What are your business goals, why you want to achieve them, and what you are doing to reach them? These are essential questions for you as an entrepreneur and your small business. Here I would like to share one clear framework related to your business goals, starting with meaning, setting up and the process of achievement and evaluation of your business goals.
What does business goals mean?
As a first, you need to understand that your business goals are part of your business planning process. With their help, you want to describe what your small business expects to achieve throughout the specific period.
Your business goals are simple the future of your business. You say what you want to achieve based on analysis and look into the future, and work hard to achieve what you want to achieve.
What you need to do before You Start Defining Your Business Goals?
Before you start to think and write down your business goals, you will need to know what is most important for your business to improve. You can achieve this if you use some of the following techniques:
- Market research. Start with the market research. The purpose of market research is to discover your customer’s needs, market trends and changes, and most important competition. Be careful when you conduct the market research to see things in the market from different perspectives. You can achieve this through several market research methods.
- SWOT analysis. Conduct a SWOT analysis to identify your business’s strengths, weaknesses, opportunities, and threats. Here are 4 easy steps that will help you in conducting a SWOT analysis and use this SWOT analysis template.
- Benchmarking. Before you continue with the development of the business goals you need to research better the competition in your industry and compare the results with your own business.
Why are Business Goals Important?
In my experience, too many entrepreneurs manage their business without specific business goals and clear achievement process. But, there is one thing that correlates with all of them. They are running an average small business and in some cases micro business. Their companies don’t grow and put all their efforts to survive and maintain the status quo situation.
But, you are an entrepreneur who wants to grow the business with exponential speed and steps. So, here we will take all necessary things you will need to do.
Business goals are used to help you to achieve strong business growth. Because of that setup business goals is an essential part of your entrepreneurial journey.
You need to understand that you will not lose anything if you have business goals and clear process to achieve them. With goals, you will have a clear direction where you want your business to move and framework that will help you measure results.
Here are some of the most important reasons why you need to have business goals.
1. Business goals give you clear directions where your small business need to go
Assume that you have a business goal related to the profitability of your business. So, you have a goal that requires your company to increase the profitability by 20% in the next year. When you have such a written goal, you can quickly start to brainstorm ideas about what you need to do to achieve this goal.
For example, you will analyze your sales numbers and costs to measure the profitability level of each of your products and services. You will check how is the ratio between profit and expenses. Because if this rate is the same, even you increase the income by 20%, you will not increase your profitability. All of this things can bring you clear step-by-step directions about what you need to do to achieve the increase in profitability by 20% next year.
2. You will have a clear framework to measure the progress of your business
A successful entrepreneur is always trying to achieve their business goals, so they improve and grow his business. If you don’t have goals, you will not have a subject that will need to be measured. For example, if we continue with the earlier case of increasing profitability by 20%, from the start, you know what you need to measure.
If you continue to break down this measurement, you will come to more specific subjects of measurement you will need to measure to see how your business progress. So, you will probably measure the results from the activities you will implement to achieve this goal on the weekly, monthly and quarterly level. You will also measure the costs and income continually. So, your business goals will hive you.
3. You will have strong organizational coherence when you have clear business goals
If you have clear business goals, then everyone in your company will understand what your small business is trying to achieve and what will be their role in this achievements.
For example, the sales manager will know what will need to be done to increase the profitability by 20%. Also, the marketing department will have a clear understanding of their role. If the achievement of this goal requires substantial costs reduction, everyone will know what will need to do and why it is necessary for the company. If all employees in your small business know and understand your business goals, it will be easier for them to do the work they will need to do.
How are business goals achieved
Ok, until now you already have enough background to start setting up your business goals and work on achievement. You know what you want to achieve and you know what you need to do to achieve what you want to achieve.
So, now it is a time for the real work to make your business remarkable. Here is a simple, but a robust framework to set up and achieve your goals.
1. Start with setting up your business goals?
One of the most important questions I get from small business entrepreneurs related to business goals are following:
- How are business goals set?
- What are measurable business goals for my business?
- What are SMART business goals for my business?
- The most critical business goals I need to have?
Let’s try to answer these questions.
How to set up your business goals?
You can set up your business goals following these action steps:
- Write down in a spreadsheet your business needs based on the analysis you have made previously and your dream about the future of your company. For example, I need to invest in new product launch to stay at the top of my competition.
- In the second column translate each business need into actionable elements. For example, I need to increase my profitability to invest in research and development; So, I need to improve my income and decrease my costs.
- Be sure that your list is as small as possible. You don’t want to lose yourself in a bunch of stuff that you can not manage.
