When you start a small business or launch a startup, the one thing you can count on is the unexpected. No matter how thoroughly you plan, forecast, and test—problems are bound to arise. 

This is why, a key skill you must develop as an entrepreneur, is business problem solving.

What is problem solving?

Problem solving in business relates to establishing processes that mitigate or remove obstacles preventing you from reaching strategic goals. 

These are typically complex issues that create a gap between actual results and your desired outcome. They may be present in a single team, operational process, or throughout your organization, typically without an immediate or obvious solution. 

To find effective solutions, you need to establish consistent problem solving methods that help you: 

• •Evaluate
• •Explore solutions
• •Prioritize execution
• •Measure success

This should be similar to how you review business performance during a monthly plan review. 

You work through the same documentation, look for gaps, dig deeper to identify the root cause of the problem, and hash out options. 

Without this process, you can’t expect to solve problems efficiently or effectively. 

Why problem solving is important for your business

While some would say problem-solving comes naturally, it’s actually a skill you can grow and refine over time. 

The best business leaders didn’t just find a magic solution to solve their problems, they built processes and leveraged tools to find success. And you can do the same.

I’ll take you through the process, step-by-step, so you can confidently tackle any type of problem. 

1. Define the problem

When a problem arises, it’s all too easy to jump into finding a solution. 

While taking action is admirable, if you don’t correctly identify the source of the problem, you may not solve it. You just treat the symptoms, get short-term relief, and the likely possibility of the issue resurfacing.

For instance, if you realize that your sales from new customers are dropping, your first inclination might be to rush into upping your marketing spend to increase exposure. 

But what if decreasing sales are just a symptom of the real problem?

You want to be sure you’re not missing the forest for the trees. 

So, whenever you have a large issue, take the time to look at it from multiple angles. While not exhaustive, here are a few places to start with:

Competition 

• •Is a competitor’s promotion or pricing affecting your sales?
• •Are there new entrants in your market?
• •How are they marketing their product or business?

Business model 

• •Is your business model sustainable?
• •Is it realistic for how fast you want to grow?
• •Should you explore different pricing or cost strategies?

Market factors

• •Are world events, social trends, or your nation’s economy impacting customer spending?
• •Are there supply chain changes impacting your expenses or distribution processes?

Team 

• •Are there any issues affecting your team?
• •Do they have the tools and resources they need to succeed?

Goal alignment 

• •Is everyone on your team working toward the same goal?
• •Have you communicated short-term and long-term business goals clearly and often?

Back to our example: By looking at every facet of your business, you may discover you’re already spending more on advertising than your competitors. Instead, a communication gap within your team is leading to the mishandling of new customers and therefore lost sales. 

If you jumped into fixing your brand exposure with more ads, you would have been dumping more money into an area you’re already winning. Potentially leading to greater losses as more and more new customers are dropped due to poor internal communication.

This is why it’s so vital that you explore your blind spots and track the problem to its source.

2. Conduct a SWOT analysis

All good businesses solve some sort of problem for customers. 

What if your particular business problem is an opportunity? What if it’s a strength if considered from a different angle? 

You’ll want to conduct a SWOT analysis to determine if that is the case. 

SWOT is a great tool to use whenever you’re looking at investing resources to solve a problem. It can help you avoid implementing a solution where the chances of success are low due to your current internal or external positioning.

You may even want to use this analysis when defining your problem—as it immediately frames problems and solutions through the lens of specific strengths and weaknesses of your business. Then use any opportunities or threats you identify to kickstart a solution.

If you’re not a fan of using SWOT as a problem-solving technique, there are plenty of other alternative frameworks to use. All that matters is that it helps you further identify the problem and what potential solutions may require.

3. Identify multiple solutions with design thinking

The worst thing you can do is limit your solutions. If you do, you may miss out on solutions that lead to better, cheaper, or faster results.

That’s why you may want to use the design thinking approach. It’s often used by organizations looking to solve big, community-based problems and emphasizes rapid iteration by opening up the floor to any and all ideas. 

One of the strengths of design thinking is that it brings a wide range of people into the problem-solving process. Allowing multiple perspectives and solutions to arise.

