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What is a smart business decision worth?

We all make hundreds of business decisions every day. They range from small, operational, administrative or financial things like where to put a delivery or what margin to allow on a new order, to the big, strategic things like what products to stock, whether to invest in a new depot or when to launch an eCommerce platform.

Does decision-making leave you feeling stressed?

Making decisions without the right information available can be stressful. The consequences may be severe, and bad decisions could cost a business money, time and reputation damage.

Well-informed decisions, made with all the relevant information available to assess risk and potential gain, are faster, less stressful and will more commonly have a positive outcome.

Having that information at your fingertips speeds up every micro- and macro-decision, across the board, and leads to greater efficiency, happier and more productive staff, satisfied customers and ultimately, greater business growth.

Every decision matters (not just the big stuff)

What many people forget is the full extent of decision-making that goes on every day within a business. We’re all making decisions all the time, so the potential impact of those decisions – commercially, operationally, socially, psychologically – really adds up over time. Of course, some decisions will be bigger than others, but all decisions require our input.

Even small decisions require information. Whether that information is just based on “that’s how it’s always done,” or whether you’re actually weighing up data to make an informed choice, every decision we make requires a certain about of knowledge and understanding. Filing, quotes, stocking shelves, speaking with customers, resolving queries or complaints, selecting suppliers, presenting reports, negotiating deals or terms, deciding your strategy for expansion – even when to take a day off, how flexible to be regarding remote working, how to reward employees, and whether to spend half your holiday logged in to the work system – they’re all decisions, and they all have an impact.

But when the information, knowledge or understanding feels out of reach or entirely unavailable, that’s when risk, doubt and anxiety creep in. Over time, that can lead to stressed employees, eroded profitability and lost opportunities, or worse.

How much of your decision-making is actually just habit?

There are many types of decision and we’re not here to walk you through every iteration. But we would urge you to be conscious of the decisions you’re making every day – yes, you, reading this blog.

Too many choices in business can leave you standing still

How do you make those decisions? What information do you use? Many business “decisions” are barely decisions at all – they are simply a continuation of the way things area already done. Which can work well (the expression “don’t rock the boat” exists for a reason after all). But it’s important to ensure that, if you are doing something because that’s how it’s always been done, it really is – and continues to be – the best way to do it. Habit can be extremely damaging in business, as can the fear of change (which is very similar when you think about it.)

It's important to recognise all the opportunities for decision-making each day and make sure you're consciously making them, not just following a pattern. Making decisions more conscious is a great way to mitigate risk - once you start getting into the habit of looking at the numbers, the information and the trends in your business, the easier it becomes to make decisions that will take you in the right direction, for the right reasons.

Hold your decisions to account and check your reasoning. Ask yourself, if you were the first person doing this particular job – would this be the way you’d choose to do it? And if not – how might it be done better? Is there a potential risk attached to this decision? Does the potential benefit outweigh that risk?

Accessibility of information is crucial

When it takes a long time to track down the information you need, or you simply can’t find it at all, it’s stressful. It means decisions are at best delayed, and at worst, get made without the back-up of up to date, critical information. Again, that’s where the risk lies.

When things are time consuming and hard work, they don’t get done as often, or as well. So if reliable, up to date information is easily accessible within a couple of clicks, it’s much more likely that people will go through that process before making the call.

When decisions are backed up by information, they are less risky, less stressful, and less likely to be wrong. Obviously no-one can see the future, but being able to instantly check your thought process against previous examples, being able to instantly check a customer’s credit history or a supplier’s delivery reliability, often takes the pain out of a decision and alerts to you the realistic level of risk. Basing a decision on data can also reduce choice paralysis (aka that rabbit in headlights feeling) when there are just too many options available.

The better the information is in the first place, the better the decision-making process will be. When every member of your workforce from yard worker to delivery driver to sales rep to MD is plugged into the same system, using the same up to date information and integrating that information across the business, that decision-making framework becomes ever more reliable.

So – what’s it worth?
Timber merchant sales figures screenshot

While it would be impossible to put an exact figure on the potential value of smarter decision-making throughout your business, it’s easier to see the potential.

Imagine you are a timber merchant with a turnover of £2M per year, with an average of 25% profit. That’s £500,000 profit per year. Naturally there are overheads to take into account here which eat into that profit as well. Stock, premises, staff, hardware, services... the bills really take a bite out of it.

To get to that turnover figure, you are averaging around £167K per month. For an easy example, let’s say that is based on 400 orders per month at £417.50 per order.

There are many factors which influence how many orders a business is able to process in any given month. Stock levels, demand, staff productivity, process efficiency, logistics capacity and many other areas all play a part.

If every one of those areas can be enhanced, whether in terms of enhanced stock management to ensure better availability of more product lines, better margins maintained across more products, more efficient logistics planning, higher productivity enabling a higher number of orders to be processed daily, it’s easy to see how the little differences add up to big changes.

In your £2m turnover business, if you were to increase the value of every order by just 1%, you’d have another £20K per year. Increasing your average margin by just 1%, that’s another £4K. Add to this reduced overheads and the opportunity to increase your customer base, order value and order frequency, and you start to see the potential for improvement.

Calculations screenshot

Calculations screenshot

It's worth nothing that we tend to use deliberately conservative examples. The potential could be far greater, and we know based on our existing customer base that the increases we are proposing are entirely achievable, as a minimum.

What is the cost of a bad decision?

The reason decision-making can be stressful is because it has an impact on your business. The greater the potential risk, the more stressful it becomes. So when decisions are made daily without the right information to back them up, the cost - both literal and figurative - can be very high.

As we said before, no-one can see the future. But using the intelligent tools at our disposal to weigh up options using accurate, up to date information is a good second place, and can help alleviate stress, reduce risk and optimise opportunity at every step.

Would you like to feel more confident making smart business decisions?

Choosing a system that enables your whole workforce to input, access and retrieve information instantly is vital for confident decision-making. And as we have shown, smarter decision-making adds up not only to happier, more empowered employees and more efficient processes – it also directly translates to productivity, profitability and growth.

If you, and every member of your team, could find a way to feel more confident in every decision at every level of the business - imagine the positive impact that would have.

Want to give it a go for yourself?

If you would like to try the free online demo of Merchanter, our digital ERP system for merchants, please register here for login details. It could be the smartest decision you’ll make this week.


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