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Home » How To » How To Make Important Business Decisions Using Excel

How To Make Important Business Decisions Using Excel

August 19, 2013

A good command over computers and software is an invaluable attribute for any business leader. While you might be the best project manager/site manager in the world, but there is only such information you can store and juggle in your mind. Using technology allows you to visualize that information, to store data and to predict the future which can be highly useful in a whole range of different situations. In particular it can help you to navigate difficult decisions and make the right choices when faced with a lot of information and a lot of potential options. Excel in particular is a fantastic tool for decision making, and can help any manager to organize, plan and decide. But in order to use it well, you need to know the best methods. Read on to learn what those are…

How To Use Excel for Decision Making

Decision Making

How To Make Important Business Decisions Using Excel

Excel is an incredibly useful tool for decision making or choosing between multiple options – whether those are purchasing decisions, marketing decisions, or investment decisions. To do this, you will essentially be creating a ‘pros and cons’ list for each decision, but with a much more complicated system behind it.

Start off by making a list of the criteria that you need to meet. For instance then, if you’re looking at hiring a new member of staff, that criteria might include: ‘experience’, ‘likeability’, ‘creativity’, ‘skills’ etc. Alternatively if you’re thinking of moving to a new office, the criteria may be things like ‘locality’, ‘size’ and ‘cost’. Write these as headings on your Excel spreadsheet and leave a few spaces underneath each one.

From here you are then going to take your options and score them out of ten for each category. Perhaps one candidate is a 10 for experience and an 8 for likeability, while the other has the opposite scores. This way you can immediately get a picture of where each candidate’s skill lie.

Next you are going to add up the scores in each of those categories, but not before turning them into percentages that represent the weighting of each criteria. So for instance, you might value a good price for your next office more than the extra space, so in which case you would make cost 30% and space 10%. Now if the property scored 8 and 9 respectively, that would be 80% of 30% and 90% of 10%. Add up these totals to get 100% and you have a final score for each option that takes into consideration the weightings of the various criteria – now you know which option will best fulfill all of your requirements and hopefully you know which one to choose as a result.

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Financial Modeling

financial modeling

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Simpler is financial modeling. This essentially means creating a spreadsheet of all of your overheads and incomes in order to create a complete picture of your finances on any given month. Include in this your total assets and add to this the amount of profit left over at the end of that month/subtract the difference. This way you can not only see where your money is being spent each month, but also how this is going to affect your finances over time, and what it will ultimately result in if you continue to follow the same patterns. Of course some elements might factor in bi-monthly or tri-monthly, and should be entered accordingly.

This then also allows you to make ‘projections’ of where your finances should be at any given time and those projections can be visualized as graphs and charts. This can be useful when demonstrating to clients/business partners/investors why your business is a safe bet, but it can also be useful for financial decision making as it allows you to ‘test’ the financial impact of those moves.

For instance you could sample what would happen to your finances were you to move to a cheaper energy provider by entering it into the spreadsheet and then decide whether or not the savings would warrant the hassle of making the move. Likewise it can also be used to show you what you would be able to afford at any given time. Can you afford to invest in a new marketing campaign next month? Or would you be better served by waiting just one more month?

By using financial modeling templates and using Excel spreadsheets well it can become your crystal ball for divining the future of your business and testing out various scenarios. Your company will be able to dance between the rain drops…

This post is contributed by Thomas Ethan, a project management consultant who works for Procept Consulting, one of the best consulting services providers. Whenever he isn’t busy, he likes to spend time with his family and learn about various gadgets.

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Filed Under: How To Tagged With: excel

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