tips for starting a business. The decisions you make at the outset are often crucial. How you make these decisions can make a big difference to your chance of success.
1. Understand your values and biases.
As you decide whether to launch the business, it’s important not to get carried away with the excitement of change, or on the other hand to be overly conservative. The best technique here is to look at your own needs in 2 pairs: change vs certainty and ego vs oneness. If you can write down what biases you might be subject to under these 4 headings, it will help you remove any subconscious influences. This was important for me to rid myself of any unnecessary fear of change. I call this technique MinusBias.
Other useful techniques at this Stop/Go phase include writing out your Career Flower, looking back over your life where you took a risk and what happened as a result, and creating the best-case and worst-case scenarios. All these techniques can give you confidence in your decision, or stop you from making rash emotionally-driven decisions.
2. Establish your base rates
We all suffer from the over-confidence bias where we are overly optimistic about how quickly and
profitably we can run a project, or start a business. This is a very robust and reliable effect. Your best bet is to seek out people that have done what you're doing, or something similar, before. As a result of doing this,I know it might take me 2 years to get my business really flying, I also know roughly the conversion rates of prospects (from coffee chat to paying customer), and approximate price points. These are called“base rates” and I strongly recommend you go and talk to people who can give you advice on
3. Set yourself pivot points.
I advise readingEric Ries Lean Start Up. Everyone will take something different away from his
philosophy of “Build-Test-Learn” and “fail quickly and cheaply, and then try a different tack”. What I took away is to set “pivot points”– meetings in the diary where you gather a group of independent advisers
(not your mum) every 3 months and present data about whether you are on track or not. You should have previously set benchmarks for the key measures (perhaps the base rates above) which you report back on. If you can have an honest and dispassionate discussion, you can decide whether you need to update the business strategy. This helps you avoid the sunk-cost effect, and helps you avoid not seeing trends until it’s too late.
4. Be as honest as you can. Ask disconfirming questions.
It is human nature, deeply ingrained, to only look for data that supports our point of view. It’s called confirmation bias. This is the academic area I worked in my psychology days. Hundreds of
experiments show that one piece of information – say a newspaper article about the carbon tax – can be looked at by say a Gillard fan and an Abbott fan, and they sift through it and only take out of the information the bits that support their current belief. They use this to strengthen their own belief, even if an objective reading of the article undermines their position. Likewise in business, we only look for information to back up our new business idea. It’s very rare for someone to actively look for information that might undermine our idea. Why would we?
Well, there’s a careful balance here. As a business you need confidence. Our whole society uses confidence as a cue towards the ability and likely success(although this isn’t always a good cue). However, too much of a good thing can be bad. Witness the people who audition for Idol who turn out to be awful because none of their families have ever had the guts to tell them they can’t sing. You don’t want that to be you. You want healthy confidence. Which comes from taking a good look at yourself and your business idea and asking some tough questions.
So, ask yourself….Is there a real need for my business? Will people buy this service/product from me? What if a bigger company launched something similar? If you find one data point to support your point of view, don’t stop there, keep looking and adjust your google search terms to find opposite points of view. Having a reality check can only make you stronger in the long run.
The pre-mortem technique I blogged about recently is incredibly useful in this area too.
In summary of the 4 points, start-up owners need to have two key skills: the ability to know themselves including surfacing their own hidden biases. And you need to train yourself to have a wide perspective on your business, using a range of opinions and data before you make key decisions.
Posted by Rob Pyne