For business owners, from small and big to our favorite industry — real estate investment — you can bet tough decisions will come your way. It could be deciding to take on a big project, start a new partnership or try new approaches. Some decisions are real milestones for your business, and deciding what to do can be challenging. Decision-making is a major business book category, and you can purchase dozens of titles at any bookstore all designed to help investors, business executives and entrepreneurs alike with making tough decisions.
The truth of the matter is that we all will be faced with tough decisions. Even owners with the best business strategies come to a crossroads. Where risk is involved, there’s bound to be doubt — even fear. At our company, there have been multiple instances where we were faced with what others saw as easy decisions — and that we saw as monumental. For instance, in January 2011 we were coming off a fantastic year in sales, closing 189 turnkey transactions. We had never even completed 200 transactions in a calendar year, but we felt there was an incredible opportunity to grow. While many outsiders told us that the status quo was working and to be patient, we knew something needed to be changed.
We took several drastic actions and completely overhauled the way our company operated from top to bottom. We changed the focus from sales to service, which sounds like a cliche, yet was a monumental shift in approach and thought. We doubled our team in a 12-month period and doubled our renovation costs. To say we doubled-down would be an understatement. It was a tremendous risk for our company and through the end of the first quarter, we were on pace to go backwards…. not grow!
But a funny thing happens along the way to taking calculated risks and making tough decisions. With clarity of purpose and open communication to everyone involved, risks and tough decisions can help bring a team together. After a slow start in the first quarter, all of our changes and each of the tough decisions began to take shape, and our company completed 301 transactions in that year. Each subsequent year, we would continue to make small changes, tough decisions and issue challenges to continue to improve. We are on pace to complete over 630 transactions in 2015.
While every situation is different and the stakes vary, there are a few probing questions to answer before you take the plunge one way or the other. These are the questions that we ask the leaders in our company, and they have helped us to stay focused on crystal clear objectives that literally have nothing to do with sales. Sales, profits — whatever the metric is that you use to gauge success — all grow when you concentrate on making tough decisions to improve your company. Try these questions next time you are ready to face those tough decisions.
When Making Business Decisions, Ask Yourself…
1. What’s the worst that could happen?
No, really. What’s the worst that could happen? So many people still look upon mistakes are failures — usually in character or intelligence, and it’s simply not true. We all make mistakes, and mistakes aren’t failures unless we refuse to pick ourselves up and learn from them. Now that you’re prepared to fail, think about the details. Will this deal devastate your business if it doesn’t pan out? Be realistic about the consequences.
Whether it is a decision about hiring, purchasing a particular property, engaging in a marketing campaign or a decision about being more patient, always start with the negative consequences. There are consequences to both action and inaction. If you make a move or do not make a move, both are decisions, and both can lead to good and bad. Always be aware of the downside before making a final decision. There may be the possibility of big dollars, lots of growth or a ton of leads, but what are the chances of those things not happening? Being aware is a great place to start with your decision making.
2. What does my business stand to gain?
Completing the above question brings you to the classic risk versus reward assessment. You know what’s at stake; now you have to look at what you stand to gain. Think about where benefits are — even in the case of “failure.” Is it worth it? There is a lot to be learned from experience. However, there is no reason to purposely lose on a deal just to learn from failure. Be smart and aware of both the good and the bad, and then weigh those against one another to decide which decision to make.
3. How will this decision affect my team?
Too many business owners take matters into their own hands and make decisions without considering how it will affect their team. Whether it’s a small, close-knit group of collaborators or many, many employees, decisions that affect the business will ultimately affect them. Can you provide the training for new systems? Will anyone lose their jobs? How will it affect their livelihood and job satisfaction? As much as you can, involve your team in the big decisions. They can offer a valuable perspective.
This is the hardest lesson for real estate entrepreneurs and even investors to understand. The decisions you make effect other people. Sometimes your team is made up of those that believe in your vision and your ability to deliver. Make sure you give them reason to continue to believe. Involving them in your decision making, even if you do not ultimately take their advice, can be a great way to keep a team strong and intact to help you achieve your vision.
4. Am I taking the high road?
Some decisions are, for lack of better term, “sketchy.” Whatever crossroads you find yourself at, if something seems underhanded, fishy, or outright wrong, you’d do well to avoid it. While it may not be illegal, maintaining your integrity is more than just staying on the side of the law.
The high road is often thought of as one of those fictional places that exists only in one-liners and old sayings. In reality, it is very real and very often the place where investors go to separate themselves and their products from others in their niche. Integrity, honor, your name… these are all things that people want to protect. How successful we are at doing that depends on staying on the high road and out of the mud.
Many times we will all be faced with a decision that helps us get to where we think we want to go — faster. These decisions come in all sorts of forms. Sometimes they sneak up on us, and we do not even realize how close we are to falling off the high road and into the mud. There is no amount of money worth losing your integrity for. If you know it is the wrong decision morally, then go in the other direction. That is the easiest decision you can make.
5. How will this impact my long-term vision?
Are you willing to change your vision for your business? Some big decisions can turn your vision on its head. It’s not necessarily a bad thing. After all, that is exactly what we did, and it has led us to a more fulfilling vision and one that ultimately is the right direction. But in making business decisions, consider beforehand how it may change or maintain your ultimate goals. You don’t want to wake up one morning completely surprised that everything has changed. It is important to remember that each tough decision you make can have immediate and long-term impacts. What feels like the right call short-term can be the exact opposite of what you had in mind for long-term.
Once you have considered these five areas and acted accordingly, you should be in a much better position to make tough decisions!
What’s your method for making a choice at a critical juncture?
Share with us in the comments.