The Art of the Decision Matrix
How do you figure out the right business idea to pursue?
Some entrepreneurs begin their journey because of a great business idea that randomly struck and they felt compelled to pursue it. Other entrepreneurs recognize that they are just meant to be an entrepreneur and their career goals include building a business, even though they have not yet determined what idea will get them there. Each of these paths is completely valid and can lead to a rewarding entrepreneurial experience.
If you haven’t yet landed on what idea you’d like to pursue and you’re trying to decide between a handful of entrepreneurial projects, we have developed a tool to help you:
The Decision Matrix was created to help founders determine which entrepreneurial venture they should pursue.
This matrix empowers you to compare different venture ideas against each other based on six categories to help you determine which is the most viable for you, based on your priorities.
The matrix focuses on helping you analyze the six most important factors when deciding on which business venture to pursue which are:
1. How much does this idea excite me?
Most successful entrepreneurs don’t start with an idea that they merely feel “meh” about. Typically, not only are they in love with their idea but they’re obsessed with it, which motivates them to work hard to build their venture. It also helps them remain committed as they work to overcome the inevitable obstacles that will arise. Having passion for a business idea you want to pursue is extremely important.
2. How much would my skill sets compliment executing this potential idea?
Having a skill set that compliments executing your idea may be worth factoring into your decision. For example, one solopreneur that’s a developer decided not to move forward with a project because it would require doing direct sales. Instead, they pivoted towards developing a product that was intuitive for customers to sign-up for and adopt without a hands-on sales process.
Alternatively, this may not be a factor at all if you’re willing to team up or invest in hiring employees or contractors with complementary skill sets.
3. How likely is it that there is a paying customer with a major pain point willing to invest in solving it?
Having a paying customer is arguably the most important factor when making a decision.
Regardless of how great an idea you may have, it will not be a viable option if it does not solve a pain point for people and there is nobody willing to invest in your product or service.
When comparing different ideas, take the time to research whether or not you have a customer that is willing to pay you, at a sustainable rate, to solve the problem you’re setting out to solve.
To truly understand if you have a viable venture, consider conducting customer interviews to learn from your actual target market and gauge their interest in your idea. The book The Mom Test by Rob Fitzpatrick is a great place to start to learn about conducting customer interviews.
4. How much capital investment will this idea involve?
The importance of capital investment differs for many founders. If you are comfortable with seeking investment, it’s okay to not put any weight into this factor. However, if you want to remain a privately owned company, the amount of capital needed may heavily impact your analysis of your different business ideas.
Deciding how and if you’ll seek investment will depend on how much you care about ownership, the business model you’re pursuing, and the timeline you have for growth.
5. How potentially scalable is the idea?
Some entrepreneurs strive to drastically scale their company as much as they possibly can, while other founders are simply hoping to build a lifestyle business.
Consider:
- Do you want to grow your business to serve as many people as possible?
- How big of a team do you want (if you want a team at all)?
- Are you trying to solve a systemic problem?
- Or do you simply want to build a business that works for you?
To understand the scalability of your business, and the importance of scalability to you, you must first think through the answers to these questions.
6. How much of a positive impact will this idea potentially make on the world?
Why are you building your company and what does making a positive impact mean to you?
In some way, the impact your company will have should be considered as you analyze different potential ventures.
Consider:
- Will your company create great jobs for people?
- Will you be able to donate a certain percentage of your profits to charities?
- Will your product or services help the environment?
- Will you and/or your employees be able to volunteer thanks to the business you are building?
- Will your company contribute to workforce development for the traditionally underemployed?
- Will you influence an industry to become more ethical?
- Can your business help support other local or mission-driven businesses through its supply chain?
Spend some time thinking about each of these factors and the weight they carry for you personally. If you need some inspiration for understanding the different ways a business venture can make an impact, consider filling out the free B Impact Assessment tool.
Then, hop on over to the Decision Matrix template and begin thoroughly analyzing each of the relevant factors to you for each of your venture ideas.
Looking for instructions on how to actually USE the Decision Matrix?
Don’t worry, here you go:
To begin, write down your business ideas in Column A… as many as you have. Then, look through the questions in Row 5 and decide how important each question is to you. The importance of each question will determine the ranking scale.
For example, if capital investment isn’t important to you, you may choose to rank it 1–3 rather than 1–10. Once you have decided your ranking system for each question, go through and put a rank for each question with each idea.
After ranking your ideas, add up the scores, and put them in Column I. The idea with the highest score is the business idea you should most strongly consider pursuing.
If the idea with the highest score doesn’t feel “right” then go back and consider whether you failed to add in another factor into your decision that hasn’t yet been considered or whether the “weight” you applied to each of the individual factors are truly adjusted relative to the level of importance of them to you.
The intent of this tool is not to tell you which venture is the best for you. Rather, it’s to help you conduct a more thorough analysis and take time to consider what factors are most important to you when pursuing a new business venture.
