Financially Rigorous Commercial Decision Making

By Moira Creedon

The Rev counter is the dial that tells you when to change gears as otherwise you will be wasting fuel.

In a company this represents decision making systems that ensure the company makes commercial decisions that make financial sense and do not waste company resources.

This includes:

• Pricing,
• Investing in Physical assets – equipment, property, vehicles,
• Investing in IT systems,
• Investing in New product or Market Development,
• R&D,
• Acquisitions,
• Product or customer portfolio management,
• Procurement,
• Outsourcing vs Insourcing.

Many small businesses use gut instinct to make decisions for example on whether or not to invest in new products and often believe passionately that this is the right way to do it. They may feel a more considered and analytical approach might stifle entrepreneurialism.

However the reality is that gut instinct is great until you make a major costly mistake.

Establishing light touch decision making systems whereby your company only invests after preparation of a very high level (ie not over detailed but nonetheless reflecting a lot of common sense) business plan will save you a lot of money in the long run. Quantifying the implications of what you are about to do and taking a hard look at the numbers shines a torch that clarifies immediately whether this is a crazy whim or a serious business prospect.

This article is written and reproduced with the kind permission by Moira Creedon of Artemis Consulting