Things aren’t always black and white though. Otherwise, decision-making would be easy. It’s all that blurriness that causes most decision-makers to pause before exploring any specific strategy. Generally, the bigger the decision, the longer the pause should be before moving forward. Another key to helping make better decisions is to financially model the potential outcomes of various options resulting from any given decision. Not knowing the financial impact of a potential decision with a high level of certainty should create an even longer pause, if not outright abandonment. Otherwise, what is the decision based upon?
The chant I have adopted -- “Know Your Numbers. Know Your Business.” -- was not chosen by accident. Financial analysis of past performance, understanding industry trends and using that information in modeling the future reduces uncertainty and increases your probability of achieving a desired outcome. When opportunities present themselves, financial modeling the future of various options removes some of that blurriness and provides you a better understanding of possible outcomes.