SMART business goals
When you already have a list of your possible long-term and short-term goals, you need to check are they something measurable. Measurable business goals are goals that you can easily measure relating to the progress you are making with all of them. For example, if your goal is to decrease your business costs this year by 30%, you have a specific number that you can measure and compare to see if the measures you implement help in achieving this goal.
You can achieve this if you start using SMART goals from the beginning. So, your goals must be specific, measurable, achievable and time-limited.
Results from research by Edwin Locke and Gary Latham on the effects of goal setting on the performance show that:
in 90% of the studies, specific and challenging goals led to higher performance than easy goals, “do your best” goals or no goals.
So, if you have the more specific and challenging business goals, you will have a higher motivation to achieve them.
The most important business goals for your company
When it comes to the most important goals you will need to setup it will depend on the current situation in which your company operates. But, as a general rule I can recommend following:
- Profitability. Profitability is essential for your small business because it will enable you to invest in more significant business growth in the future. On the other side, if you have goals related to your profitability you can continuously monitor your costs and income.
- Customer’s satisfaction. Another important goal for your small business is customer’s satisfaction because your company depends on their satisfaction.
- Productivity. How your company is doing the most important things regarding the resources is the essential part of your business success. So, having goals related to productivity are vital for you.
- Business growth. You want to succeed in your business to grow fast and with giant steps.
- Competitiveness. If you are competitive in the market, your business will be better than your competition. So, having goals related to your competitiveness is important for you and your small business.
2. Define the strategy to achieve them?
In many small business companies, the strategy, or the strategic planning, is not in place. It doesn’t mean that if your company is a small business you don’t need strategic thinking. I have seen many small business owners not providing sufficient attention to strategic thinking or the development of an appropriate longer-term vision for the company.
Having strategy is important for your small business because strategy development will help you to see broader things inside and outside your small business. Your strategy will need to cover your long-term goals, followed by short-term goals.
3. Create a clear action plan to reach your business goals?
According to the research by the Statistic Brain Research Institute, 42% of people never succeed to achieve their goals, 17% infrequently succeed and 41% usually reach them.
The action plan is a process that your company will use to define actions to ensure achievement of your strategic goals. This plan will help you to implement action steps and monitor the status of the implementation, proper allocation of resources and decision making based on the performance results.
Usually, according to my experience action plans in many cases are missing, or if they exist, they were developed in a broader view, without specifics to monitor and measure the goals implementation status and achievement. Such action plans are limiting your company. You will not develop the required KPI’s to measure the success of the actions.
Because you want to achieve your business goals, you need to focus on results. In such a way you will include the following performance measures in your action plans:
- The current or actual measure for each activity;
- Tthe expected measure after implementation of each activity.
4. Do you have measurable key performance indicators?
Performance measurement is the foundation to improve your business operations and achieve your business goals. You should measure the difference between realized performance and desired performance. If they are different, then there is a gap that you should fill with the improvements. For example, if your goal is to process 500 clients per day, and your business capacity can process only 300 clients you will need to focus on:
- Process improvements
- Employees education
- New employees
Key Performance Areas. KPAs are areas of your business success factors and improved performance of your small business. A KPA contains one or more concrete KPIs related to a specific area. For your small business, the first step is to define goal areas and success factors on KPA level.
Key Performance Indicators. KPIs are quantitative or qualitative measurements that reflect the business success factors and strategic performance of the company. You can define different KPIs related to achievement of your business goals. If one of your goals is “increase profitability by 20%” you can use following KPIs:
- Sales growth – per department, per employee, per spend dollar, etc.
- Reduction of costs – per department, per employee, per spend dollar, etc.
If your goal is to reduce production time, one of your KPIs will be to measure average supplier’s delays and variations.
5. Work hard to reach your business goals
Because now you have all the framework elements to achieve your business goals successfully, it is time to start working on the implementation of your action plan. You already have the strategy, action plan with action steps, responsibilities, time-frame, and KPIs. So, you can quickly start implementing one by one action step.
6. Measure and celebrate your progress
You have developed your KPIs, so now it is easy to measure your achievements, by the development of measuring schedule and analyzing the results. You can use weekly, monthly and quarterly measurements to be sure that everything is moving like it needs to move.
Celebrate each your milestone and progress with your team members to motivate them to work hard for the total accomplishment of your business goals.
7. Evaluate your business goals
Now, the question is how to evaluate business goals. You set them up, implement action steps, and now the question is are their achievement bring desired results for your company. In this step, you need to reflect on all of your previous steps and see what was right, and what was wrong in the process. The purpose of this action step is to help you improve your next setup and achievement of business goals. So, your business will enter into the cycle of continuous improvement.