In a study done of Ivy League graduates – those who set clear, written goals for their futures earned up to 10 times more than those that didn’t envision and track their goals. The same rings true for business leaders, as those who plan for success are much more likely to get there than those that simply hope for the best.
It’s an obvious statement that you want your business to make money both now and into the future, and setting financial goals can help you get there.
Instead of offering a cookie cutter answer on how to get from A to B, we know that each business and business owner also has radically different goals depending on infinite variables. Using the below steps, you will be able to set financial goals that meet your unique desired outcome.
Step 1: Ask The Right Questions
Your goal is to dig deep and come out with some heavy hitting answers. Some questions we might recommend would be: How much do revenue do you need to generate to cover your expenses in 1 year, 3 years, 5 years? What is your (the owner’s) end goal and desired involvement? Is it to sell the business after a certain point in time, to stay involved for decades, or to build it to a point where you hire a manager to maintain operations? What kind of growth do you want and/or does the business model demand? Do you have someone equipped to make educated and insightful assessments of your financials? “Small-Business Growth: Are You Asking the Right Questions?” lists even more questions you might want to consider.
Once you ask all of the necessary questions, compile a list of answers, which should now correlate to goals. For example, you might have come to realize that in the next 2 years, you want to triple your revenue. Or perhaps it’s related to bringing on staff that will help increase productivity and drive sales.
Now that you know your goals – Write them down!
Step 2: Walk Backwards
Think about this – it’s June 2016 – doesn’t that mean you should be halfway towards your yearly goal? Goals do not exist in a vacuum. You don’t suddenly reach December 31st, 2016 and BAM – your goals have miraculously completed themselves.
This step is about starting with a massive objective and breaking it into smaller more manageable tasks or “action items” so that you can start tracking and know where you stand.
Step backwards in consistent increments, keeping track of each layer. You can dive into anything that will get you to your goal – from the number of sales calls that you need to make, to your customer service levels. For example, if you want revenue of $200K/month in Dec 2016, what sales and actions do you need achieve in Nov 2016? Now what about in Oct 2016? September 2016? Or maybe you know that out of 50 sales calls a month, 5% result in a sale of $2000+, which means that by increasing the number of sales calls, you can increase your revenue.
Step 3: Give Your Goals a Plan
Now that you have over-arching objectives, don’t fall into the trap of failing to plan – and therefore planning to fail. Create a game plan and milestones for each KPI. These will form your compass.
You can delegate each item to a specific member of your team who can best complete it, or even build some of the action items into the daily activity of every employee.
“A mere 7% of employees today fully understand their company’s business strategies and what’s expected of them in order to help achieve company goals.”
-Robert S. Kaplan and David P. Norton, “The Strategy-Focused Organization”
While measures of success can change along the way due to an ever evolving business climate, your employees should be well aware of your goals so they can help you achieve them. Help your team put the pedal to the metal, ensuring you are on track to meet the goals you dream of for your business.
By following the above steps above – asking questions, creating manageable milestones, and putting those milestones to task, you are well on your way to compelling your business to meet it’s financial goals!
For more information on assessing your company’s finances, you can find our e-book here.