When you are an entrepreneur, logical reasoning it's not just an academic exercise, it's a vital tool for making smart decisions. Whether you're a month into your startup journey or a decade into running your business, mastering the art of sound reasoning can significantly impact your success.

For this reason, understanding mistakes is an overlooked and undervalued business skill. Mistakes can wreak havoc on your operations and even your bottom line. A seemingly minor flaw in reasoning has led to bankruptcy in the worst case scenario.

Here are four common thinking traps I've personally encountered in more than 20 years as an entrepreneur and how they can affect your business.

1. Appeal to the authority

Consulting experts and advisors can provide valuable insight, but relying too much on their opinions without considering the context of your business can lead to the Appeal to Authority error. Just because someone is an authority doesn't mean their advice fits your unique situation.

At my company, Vungle, we had a board full of seasoned investors with deep experience in ad tech. Their advice was to diversify away from gaming, which was our core market, and focus more on brand advertisers. In hindsight, this was a mistake. While their authority and experience was undeniable, the direction didn't match the reality of our business – 90% of our revenue came from gaming companies. Unfortunately, we spread very poorly in both markets. In contrast, a competitor called AppLovin overcame us staying fully focused on the games. They eventually went public and are now worth over $40 billion, while Vungle was sold for $780 million. I still see our exit as a massive success, but this remains a very disappointing lesson for me about the dangers of following authority without question.

Bottom line: You always have to evaluate if expert advice is relevant to your specific situation. Combine external knowledge with your own data and experience to ensure balanced and informed decision-making.

Related: 3 main qualities to look for in a great mentor

2. Green timber

The Greenwood Fallacy, coined by Nassim Taleb in Antifragilewarns against overemphasizing unimportant details at the expense of more important factors. Early in my angel investment journey, I fell into this trap of focusing too much on startups with impressive products, neglecting critical aspects like sales, distribution and market size. While the products themselves were superior, the lack of strong distribution channels meant these companies struggled to gain traction and eventually failed.

Focus on the critical factors that directly affect the success of your business instead of getting lost in technical details. Make sure your product knowledge matches the market requirements and customer needs.

3. False cause

Imagine a spike in sales during a holiday season. It may not seem difficult to increase production for the next holiday. However, this is a classic example of the Fallacy of False Causation, where you assume a direct cause-and-effect relationship between two related events without hard evidence.

To avoid this trap, always question the underlying reasons behind observed patterns. Analyze data comprehensively to make sure you're not mistaking correlation for causation. Test hypotheses with a controlled approach before committing significant resources.

4. The gambler's fallacy

The Gambler's Fallacy is the mistaken belief that past success guarantees future results. after Vungle's $17 million Series B roundwe raised our growth projections significantly, assuming this momentum will continue. However, despite targeting 50% growth, we only achieved 15% growth the following year. Our rapid scaling presented challenges we had not fully anticipated, and this led to disappointing results.

While the following years saw our growth double, this experience taught me a valuable lesson: past performance does not dictate future results. Always base your predictions on solid analysis, not just recent success, and stay agile to adapt to the evolving circumstances.

Related: 16 Characteristics of Critical Thinkers

Avoiding mistakes for better decision making

In the whirlwind of entrepreneurship, where every decision matters, avoiding logical fallacies can be your secret weapon for success. Don't let flawed reasoning hold you back—arm yourself with strategies that sharpen your decision-making and keep your business on track. Here's how to turn potential pitfalls into powerful opportunities:

• Dig into the data. Don't operate on your gut feelings; instead, levers A/B testingmarket research and financial modeling to make decisions that are sustainable and evidence-based. Before you dive in, test your ideas on a smaller scale to validate their potential and minimize risk.
• Question assumptions and don't take valuable advice, even from investors or authority figures. Make sure their knowledge matches your day-to-day operations. Actively challenge default attitudes and seek different perspectives from your team and stakeholders who are more immersed in operational details.
• Implementation of decision-making frameworks. Use tools like SWOT analysis or cost-benefit analysis to ensure that your choices are based on a comprehensive assessment of all relevant factors.
• Stay informed. Keep your sharp edge by learning about cognitive biases and documenting your decision-making process for future reflection and growth.

Embracing these practices not only enhances your decision-making skills, but also transforms the way you approach challenges. With these tools in your entrepreneurial arsenal, you'll turn logical fallacies into stepping stones to success, driving your business to extraordinary achievements and avoiding costly mistakes.