Do you have a decision to make? Are you unable to make decisions? Here’s a tactic we heard on the To the Lost episode of Boardwalk Empire:

Flip a coin.

Whether it comes up heads or tails barely matters. What does matter is how you feel when it’s in the air. What are you hoping for?

It’s your intuition at work. And ultimately, it can be an important decision-making tool. If you prefer, you can use a Magic 8 ball to make your next decision.

(Unless you usually get it wrong. Then you may want to use
George Costanza’s technique.)

Whatever you do, there’s an important concept underlying these methods. It’s a systematic way to apply your intuition. Once you grasp it, it will help you make decisions in life.

Frame your options as a binary choice: heads or tails, yes or no, this or that, either or.

For example, let’s say you want to start a business. One question you may ask is when.

So get out your coin. Heads you’ll go into business now. Tails you’ll wait.

Flip the coin in the air. Do you feel a knot in your stomach? Which side do you want to come up?

More importantly, don’t stop there. Take the hoped-for answer and expand on it. Create a series of choices:

Part-time or full-time? Online or off? Start or buy? Independent or franchise?

Of course, the choices will be determined in part by the type of business you want to own. Step-by-step, you’re creating a decision tree.

By getting it on paper, you’ll be able to quickly see how choices now affect options later. You can weigh what you’re giving up against what you’re getting. Then you’ll be able to make a decision that leads to BIGG success!

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This is a guest post by Dana Mancuso. In addition to being a mom of two and the wife of one, Dana is the Public Information Manager for the Urbana Park District. She also is a freelance writer. We always enjoy her interesting perspective on our daily lives.

I love exploring the differences between American English and British English. There are some nuances of meaning that can really make you think if you choose to.  The phrase I have been thinking about lately is related to decisions.

In the United States we say “make a decision”, while in England they “take a decision”.

Now essentially we’re saying the same thing. We’re choosing.  But think a little more and you’ll get some great advice for how to think about choosing.

Make a decision
Okay, I’m going to MAKE a decision. The word make itself implies that the decision is constructed and it is worked on. There is sweat and thought and hard work going into that decision. But on the flip side, there is the ownership of that decision. I MADE that decision. I can’t UNMAKE it. (Can I?) I can’t give up on something I constructed or thought about so long? It seems like an all or nothing proposition.

Take a decision
But if I TAKE a decision, it is one of perhaps many options available to me. I envision a library shelf and there are several volumes I could select from. I pick one and start reading. If it isn’t getting me what I need or where I need to go, I can shelve that book (or idea) and choose a new one. There is not as much entanglement with our decisions when we take them rather than make them. We can allow ourselves to put them back and try others that work better.  Maybe taking that second book off the shelf gets you even less information than you had before? But you can put that second book back, too. You never know until you take it.

Image in this post from stock.xchng

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This process can be used for so many things. You could use it to decide if you should start a business. It would help figure out if you should expand your existing business. You could even use it to determine if it’s worth going back and getting more education.

To get started, you’ll need to make some projections, using assumptions, about the expected income and expenses of your project. The process itself is a science but the assumptions are definitely an art. It requires that you use your own judgment and the only way to learn how to do it is by doing it.

So let’s look at the two most common ways to determine if a project is worth doing.

Payback period

As its name implies, this method simply looks at how quickly you get your investment back. So if you invest $100 now and earn $25 the first year and $75 the second year, you have a two-year payback.

Payback is commonly used because it’s so simple. But think about it … it ignores all the money you could make after the payback period. And that can really skew your investing decisions. You choose projects that return your investment quickly and neglect projects that may offer greater potential but more patience. 

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Discounted cash flow (DCF)

Fortunately, there is a better way to calculate the worth of a project. With this method, you explicitly recognize that a dollar today is worth more than a dollar tomorrow. However, a dollar tomorrow is still worth something which isn’t recognized by the payback method.

It’s called discounted cash flow because we look at all of our expected cash flows and determine how much they’re worth right now by discounting them back to today. That is called the “net present value” (NPV).

Calculating the NPV is a four step process:

• Determine how much you will invest by year.
  Usually most of your investment in a new project is made upfront (and probably in the first year). But if your project requires that you make an investment over a few years, you’ll want to account for that.

• Estimate how much income this project will generate by year.
  Obviously, you don’t want to take on a project if it doesn’t increase your income. So look at how much you think you will make with this project and compare that to how much you think you plan to make without it. That’s your increased income from the project.

• Decide upon your opportunity cost.
  Here’s where it gets a little tricky. Consider where you could invest your money if you didn’t invest it in this project. Weigh in how certain you are about your projections.
  For example, if you determined your project was no more risky than investing in Certificates of Deposit at a FDIC-insured bank, you could use the interest paid on those accounts as your opportunity cost.

Most projects aren’t that certain so your rate will usually be higher than that. Just remember – the less certain you are about your incremental income, the higher your opportunity cost.

• Run the numbers in Microsoft Excel (or your favorite spreadsheet program) using the formula:

Example – Should I get certified?

We’ll offer an example so you can see this concept in action. Let’s say you want to go back to school to get certified. It costs $2,000 for the certification program. You expect to make an additional $2,000 a year if you do it. You plan to retire in three years so the increased income won’t benefit you for too long. You’ve looked at other opportunities and determined that you need to earn at least 6% on your money.

We see that your payback period is one year. That’s how long it will take to pay you back the money you invested.

