Making a Tough Business Decision? This Framework Will Help You Through It
Andrew Luck, the celebrated quarterback of the Indianapolis Colts, recently announced his retirement from professional football at just 29 years old.
This meant choosing to walk away from the $58 million remaining on his current contract. During his career, Luck had great successes, including four Pro Bowls, four playoff seasons, and being named NFL Comeback Player of the Year in 2018. But he also suffered several serious injuries, from a lacerated kidney, to a major shoulder injury, to the recent ankle and calf issues that kept him out of preseason training.
But still… $58 million is a lot of money.
A decision like this is incredibly difficult. It involves weighing pain against money. Weighing the grind of near-constant rehab against doing what you love. Weighing your commitment to teammates against a commitment to yourself and your family.
“It’s sad,” Luck said. “But I also have a lot of clarity.”
I believe Luck gained that clarity by making a huge decision the right way. And so should you.
The Bezos model for making decisions
In a letter to shareholders, Amazon CEO Jeff Bezos shared that he thinks of decisions in two ways: impossible to reverse and easy to reverse.
According to Bezos, an impossible to reverse decision is a “one-way door”—like selling your small business, firing a long-time employee, shutting down a failing product line…
Or retiring from the NFL.
Theoretically you can still take those types of decisions back, but pulling it off will be really, really hard. That’s why they’re hard decisions.
Bezos sees easy to reverse decisions as “two-way doors,” like introducing a new product or service, changing a pricing model, or implementing a new marketing strategy. While easy to reverse decisions may still feel huge, they can also be reversed with less time, effort, or cost than you might originally assume.
Your first step should be to determine whether a decision is easy to reverse, and therefore less permanent, or impossible to reserve—in short, a hard decision. When you know you’re facing a hard decision, you can approach it with the understanding that once you make a choice, there’s no going back.
How to make a hard decision
Making a hard decision is daunting. That’s why so many people actively avoid making a decision. They wait for more data, more input, more information, more “something.”
Sometimes waiting makes sense, but more often it only means delaying the inevitable.
As Teddy Roosevelt said, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.”
Let’s make sure you avoid doing nothing and actually make the right decision. Here’s a simple framework to follow whenever you need to make a hard decision. Let’s use deciding whether to sell your business as an example.
Step 1: Make the decision as binary as possible.
Research shows that the more options you have, the harder it is to make a choice. (In fact, too many options can keep you from making a choice at all.)
Where hard decisions are concerned, introducing too many options can cloud your thinking. For Luck, the choice came down to retiring or playing.
If he chose to continue playing, then he could consider different options, like methods of rehabilitation, what role he would play on the team, etc. In short, subsequent choices that resulted from his one main decision.
The same is true if you’re deciding whether or not to sell your business. Everything else—maintaining a small ownership stake, continuing on during a transition period, starting another business, taking a sabbatical, and so on—flows from making one choice or the other.
Work hard to focus your decision on “this” or “that.”
Because this or that is what you will ultimately be left with.
Step 2: Don’t look for opinions. Look for data.
We’re taught to ask for input when we need to make a decision—to run our thoughts past others, ask for guidance, and gather the knowledge and wisdom of people we trust.
The problem is, most of the input you receive will be opinions, not data. Take Luck: Had he asked for my opinion, my thinking would have been clouded by the fact that being an NFL quarterback seems like the best job in the world.
Forget the money. Countless kids dream of playing professional football. Willingly give that up? No way.
The same is true if you ask for input about selling your business. People’s perspectives naturally affect their reasoning. “I think you should sell,” no matter how strongly stated, is just an opinion.
Ask how the person arrived at that opinion. Ask for facts, reasoning, logic, and data that supports their conclusion. For your business, this could be reasonable revenue multiples, market trends, changes in the competitive landscape, or shifts in customer tastes.
Then you just might learn something you didn’t know.
And while you’re at it, don’t make a common mistake: adding up the opinions instead of the data.
Say seven people tell you to sell, and only one says you shouldn’t. Sound like it’s time to cash out?
Maybe not. Instead of tallying the opinions, tally the data. Make a list of pros and cons. Analyze the costs and benefits. Be as objective as possible. Think in coldly rational terms. Make a business decision.
Step 3: Make your decision based on logic and emotion.
Data is important, but so is how you feel. Maybe cashing out at a huge profit is the smart financial decision. But what if you love what you do? What if living your professional life on your terms is more important than adding more zeros to your bank account?
What if you love to not just work on your business, but also in it?
Analysis will only take you so far. You must also weigh your feelings. How will it feel to sell? How will it feel to walk away from a great deal?
How will it feel to walk away from the business, the people, the relationships?
That’s a decision only you can make.
“This is not an easy decision,” Luck said. “It’s the hardest decision of my life. But it is the right decision for me.”
The hardest decision of Luck’s life was made even harder by the external criticism his decision inevitably sparked. Something similar happened to me when I decided to resign from my job running a manufacturing plant to start my own business—for a lot less pay and security, and with the knowledge that I was stepping into a field where I had a lot less skills.
Most people didn’t understand. Many thought I was foolish.
But I knew—however things turned out—that it was the right decision for me.
Make sure, when you make a hard decision, that you make the right decision for you, your family, and the people you care about.
And not to please anyone else.