How We Make Business Decisions – The CAG Model

I’ve noticed over the years that we’ve become very balanced in our decision making. I think that comes from having a very diverse set of partners. Almost every major decision involves a group discussion in which we discuss the pros and cons of the decision, as well as the priorities of making a decision (sometimes the best business decision is to just leave something alone). And, for the most part, we’ve been successful with this approach. Not like billion dollar successful, but continuous, steady, profitable growth in a down economy.

I was thinking a lot about this the other day. What factors go in to making a “balanced” decision? What I came up with was what I’ve decided to call the CAG model:

Customers – what are our customers saying? Are they complaining? Are they asking for a feature?  Are we getting a lot of emails that could be reduced by improving how we do something?

Analytics – what does the data say?  Are we losing customers? Are customers searching our site for something we don’t have? Are our conversion rates lower than they should be?

Gut – what do we think is the best for the short term and long term health of the business? Can we maintain whatever we create?  Are we creating more problems than we’re solving? Is there something else that’s more important to us? Does this decision help or hurt potential future initiatives?  How does this affect our current and future employees?

Not all decisions we make are weighted 1/3 each, but for most big decisions we’re giving quite a bit of weight to all of the above. For instance, it’s rare that we make a decision solely based upon our gut without investigating the other two.

This is probably one of the best reasons I’ve found for having partners.  There’s no way that I could make sound business decisions by myself at anywhere near the consistency that we do as a team.

Generally the person who brings up the idea has the most jaded perspective. If I deal with a ticked off customer and I see a way to fix a problem, I’m likely going to prioritize it higher than Greg or Mike might.  Their job is to ask questions like “how often do we see this problem?” and “is this more or less important than fixing other problems?”  Generally we’re able to come to a consensus pretty quickly, and if we aren’t there’s always an action item – say to collect more data or run a test – that will help us revisit the situation in the near future and make a good decision.

This process isn’t rocket science. I’m sure most good businesses do something similar, either consciously or subconsciously. Yet I think it’s critically important in helping us maximize our upside and minimize our downside when it comes to making most business decisions.

5 comments on How We Make Business Decisions – The CAG Model

  1. Tim says:

    As a one man show this is what I find missing in my business. I find it great that it’s me and only me, but it also drastically decreases balance and not acting too rashly/blindly. Thankfully I’m approaching a zen like state in my degree of level headedness but that’s not as reliable as having equally motivated partners to balance each other out. I’m rapidly approaching the need to hire someone or stop growing phase of business and based on my experiences in the past, all of them to be exact, I always seem to get the short end of the stick with partners so I’m thinking of staying smaller and doing it myself.

    This is in stark contrast to what all of the “make the next facebook” business guides are about, but there’s something to be said by a successful small business. You don’t need the next facebook to have a great business, make a great living and provide a valuable service. I think tech blogs and entrepreneur blogs are putting too much hype on “valuation” and money raised. The reality is DI makes more than Groupon, and they’re valued at between $6-32B depending on who you ask. When I say “making” I’m defining that as revenue minus expenses. Depending on your model you don’t even need to gross $1m/year to be knocking it out of the park, if I were grossing $300k I would be peanuts in the big picture, but killing it and making more than I could spend.

    • Adam McFarland says:

      Well put Tim. I’ve put some thought into what I would do if I was a one man show again. I think I would probably go the board route – give ~1% equity out to 3-5 people to have say quarterly board meetings and to have some people with a little vested interest to bounce ideas off of. I know you’re probably not looking for that right now, but it’s one option to keep in mind for the future. You could potentially get the best of both worlds 🙂

  2. Mark W. says:

    Wouldn’t knowing your market (beyond what your customers are saying) need to be included here?
    It wasn’t explicitly mentioned so that’s why I bring it up.
    You always need to listen and respond to your customer’s needs and wants but you also have to know your market (i.e. – what’s the competition doing and how can you do it better). Just a thought.

    • Adam McFarland says:

      Really good point Mark. I should have mentioned in the post that I’d put “market factors” under the gut section. When it comes to e-commerce and web dev stuff, Mike & I read a bunch of blogs (and obviously we all shop online a lot), and when it comes to detailing Greg has his finger on the pulse of the industry, so we all trust that whomever is the more versed in the topic will bring their opinion of the market to the table when having these discussions.

      I intentionally omitted competition…that is the topic of my next post so I’ll save my thoughts on that for now 🙂

  3. […] All the while we’ve been collecting data and making it really easy for our customers to contact us.  Next year when we make a big push, we’ll be armed with a strong existing user base, a lot of data, a lot of customer feedback, and confidence that what we’re building is valuable to people.  In short, we’ll have everything we need to make good strong business decisions. […]

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