Why Smart Business Owners Keep Making Bad Decisions — And How to Break the Cycle

Running a small business in Australia has never been easy — but in today’s climate of economic pressure, rapid change, and information overload, the cost of bad decisions has never been higher. Whether it’s signing the wrong lease, overinvesting in a poor hire, taking on unsustainable debt, or launching a product too early, many business owners are making choices they later regret.

But what if these decisions aren’t just poor judgment, but signs of deeper emotional overwhelm?

“Bad decisions don’t happen in a vacuum,” says Gary Fahey, a former elite federal police officer turned crisis intervention and performance specialist. “They’re usually driven by emotional overload, stress, shame or unresolved pain. You’re not making logical choices — you’re reacting to how you feel in the moment.”

Fahey’s experience working with business leaders, founders and professionals shows that when people are burnt out or operating in ‘survival mode’, even smart, capable individuals can make impulsive or self-sabotaging choices. “When the brain is under stress, it looks for instant relief,” he explains. “That’s when people say yes to bad deals, ghost clients they’re overwhelmed by, or avoid financial reality until it snowballs.”

The Psychology Behind Poor Decision-Making

Research from Harvard Business School has shown that stress reduces cognitive flexibility — the brain’s ability to consider multiple options and think clearly under pressure. In other words, when you’re exhausted, anxious or emotionally drained, you’re more likely to make snap decisions without thinking through the consequences.

In fact, a 2022 study published in Frontiers in Psychology found that chronic stress reduces activity in the prefrontal cortex — the area of the brain responsible for planning, decision-making, and rational thought — and increases activity in the amygdala, which is linked to emotional and impulsive reactions.

Why Business Owners Are at Risk

Small business owners are especially vulnerable. The pressure to keep things afloat, wear multiple hats, and manage financial uncertainty means many operate in a near-constant state of low-level panic — which only increases the risk of reactive choices.

“Many founders pride themselves on being self-reliant,” says Fahey. “But that same independence can become their downfall when they ignore warning signs, avoid asking for help, and keep pushing until everything breaks.”

He adds: “People think asking for help is a weakness. But often, it’s the smartest decision they can make.”

What to Do Instead

Fahey’s approach focuses on immediate stabilisation followed by long-term structure. “If you’re a business owner who feels like you’re spinning, don’t wait until you burn out or implode,” he advises. “You don’t necessarily need therapy — you need a circuit breaker. Someone to help you make sense of the chaos and get your decision-making back on track.”

He recommends:

• Recognising emotional triggers: Take note of when you’re most reactive — tired, stressed, under pressure — and delay major decisions during those times.

• Building structure: Implement checklists or decision-making frameworks that slow you down and force you to weigh pros and cons.

• Delegating wisely: Surround yourself with advisors or team members who aren’t emotionally involved and can offer objective perspectives.

• Seeking external help: A mentor, coach or crisis specialist can provide clarity and help rebuild decision-making systems.

The Bottom Line

A bad decision doesn’t make you a bad business owner — but ignoring patterns of poor judgment can cost you dearly. As Fahey puts it: “You can’t undo the past, but you can stop it from becoming your future.”

Small business success doesn’t come from always getting it right — it comes from learning when to stop, reset, and choose better next time.

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