The Ultimate Business Decisions Guide

When you’re making important business decisions, a strategic approach replaces guesswork with confidence. It helps you align decisions with company goals, tackle challenges and guide your business toward growth.

In this article, you’ll learn what a business decision is and how to make choices that drive long-term success.

What is a business decision?

A business decision is a choice business professionals make to achieve specific goals or solve problems within a company. These decisions can range from everyday operational choices to major long-term decisions that shape the organization’s future.

There are three main categories of business decisions:

• Strategic decisions. Long-term choices that set the company’s overall direction and require significant resources. Examples include launching a new product, entering international markets or merging with another company.

• Tactical decisions. These support strategic decisions but are more focused on short to medium-term concerns. Examples include deciding on marketing campaigns or adjusting pricing strategies.

• Operational decisions. Everyday decisions that help run the business efficiently. These decisions are usually routine tasks like scheduling staff and managing inventory.

Each of these categories breaks down further into three main types of decisions:

The benefits of making good business decisions

Every business decision affects your success, so it’s essential to take a thoughtful approach to each. The benefits of good decision-making in business go beyond just keeping your company afloat. Additional advantages include:

• Improved efficiency and performance. Good decisions align initiatives with business goals, streamline operations and improve productivity

• Better financial outcomes. Sound financial decisions, like effective budgeting and investment choices, lead to healthier profits and reduced waste

• Increased competitiveness and innovation. Well-thought-out strategic decisions can give your company a competitive edge

• Enhanced reputation and customer satisfaction. Decisions that focus on providing value drive higher customer satisfaction levels

• Effective risk management. Good decisions ensure you assess potential risks and put measures in place to prevent them

Let’s look at Netflix’s decision to shift from a DVD rental service to a streaming platform as an example. In the mid-2000s, Netflix recognized the growing demand for digital content and foresaw a trend toward internet-based entertainment.

Investing heavily in streaming infrastructure and phasing out DVDs revolutionized how people consumed media.

The decision helped the company grow its revenue and establish itself as a leader in the entertainment industry.

4 decision-making models for business leaders

Decision-making models give you a structured approach to tackle different kinds of problems. Choosing the right model for your situation can help you make more effective decisions. Here are the four most common decision-making models in business:

1. Rational decision-making model

This model involves a systematic approach to decision-making through a series of steps. The rational approach ensures you consider all relevant factors, including a thorough analysis of the pros and cons of each alternative. It minimizes the risk of making a costly mistake.

The rational decision-making process:

1. Define the problem and gather relevant information

2. Identify possible choices or alternatives

3. Weigh the evidence and analyze the pros and cons

4. Choose the best alternative

5. Implement the decision

6. Evaluate the decision for future learning

2. Intuitive decision-making model

This model relies on instinct and experience rather than analysis. In some instances, relying on intuition can be more efficient than a lengthy, analytical process.

Experienced decision-makers can often quickly assess a situation and make sound decisions based on past learnings and gut feelings.

The intuitive decision-making process:

1. Understanding the problem and context based on experience

2. Letting intuition guide the decision

3. Taking swift action

3. Creative decision-making model

This model encourages brainstorming, helping problem-solvers come up with innovative ideas and solutions. Visionary tasks like developing new products or services require thinking outside the box. The creative approach can lead to breakthrough innovations and competitive advantages.

The creative business decision-making process:

1. Identify the problem and desired outcome

2. Brainstorm a range of creative problem-solving ideas

3. Evaluate ideas based on criteria like feasibility and impact

4. Select the most promising idea or combination of ideas

5. Implement the creative solution

6. Review the results for effectiveness and learning

4. Collaborative decision-making model

This model involves gathering input and consensus among group members, leveraging collective expertise and perspectives. Collaboration is helpful when you need buy-in or input from different teams or people. It can help you reach the best decision and generate support for the outcome.

The collaborative decision-making process:

1. Identify the decision you need to make

2. Assemble the stakeholders

3. Encourage open discussion and gather ideas

4. Make a decision based on consensus or a majority vote

5. Implement the decision

How to make data-driven business decisions: an example in action

For most business decisions, a rational decision-making approach is most effective. It’s especially useful for strategic decisions and day-to-day business operations where analyzing data and evaluating options really pays off.

Here’s how to use the rational decision-making model to make better decisions.

Identify the problem and gather relevant information

Understanding the problem you’re facing is the first step in making sound business decisions – and it’s arguably the most important. You need to figure out what’s really going on so you can direct your efforts to the right places and come up with solutions that work.

There are five steps to help you identify any problem:

Identify possible choices and alternatives

The next step is to explore and list the potential ways to address the problem. At this stage, your goal is to be as comprehensive as possible. The more options you explore, the more likely you’ll find the best solution. Here’s what to do:

1. Brainstorm solutions. Gather a team of decision-makers and brainstorm all possible solutions without judgment or filtering. Encourage out-of-the-box ideas and cover as many possibilities as you can.

2. Research best practices. Look at how other companies or industries have addressed similar problems. Try to find insights or spark ideas that you hadn’t considered.

3. List all alternatives. Create a comprehensive list of potential choices, regardless of their feasibility.

4. Consult stakeholders. Discuss options with people who have valuable insights, including employees, customers or partners. Their input can help validate ideas or highlight overlooked alternatives.

