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Decision Trees

Not all problems have a clear solution. Some decisions you will need to make about your business are likely to have uncertain outcomes or may be risky.  A decision tree is a visual presentation of the options available to you when you need to make a decision. Decision trees give you an effective way to understand the potential options of a decision and a range of possible outcomes. Moreover they weigh each course of action against the risks and rewards each option can yield.

 

Feel free to request the templates laura@thehiddenedge.co.uk. I am happy to share.

1. Identify the decision you wish to make on the left handside of your page

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2. Draw spurs out to identify the options you are considering

3. Draw further spurs to explore each option further, continue to extend until you have identified all measurable alternatives

4. Assess what you might expect the £ returns might be for each option in the best, medium and worst case scenarios

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5. Consider the probability factor for each of those options

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6. Multiply the estimated £ returns by the probability factor for each of the options to get a justifiable average

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7. Minus the estimated cost of delivering the option

8. Consider the results from your map.  You may chose not to go with the best financial option.  A decision tree analysis should be used in conjunction with your growth strategies in mind.

Please do share your experiences with this model in the comments below.  I am building a portfolio of small business case studies and would love to include examples of what has worked well for you.

PS – If you need further help then give me a call on 07962 626604 to arrange a Skype session with me.

 

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