This approach—applying your company’s skills and expertise to a problem in the market—is the basis for design thinking.

It’s not about finding and solving the most complex problems, but common needs within the organization and in the real world. 

When you’re solving business problems, this applies in the sense that you’re looking for solutions that address underlying issues—you’re looking at the big picture.

4. Conduct market research and customer outreach

Market research and customer interviews aren’t meant to be done once and forgotten about. No, customer feedback should be something that you seek out frequently to ensure you’re meeting customer needs. 

Now, market research and the insights you get from customer outreach aren’t a silver bullet. Many companies struggle with what they should do with conflicting data points. But it’s worth gathering information that can help you better understand your target market. 

Plus, your customers can be one of the best sources of criticism. It’s a gift if you can avoid taking the negatives personally.

The worst thing you can do when facing challenges is to isolate yourself from your customers. 

So, if you haven’t been already, survey your customers. Talk to them. Take their feedback to heart and use it to further define the problem and potential solutions. 

5. Seek input from your team and your mentors

Hopefully, you haven’t waited to involve team members until five steps into solving a problem. If you have, it’s still not too late to reap the benefits of collaborating with others.

Ideally, you bring in different contributors throughout to express concerns, opinions, and ideas. Their feedback is going to help you move faster and more efficiently. 

If you have a team in place, bring them into the discussion. You hired them to be experts in their area; use their expertise to navigate and dig deeper into underlying causes of problems and potential solutions.

Quoting Stephen Covey, “strength lies in differences, not in similarities.” The more diverse a team is, the more often innovative solutions to the problems faced by the organization appear.

It has been found that groups that show greater diversity were better at solving problems than groups made up specifically of highly skilled problem solvers. So whoever you bring in to help you problem-solve, resist the urge to surround yourself with people who already agree with you about everything

If you’re running your business solo, bring in a trusted mentor instead. 

SCORE offers a free business mentorship program if you don’t already have one. It can also be helpful to connect with a business advisor, especially if business financials aren’t your strongest suit.

6. Apply growth planning for nimble execution

So you do your SWOT analysis and your design thinking exercise. You come up with a set of strong, data-driven ideas. However, implementing them requires you to adjust your budget, your strategic plan, or even your understanding of your target market.

Are you willing to change course? Can you quickly make adjustments? Well to grow, you can’t be afraid to be nimble. 

By adopting the growth planning method—plan, project, review, and revise—you can shift your strategies more fluidly. 

You don’t want to change course every week, and you don’t want to fall victim to shiny object thinking. But you can strike a balance to reduce your business’s risk while keeping your team heading in the right direction.

Along the way, you’ll make strategic decisions that don’t pan out how you hoped. The best thing you can do is test your ideas and iterate often to avoid wasting money and resources on things that don’t work. 

That’s growth planning in action.

7. Model different financial scenarios

Now, you have a detailed understanding of your problem and one or two solutions in mind. However, even with all of this planning and analysis, things are bound to change. 

Luckily, you can minimze your risk and plan how you’ll react if things go better or worse than expected, by developing a few different financial forecast scenarios. 

You might find that the idea that seemed the strongest will take longer than you thought to reverse a negative financial trend. Or another requires so much up front investment that it risks draining your cash reserves before any gains are realized.

Even if the answers aren’t as obvious as those examples, at the very least you’ll understand the financial impact of moving in a different direction.

The real benefit here is looking at different tactical approaches to the same problem. Maybe instead of increasing sales right now, you’re better off in the long run if you adopt a strategy to reduce churn and retain your best customers. 

You won’t know unless you model a few different scenarios. You can do this work with a customized spreadsheet or a dedicated forecasting tool like LivePlan.

8. Watch your cash flow

While you’re working to solve a challenging business problem, pay particular attention to your cash flow and your cash flow forecast. 

Understanding when your company is at risk of running out of cash in the bank can help you be proactive. It’s a lot easier to get a line of credit while your financials still look good and healthy, than when you’re one pay period away from ruin.

Remember, it’s easy to get tunnel vision. You’ll benefit from maintaining a little breathing room for your business as you figure out what to do next.