Using DCF, your NPV is $3,157 as shown in this screenshot from Microsoft Excel:

To get that, use Excel’s “Insert Function” command:

With DCF, the rule is: If NPV > $0, then invest in the project. After all, your expected return exceeds your expected cost. So in this case, your NPV is over $3,000. Therefore, you should go for it! 

If you want to know what your annual return is, just change the opportunity cost field in your spreadsheet until your NPV equals $0. In this case, your annual return is 83% over the life of the project.

In general, pick the projects with the highest NPV until you run out of money to invest. However, there is one important variable we failed to account for in this calculation – your time. We’ll discuss that tomorrow.

Thanks so much for stopping in to read our post today. Until next time, here’s to your bigg success!

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We have a friend who was talking about the choice she and her husband made to have kids. She said that she really wanted to stay home with them when they were young. So she suspended her career which meant that less money for her family.

You can’t have it all, but you can have all you really want.

It starts with a realistic assessment. To continue with the choice about having kids, you may choose to have kids and continue working. But there are still trade-offs – not as much time with your spouse, money spent on child-care, and less sleep to name a few.

When faced with an important decision, ask yourself these two questions:

• To get what you want, what will you have to give up?

• Are you willing to do that?

These two questions help you weigh the relative importance of your options. They will also help you later – when the reality of what you sacrificed comes to fruition – you can remind yourself that you are doing what you want.

It doesn’t have to be “all or nothing” all of the time.

It’s important to not under-estimate the sacrifices that will be necessary to make something happen. However, it’s also crucial to not over-estimate them. We have a tendency to look at things in an “all or nothing” manner.

Even major decisions, like having kids, often have phases. Our friend went back to work after her kids went to school. Then she and her family were able to live more comfortably.

Since then, she has continued working at her primary career, as has her husband, although they really want to own their own business. However, they’re postponing that until their youngest finishes college. They feel more comfortable with the security of two regular paychecks.

So to have all you really want, the key is to know what you really want.

That sounds so simple, but it isn’t with all the options we have presented to us. We came up with 4 secrets to finding what you really want:

Secret 1: Avoid the “grass is greener” syndrome.
If you’re not happy with your current situation, don’t just jump at something new. Make sure it’s really important to you and your long-term future. If you don’t do this, you may end up just as unhappy with a whole new commitment.

Secret 2: Make sure it’s really is your choice.
Sometimes we do things for the wrong reasons. It’s your time – you should choose how you spend it. Someone else may think it’s the best thing for you. Another person may want something for you that you don’t want for yourself. Choose to make your choices for your reasons.

Secret 3: Test it in advance if you can.
If there’s a way to “dip your toes in the water,” by all means do it! For example, if you’re considering a career change, you might do similar work on a volunteer basis for your favorite charity. Or see if you can “shadow” someone as they do that job you think you want.

If your career change requires going back to school, start off with one class to see if you really do like it. Back to our original example – having kids – offer to babysit for a weekend for a friend or a relative. If you’re still as excited at the end of the weekend as you were at the beginning, you might be ready!

Secret 4: Once you’ve decided, focus on what can be, not what might have been.
Once you’ve made your decision, put all your energy into making it work for you. Don’t keep thinking about what you gave up. That’s a recipe for being miserable. Instead, focus on what you have now by choosing this path.

You can’t have it all, but you can have all you really want. Decide what that is and go for it!

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You made a choice to read our post today and we thank you so much. Join us next time when we talk with a college graduate whose search for the American dream led him to a homeless shelter. Until then, here’s to your bigg success!

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Direct link to The Bigg Success Show audio file:
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He says that he went against the advice of his venture capitalists. They feared losing employees, customers, and other investors if the bad news got out. Clinton found that being completely forthright strengthened his relationships with his employees.

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One of my radio managers did that when our company wasn’t doing so well. I appreciated the honesty and how it put all of us on the same page.

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Honesty is high on most of our lists of core values. However, do we really think that we should always be honest?

For example, picture yourself standing with your best friend adoring her newborn baby boy. You think he’s the least attractive baby you’ve ever seen. She’s going on and on about him, when she asks you the dreaded question …

Isn’t he the best looking baby you’ve ever seen?

Would you tell her what you really think? Or would you pick your words carefully to avoid hurting her feelings?

Of course, this is a different situation than the first one presented – being honest with your employees, even when things are not going well.

But it illustrates that there can be a second value at stake – the desire to not cause undue harm.

Is there a reason to tell your friend what you really think? What good will come from it?

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I’ve come to believe strongly in open-book management. As a general rule, I think the more you share with your employees, the better. Having said that, I have found you also have to know your employees. Open-book requires a higher level of maturity from your employees. If that’s not present, sharing more just creates undue emotional distress.

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The reason an ethical dilemma is a dilemma is because two or more core values at odds with each other. These situations flow up to the leader. You have to find a good solution.

It’s a personal decision. There likely will be disagreement on the best way to handle it. That’s why it’s so important to have a framework in place for these kinds of decisions.
This framework will help you:

• be more efficient in making decisions like this

• make decisions that are consistent instead of all over the board

• build goodwill with all affected parties

• respect the face you see in the mirror at the end of the day

We have a great resource that helps you set up the framework so when an ethical dilemma comes your way you’re prepared. It outlines the three steps to solving an ethical situation:

• Know your core values

• Select an ethical model that helps you apply those core values

• Use a problem-solving process to work through the situation at hand

So we’ve presented an ethical dilemma today … should you share all news with your employees, even the bad stuff? What do you think?

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