Two Techniques To Help You Make Good Business Decisions
Every business owner, director or a manager wants to make good business decisions. These two techniques you’re going to read about will help you make your business stronger, more sustainable and more profitable.
Technique No 1 - SWOT Analysis
Sounds mysterious, doesn’t it. What is a SWOT analysis and how can it help you make good business decisions? SWOT analysis is a strategic planning technique that helps you look at a project, task, area, industry as a whole or any business opportunity from 4 perspectives.
- Strengths
- Weaknesses
- Opportunities
- Threats
This technique helps you make a decision that will more likely lead to a success. We’re saying more likely because how you’re going to use a SWOT analysis afterwards is a separate story.
Strengths and weaknesses
These two perspectives of a SWOT analysis are internally-focused. Strengths help you establish what is good about a project, process or any area you’re analysing. They look at what makes you and your business stand out from your competitors, what your business is amazing at. Weaknesses are the things that stop your business from achieving its goals and they are the areas you should improve otherwise they increase your chances of failing.
Opportunities and threats
The last two perspectives of a SWOT analysis focus on the external factors. Opportunities are external things and factors you can use to your advantage. If you implement them, they will increase your chances of succeeding. Threats are factors that can put you in a difficult situation and can threaten your success.
Identifying the factors under all 4 perspectives of the SWOT analysis is not enough. The crucial part is using the results of the analysis to come up with the necessary steps to:
- use the strengths to their full potential
- turn weaknesses into strengths or significantly improve them
- use the opportunities to your advantage
- minimise any threats and risk and come up with a back up plan for a rainy day
Technique No 2 – Cost-Benefit analysis
The second useful technique to help you make good business decisions is called cost-benefit analysis. Cost-benefit analysis helps you compare all the benefits of making a business decision with all the costs that will be incurred as a result of that decision. You can start the analysis by looking at the financial costs and the financial benefits and simply compare the numbers. If the benefits outweigh the costs, it’s an indication that you should go ahead with your decision. If the costs are higher than the benefits, you can either change your direction and make a different decision or analyse your costs to try to minimise them.
However, don’t focus purely on the financial side of things when doing a cost-benefit analysis and trying to make good business decisions. Numbers give one side of the story. There are also non-financial elements to every decision-making and their costs or benefits can be of a greater importance.
For example, implementing new accounting software can be costly in terms of physical money, so initially you may think it may not be worth it. However, there may be other non-financial benefits of it that will significantly outweigh the financial costs. Those non-financial benefits may bring more savings in the long run. Constant mistakes from using outdated accounting software can have a huge impact on staff morale, your relationships with suppliers or even your clients. They can damage your reputation which can be difficult to rebuild and as a consequence they can seriously threaten your business existence.
Why not get in touch with our professional Oxford accounting team today to see how they can help you and your business achieve its potential.
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