The Entrepreneur Insider network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “When making a tough business decision, how do you know when to trust your gut?” is written by Vijay Ramani, cofounder and CEO of Totspot.
Every entrepreneur running a fast–growing business thrives on high–velocity decision–making—myself included. All of us live to strike the delicate balance between deliberate thinking and fast decision-making across the entire spectrum of management. Business school taught me how to make data-driven decisions, but no formal education could have prepared me to start a company from the ground up. That’s where relying on my gut instinct kicked in.
When my team and I started building Totspot, it was evident that we didn’t have the luxury of time or resources I’d previously had at large-scale companies. So I began by leading with intuition and let my experience back those decisions rather than the other way around.
Our first version of Totspot was a marketplace for all things related to kids—not just outgrown clothes. Our app was filled with toys, strollers, and lots of baby junk you could find at a yard sale or on Craigslist. I couldn’t pinpoint the issue: We had a fast-growing app with users selling and buying items, but something wasn’t right. In a leap of faith, we narrowed the focus of our product and within weeks, we had shifted the user experience completely. Rather than offloading random items, we tailored the look and feel to be inspirational, style-based, and honed in on the areas of children’s fashion. That gut feeling—that crazy, unspoken feeling—turned out to be spot-on. Within days, we started to see a streamlined shopping and selling experience and began what would be a strong brand, savvy community of fashion-focused moms. Best of all, our new strategy gave Totspot a solid market position around resale kids’ fashion.
Of course, we all know a company can’t be run on gut alone. I’ve learned that even intuition-based decisions require a brief SWOT (strengths, weaknesses, opportunities, and threats) analysis. Over time, I’ve learned to mitigate uncertainty and reduce risk by asking, “What is the worst–case outcome of the decision I’m about to make?” Simply being aware of the ultimate scenario often enables us to act more decisively.
Running an online marketplace is incredibly dynamic—things are always in flux. One huge challenge is balancing shipping costs properly between the buyers, sellers, and the Totspot platform. We explored a series of options and even considered an extensive conjoint analysis to determine the right fees, but that project would have been both time-consuming and labor intensive. Instead, I asked myself what the risks were. In this case, two things could have happened: The demand on our platform would be slow, or the cost of our operations would be high. Neither of these things meant instant demise, so I made the call to start with a shipping–fee structure based on intuition, saving us several cycles of complex pricing optimization. We quickly adjusted, optimized, and tweaked as we rolled out several shipping programs, achieving product market fit for our mom-driven marketplace. In this case, intuition helped us achieve results that benefitted our online community sooner.
For a startup that is disrupting an incumbent, I strongly believe that speedy decision–making coupled with confidence is a competitive advantage. So here’s my bottom line: Hesitation leads to indecision and a lack of conviction. The less you contemplate, and the more attention you pay to somatic markers, the higher the likelihood of arriving at the right decision faster.
Vijay Ramani is the cofounder and CEO of Totspot. Totspot is a mobile marketplace for apparel resale and is based in San Francisco. It’s backed by top Silicon Valley VC firms like GGV Capital, AME Cloud, and 500 Startups.
Read all responses to the Entrepreneur Insider question: When making a tough business decision, how do you know when to trust your gut?
Proof Data Can’t Always Help You Make Decisions by Morgan Hermand-Waiche, founder and CEO of Adore Me.
Doing This Will Help You Make Tough Decisions by Suneera Madhani, founder and CEO of Fattmerchant.
Here’s What Happens When You Don’t Trust Your Gut by Gesche Haas, founder of Dreamers//Doers.
Here’s What You Should Do When You Have to Make a Tough Decision by Alexander Goldstein, founder and CEO of Eligo Energy.
Never Make a Big Decision Without Doing This First by Feris Rifai, cofounder and CEO of Bay Dynamics.
Here’s How Questioning Decisions Can Ruin a Business by Pat Peterson, founder and CEO of Agari.