The Key Decision Filter

numbers4The more I study other leaders and as other entrepreneurs mentor me, I feel more normal… or should I say less crazy.

In this week’s Smart Agent Podcast I interviewed, Kevin Harrington, a serial entrepreneur and star on the hit TV show Shark Tank. We asked Kevin several key questions that all business owners face no matter size or stage of business. Interestingly we found that one thing that was consistent; numbers.

“If you do not know your numbers it’s hard to make any decision in business, as it’s just a guessing game at that point.” Kevin stated. I couldn’t agree more and I believe this key factor is the basis for all decision making.

As an entrepreneur myself, I still struggle in decision making even when I know my numbers. Sometimes you have your gut telling you one thing and the numbers telling you another. This is what I call a “pivot point” or “fork in the road” that can lead your business down a path of success or the road to failure. The stakes are high, but if you follow the right process and have a solid team in place with secure controls you are sure to take the right road.

Kevin went on to share the concept of “effectuation” and what it means to be an effectual entrepreneur, which, I think, will helps one to know when to make a gut call vs. trusting the numbers.

Effectuation is a principle introduced by Saras Sarasvathy in 2001. Since 1997 Sarasvathy conducted research among 27 expert entrepreneurs. Sarasvathy interviewed the entrepreneurs and let them solve cases in order to see how they thought and where they started. It appeared that 89% of the expert entrepreneurs used effectuation more often than causation. Causation is the opposite of effectuation. Where effectuation is used in situations of uncertainty, causal reasoning is used when the future is predictable. With causal reasoning, entrepreneurs will determine goals to achieve and look for the resources to do so. At the opposite with effectuation, entrepreneurs will determine goals according to the resources in their possession.

9 out of 10 entrepreneurs seem to think this way, which goes against everything we have been taught on how to make decisions. Embrace it and have the self-awareness to know who you are and what got you to where you are today. With that said, always… I repeat ALWAYS know your numbers. This brings me to express the need for a vital tool we use at Smart Agent Consulting and which is the basis of our technology application; The Scorecard. It helps keep you on track and focused.

If you are part of the 90% group, and I am assuming you are, go to your data when faced with a decision and evaluate it with your team then process accordingly. When it comes to struggles, you are not alone. Learn from the numbers and use them to navigate through those tough times.


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