Trusting Your Gut Can Be A Dangerous Move. Here’s Why…

For the record, I’m a big fan of trusting your gut.  There are more success stories than I can count that rely on entrepreneurs who trusted their instincts and profited handsomely.  When you start a new business, full of vision and lofty goals, often the only thing you have to guide your decisions is your gut, and I counsel folks to embrace that – follow your gut and be bold.  Seek your success and reap the rewards.

There’s a point at which things change, though.  As your business grows, you have data – specific evidence of trends, successes, and failures – and you should begin to use the data to temper your instincts.  Go with your gut when you don’t have evidence to the contrary, but when you get to the point at which you can rely on facts and figures to support your decision, you’re foolish if you rely solely on your instincts.

Imagine a major airline that decided – based on the instinct of its owner – that the new strategy would be to focus on servicing small and emerging airports, rather than major cities.  The president of the company decides to forego the urban center of New York City in favor of the grass roots appeal of a small town in Nebraska.  Sure, there might be an argument to be made for extending service to those communities that are underserved, but abandoning the markets that generate the most revenue would be disastrous.  A major airline would certainly have the data resources to prevent such a disastrous decision, but that didn’t happen overnight.

Whether you own an airline or an accounting firm, you’re going to have to make choices that affect the future of your company.  Whether you’re deciding to hire or fire an employee, or whether you’re weighing the risk of expanding your product line, basing your decisions on what’s been proven to work is your best bet.  You don’t have to abandon your instincts altogether, but neither should you ignore the facts.

The transition from gut-based decision making to data-based decision making should be a gradual one.  As your business starts to grow, you should begin collecting any information that you think will help you make better decisions in the future.  Now, this may sound like a common-sense piece of advice, but it bears repeating.  Malcolm Gladwell’s Blink has been widely misunderstood as a book that champions instinct over all other decision making methods, but in fact, the folks with the best “instincts” are the ones who synthesize data and use that information to guide their guts.

While you’re building your data, that doesn’t mean that you stop trusting your gut, because the best case scenario for decision making is verifiable data … with your gut to temper that data.

Why is it so hard to get business owners to start collecting and analyzing data?  One of the reasons is that when your business is small – say under $1 million in revenue, you’re probably able to hold the information you need in your head.  But when you surpass that $1M mark, even the most astute entrepreneur needs some help in managing numbers, growth, trends, and results.

Also, when your business is small, it’s easier to land new customers (because they’re all new to you) and experience dramatic growth.  You’ll probably attribute your early success to your instincts, which isn’t necessarily wrong, but it can get you into trouble.  If you start believing that the same instincts that got you to $1M can also (without the benefit of hard data) get you to $10M, you’re probably overconfident.  The best decisions rely on the accumulation of information and the power of your gut.  Even if you’re certain that your instinct is about to lead you to fame and fortune, once you’ve owned your business for a while, the data exists that will support or counter your gut, and smart entrepreneurs use all of their available resources.

So here’s the takeaway:  start collecting your data immediately.  Today.  Figure out who your customers are.   Determine what your best-selling products are.  What trends do you see?  What marketing tactics have proven to be the most successful?  Amass your information and start your analysis.  If you find that you can’t answer the most pressing questions you face, then go collect more information and use the magic combination of great instincts combined with evidence to make the right choices for the future of your company.

Comments

1 thought on “Trusting Your Gut Can Be A Dangerous Move. Here’s Why…”

  1. Interesting outlook. I’m a firm believer in trusting my gut, but you bring up some fantastic counter arguments. Thank you for sharing these arguments.

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