9. Use a decision-making framework

Once you’ve gathered all the information you need, generated a number of ideas, and done some financial modeling, you might still feel uncertain. 

It’s natural—you’re not a fortune-teller. You’re trying to make the best decision you can with the information you have. This is why it may be helpful to use a simple decision matrix to put everything you’ve learned on the table.

Whatever format you use to make a final decision—just stick with it. Like all the SWOT analysis alternatives, these decision frameworks all do the same thing. 

The important thing is that it makes it easy to bring everything together, review what each solution requires, and quickly move forward.  

10. Identify key metrics to track

How will you know your problem is solved? And not just the symptom—how will you know when you’ve addressed the underlying issues? 

Well, that requires you to define what success looks like. And it doesn’t have to be as complicated or daunting as that may sound.

Just decide on a few key performance indicators. 

Take a baseline measurement, and set a goal and a timeframe. You’re essentially translating your solution into a plan, complete with milestones and goals. Without these, you’ve simply made a blind decision with no way to track success. 

You need those goals and milestones to make your plan real.

Problem solving skills to improve

As you and your team work through this process, there are specific problem solving skills you should continue to develop.

Emotional intelligence

It can be very easy to make quick, emotional responses during a crisis or when discussing something you’re passionate about. 

You need to avoid making assumptions and letting your emotions get the best of you, by focusing on empathizing with others. This involves understanding your own emotional state and reactions—while also listening carefully to your team. 

The better you listen and keep your emotions in check, the better you’ll be at asking for and taking advice that leads to effective problem solving.

Research

Jumping right into a solution can immediately kill the possibility of solving your problem. 

Just like when you start a business, you need to research what the problem you’re solving is. Luckily, you can embed research into your problem solving by holding active reviews of financial performance and team processes.

Simply asking “What? Where? When? How?” can lead to more in-depth explorations of potential issues.

The best thing you can do to grow your research abilities is to encourage and practice curiosity. Look at every problem as an opportunity. Something that may be trouble now, but is worth exploring and finding the right solution. 

You’ll pick up best practices, useful tools and fine-tune your own research process the more you’re willing to explore.

Brainstorming

Creatively brainstorming with your team is somewhat of an art form.

There needs to be a willingness to throw everything at the wall and act as if nothing is a bad idea at the start. This style of collaboration encourages participation without fear of rejection. It also helps outline potential solutions outside of your current scope, that you can refine and turn into realistic action.

Work on breaking down problems and try to give everyone in the room a voice. The more input you allow, the greater potential for finding the best solution.

Decisiveness

One thing that can drag out acting upon a potential solution, is being indecisive.

If you aren’t willing to state when the final cutoff for deliberation is, you won’t take steps quickly enough. This is when having a process for problem solving comes in handy, as it purposefully outlines when you should start taking action.

Work on choosing decision-makers, identify necessary results, and be prepared to analyze and adjust if necessary. You don’t have to get it right every time, but taking action at the right time, even if it fails, is almost more vital than never taking a step.  

Resilience

Stemming off failure, you need to learn to be resilient. Again, no one gets it perfect every single time.

There are so many factors to consider and sometimes even the most well-thought-out solution doesn’t stick. Instead of being down on yourself or your team, separate yourself from the problem and continue to think of it as a puzzle worth solving. 

Every failure is a learning opportunity that only helps you further refine and eliminate issues in your strategy.

Problem solving is a process

The key to effective problem-solving in business is the ability to adapt. You can waste a lot of resources by staying on the wrong course for too long. 

So make a plan to reduce your risk now. 

Consider what you’ll do when faced with a problem large enough to sink your business. Be as proactive as you can, develop the necessary skills, and test multiple approaches to problem solving (even outside of the process listed here).

Lastly, explore tools that will help you create plans and track your progress. At a minimum, use performance dashboard software to make critical business information readily available. 

This will make it much easier to identify problems, dig into what’s causing them, and immediately measure the impact of your decisions. 

Just remember, a tool cannot replace your ability to problem solve. Focus on adopting a consistent process first—then look for ways to improve it.