Making business decisions is hard. Sometimes I think about a business decision and rethink it for years. I often come out with completely different solutions as time goes on. The problem is that assessing a business decision after the fact is not so easy.
Let’s say you decide to add more workers to your company, but then profits went down in the 3rd quarter. Did profits go down because you added new workers, or was it just a bad quarter? You have to take a closer view at what really happened with the new workers, and where the loss of profits was incurred.
I made a stupid decision last month. I tested my analytics after I removed many of our older reviews and added mobile pages at the same time. Since I did two changes at the same time, I cannot know if the decline in my stats was because my reviews were removed, or because Google didn’t like my mobile pages. Hmm. When you make changes to your business, if you want to get a clear analysis of the results of your change, you have to make one change at a time and measure the change over a reasonable period of time — and what is reasonable may vary based on what type of change you made.
Large companies like Samuel Adams experience huge ups and downs purely based on quarterly income. My stock plummetted two days after I purchased it. I lose 15% in a day. Then, I had to wait six months and they had a good quarter and the stock went up to 1.5% above where I purchased it at. So, I sold it because I decided that I didn’t like the volatility.
Another mistake is to base business decisions on short-term results. Sometimes business decisions might help you five to ten years down the road and you can’t measure what happens the following quarter when assessing long term plans. It is common for Asian auto manufacturers to sell cars at below cost to get the market moving overseas. They will wait for a decade and then start selling cars at cost, and twenty years before they make a profit. I might be exaggerating here, but long term business practices require patience, and if you have no patience, perhaps being a business man is not the right career for you!