The Emotional Cost of Business Decisions: Navigating Facts vs. Feelings

Many people base their business decisions on emotions instead of facts. While I’ve been guilty of doing the same in the past, I’ve always been a fan of crunching the numbers, which has saved me more often. You see, I like using math to deconstruct problems and find solutions, but many people don’t, and even when the numbers are telling them to go one way, they take a different route. That’s how emotions can cost you thousands of dollars.

For instance, I spoke to a small business owner who owns a contracting business the other day. After talking briefly, he said he recently bought some trucks for his employees and paid in cash. When I asked why he paid in cash, he replied with something I’ve heard plenty of times over the years, “I don’t like debt.” I understood his perspective but decided to use the opportunity to push back and add some value, so I said, “Okay, you don’t like debt? Do you also not like money? By paying in cash, you’re giving it away freely!” Of course, he looked at me with a confused look, so I suggested we sit down and run the numbers. When we did, we found better ways of acquiring the trucks. But the story doesn’t end there! Even though we did the math, he was still hesitant. Why? His emotions continued to cloud his judgment.

Here’s another example. The other day, I watched a brief video of Dave Ramsey, a financial guru known for his staunch opposition to using debt in all circumstances. In the clip, someone asked if he would borrow a billion dollars at 0 percent interest for ten years if it were an option. Now, if you run the numbers, your answer can’t be anything other than yes, but to my surprise, he answered, “No.” Even though Dave tried to make a point, the math didn’t add up.

We also see how our emotions can sway us when making other financial decisions, like the common belief that renting is financially inferior to homeownership or the decision-making process involved in selling a business. While it’s true that these decisions affect more than just numbers, the mathematical aspect often gets overlooked or overshadowed by emotional biases.

My point is this: Even though it’s difficult, we must dissociate our feelings from the mathematical realities to make more informed, rational decisions.

TOPICS: leadershipMSP advice
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