Once you’ve got a list of alternatives, it’s time to weigh the evidence for each one.

Weigh the evidence and analyze the pros and cons

Analyzing the advantages and disadvantages of each option identifies which best aligns with your business and performance objectives. It reduces risk, ensuring that you think strategically rather than impulsively.

To weigh the evidence for each option, write a basic pros and cons list. Try to get a clear picture of what you’re working with. Consider how important each factor is and how it’ll affect you in the short term and long term.

For example, let’s say a company is deciding whether to build a new manufacturing plant or upgrade an existing one. Here’s an example pros and cons list it might create for building a new plant or upgrading:

A decision tree is another effective tool for weighing business decisions. It provides a clear, visual way to map out complex outcomes.

To create a decision tree:

1. Start with the primary decision or question at the root of the tree

2. Branch out with the possible actions or decisions you can take

3. For each action, add branches that represent outcomes or further decisions – be as comprehensive as you can

4. Assign probabilities and potential value to each outcome to help compare options

Here’s what a decision tree might look like for the example above:

This decision tree shows the estimated revenue and end market value (EMV) of upgrading or building a new plant. Building a new plant costs $120 million, with a 65% chance of generating $200 million in revenue but a 35% chance of being an unprofitable investment.

Choose the best alternative

You should now have all the information you need to make a data-driven decision. Review the outcomes from the last step to see which option aligns best with your long-term goals. Consider your operational capabilities and budget to ensure you can follow through with your decision.

Here are some tips for making your final decision:

• Choose an option that balances benefits with an acceptable risk level

• Look for a flexible option you can adjust if needed rather than a rigid option you can’t change if something goes wrong

• If possible, test your choice on a smaller scale before full-scale implementation to find unforeseen issues

It’s essential to stay objective and spot personal biases that might influence your decision. Talking it over with someone else can give you a fresh perspective and might reveal things you hadn’t considered.

Implement the decision

Now that you’ve made your decision, it’s time to make it happen. To implement your decision, you need to translate it into action plans and then execute those plans. Here’s how:

1. Develop a detailed action plan. Break it down into manageable tasks. Assign responsibilities, set deadlines and outline the steps needed. Make sure the plan includes metrics for success and methods for monitoring progress.

2. Allocate resources and team members. Secure the necessary resources, including budget, personnel and technology. Hold a preliminary meeting to get all stakeholders on board with the decision.

3. Clearly communicate the plan. Make sure your team understands the decision and their roles in the implementation process.

4. Monitor progress and make adjustments. Track implementation against the plan using your chosen metrics. Review progress regularly, address issues and adjust your action plan to stay on track.

Review the outcome

The final step in the decision-making process is to review the outcome, evaluate the decision’s effectiveness and gather insights for future actions.

Compare the results with the objectives and reporting metrics you set when planning. Try to gauge whether the decision met, exceeded or fell short of expectations. Engage stakeholders for feedback to discover the decision’s impact and highlight areas for improvement.

Look for both successes and shortcomings. List your effective strategies and pinpoint areas that didn’t go to plan.

When you’re done, compile these lessons learned into a comprehensive report to guide future decisions and prevent similar mistakes.

How Pipedrive can help you make good business decisions

Pipedrive’s powerful customer relationship management (CRM) system uses business intelligence tools to streamline sales processes and empower entrepreneurs and business leaders. Here’s how it contributes to better decision-making:

Visual sales pipeline

Pipedrive’s visual sales pipeline provides an intuitive view of every deal in progress. This feature lets you easily track the status of sales opportunities and make timely decisions. Use the visual overview to quickly identify bottlenecks and prioritize tasks that drive deals toward closing.

Activity management

Effective decision-making stems from being able to oversee and manage day-to-day sales activities. Pipedrive offers comprehensive activity management that helps you organize and track all tasks, including calls, meetings and follow-ups.

Customizable reports and dashboards

Pipedrive generates custom reports and dashboards to gain real-time insights into sales metrics like conversion rates, deal progress and team performance. You can analyze big data sets to identify significant trends and refine your decision-making strategies.

Sales forecasting

Pipedrive’s sales forecasting feature helps you accurately anticipate future revenue streams. Accurate forecasting means you can set realistic sales targets, reduce uncertainty and enhance confidence in your decisions.

Contact management

Pipedrive logs all of your interactions with clients and sales prospects.

Understanding past interactions and preferences helps you take a personalized approach, enhancing the likelihood of converting leads into customers. You can tap into this information to make informed decisions about customer engagement strategies, follow-ups and more.

AI Sales Assistant

Pipedrive’s AI Sales Assistant saves time by recommending the next best action. It uses powerful artificial intelligence algorithms to find patterns in your data and offer actionable solutions. With intelligent automation functionality, it can also help you streamline processes.

Final thoughts

To make sound business decisions, business owners must choose courses of action that resolve problems, drive growth and align with broader organizational goals. Effective decision-making in business management requires a blend of analytical thinking, good judgment and data-driven insights.

Pipedrive can empower your business and help you make smarter decisions. Start a free trial today to explore how Pipedrive can transform your operations and business strategy.