The CMO Survey - Highlights and Insights Report - Spring 2024
Tips to make better decisions for your business
1. Tips to Make Better Decisions for Your
Business
By Steve Maleh
How do you quantify the business risk better andmake smarter decisions?
One of the most importantthings that business owners need to realize is the
danger they face for their companies, both for the shortand long term. In other
terms, make sureyou assess long-riskeven while looking at short-, notjustshort-,
projects—and vice versa. Projections for these groups arealways of a different
type and various considerations may need to be weighed to make the right
decisions.
What is Risk?
2. Before we address long-termor short-termrisk, let's describe"risk." Risk is a
word often confused with expected losses, but risk is fairly clear, in fact. Or put it
simply: Risk= Uncertainty. Often unexpected risk can lead to losses, but risk and
loss are not the samething. When you ask yourself how much risk a decision
entails, you wonder what variables are you unsureabout and how much
uncertainty you will face when making a decision.
For example:
If you own a grocery storeand past history and experience tells you that every
month you'll probably lose 10 percent of your inventory to spoil–that's not a
chance! You know that's going on and it can fit into your pricing. However, if you
are considering an action with the potential to increase the amount of spoilage
you get every month, but you don't know by how much, that's a chance, and the
degree of uncertainty dictates how big it is.
You should be thinking about the issues in your company about which you have
the greatestuncertainty and which of those could havethe greatest effect from
this uncertainty. When considering your various choices, the choice that provides
the lowestlevel of uncertainty and the highestlevel of possiblepositive effect is
likely where your efforts will be centered. Such measures should be avoided with
high degree of ambiguity and high potential for negative effects.
Each company needs to concentrate on three aspects to better understand your
business risk, which may differ depending on your business modeland customer
base:
1. Measure danger
2. Controlthe harm, so that you can respond
3. Wherever necessary, takesteps to mitigate the risk.
All three of these areas are relevant as none of them are adequate to operate
your small business on –
(1) You can't mitigate the risk away frommeasuring and without measuring
you won't be able to get a good image on an economic level.
3. (2) You can't get away with justtracking, becauseit doesn't provethe
correctsignal to constructthe calculation on top of it without the
measurement system.
Business owners havemany tools available to help you evaluate and quantify
your business risk. Thereare also services to provideindustry and customer
feeling knowledge. Moreover, through public entities and colleges, there are
advisors and services atlittle to no costto help you better understand and
minimize the business risk.
Knowing Short-Termvs. Long-TermRisk Impacts: Short-termrisk can cause
short-termproductivity disruption and growth, manifestation periods are
significantly different for what you would find long-termrisk. This is possibleto
see a seasonalvariance, but not significant shifts in the underlying market,
because, for example, a retailer, you will certainly not see an rise in risk stretching
over a five-year or longer period.
If your company was a used bookstore, you can see changes in your sales month
by month. Even in the last decade you wouldn't have seen a decline in printed
books. You couldn't then make short-termdecisions based on the long-term risk,
because you didn't even know it was there.
Your most successfulapproach to coping with long-termrisk is to hedge or
diversify to ensureat least that the long-termrisks arenot associated. By growing
the complexity of your business model, you can also reducethe effect on your
market.
Cyclical Businesses:
Cyclical company should start doing it in the downtime, to make surethey know if
it is an inflection point in the normal process or a shiftof structure. There are
severalsituations wherea company hits an inflection point for a period that
involves such a significant marketchange that you need to accept a systemic
change in order to set up your company to exit into new opportunities. This is
necessary when the research shows thatthe marketand current business have
changed and is likely not coming back again (think record shops).
4. Whatever long-term risks your company poses—new tech, new goods, etc. if you
have correctly evaluated the risks and set up your strategies accordingly, you will
be able to adapt and respond to any market change in a timely manner.
Where will Small Businesses improve?
Long-termrisk is whatmany small companies are struggling to predict correctly.
Since they work too hard to remain competitive and successfulin the shortrun —
they don't have the luxury, or take the time, to consider the long-term risks they
face. And, when evaluating the risks that your company faces, makesure that you
understand the long-term threats to your company and your industry while
determining the threats in the shortterm. Don't be afraid of your industry's shifts
— come to them with new ideas and taste, and your company will be set up as
best it can to solveany challenges you can face.
Author Steve Maleh
A seasoned businessmanand 3rd generation entrepreneur, Steve Maleh
has founded and started dozens of businessesover the past twenty years.
From retail, to restaurants, to technology, several of which were sold, and
several of which are multi-million dollar operations today.
Prior to his venture into the mobile space,Steve used his Architectural
degrees to build, develop and renovate over 30 million dollars in real
estate.
In addition to his own businessesand ventures, Steve has been actively
sharing his expertise and knowledge with other entrepreneurs. Acting as
an angel investor in several start up retail businesses.
Steve Maleh holds a Bachelor’s degree in Architecture and
entrepreneurship from the University of Miami, and has also taken master
classes at Columbia University in real estate developing and
entrepreneurship.
Steve is currently looking forward to being part of the future innovation in
the theatre application market with the launch of his new technology
venture SNAX®.