This time next year, we’ll be millionaires… we’ve all heard that one before.
As wonderful as it would be, it’s probably not achievable for the majority of us. Setting financial goals is important – it’s all part of the business growth plan – but they have to be realistic.
In essence, financial goals give a business owner a direction, a guide to decision-making and strategy planning. A clear financial plan makes it easier to know what’s possible in terms of investment, recruitment, spending and profit and loss.
Being unrealistic about your financial goals is merely a recipe for frustration and confusion – neither of which are good for business.
How to set financial goals for a business
Financial goals are specific targets, set by a business to manage their financial health. It’s not just about making money, it involves analysing profit margins and where savings can be made, or a debt reduced. It means a keen eye on cash flow and building your business around what is affordable and workable, without putting too much at risk.
Goals define the direction in which a business is heading, and should include short-term and long-term goals for both increasing revenue and delivering business growth.
Setting these goals and sticking to them brings a sense of stability. They will help the business owner understand what is possible, even when resources might be limited.
They will also help guide sales targets and marketing strategies – offering measurable outcomes rather than just leaving everything to luck.
Work smarter
SMART is a best-practice framework for setting financial goals in business. SMART stands for Specific, Measurable, Achievable, Relevant and Time-bound. It gives a set of benchmarks by which to measure your goals as you set them.
Break your goals down into actionable steps. So, if you want to increase sales by 25%, what is that going to cost in terms of additional staff, bigger premises, marketing, etc.
Learn your lessons
Reviewing your business’s financial history helps to understand what worked in the past and what didn’t. If a sales drive returned a less-than-impressive return, find out why that might have been and try a different approach. Looking at your competitors’ financial performance, and cross-referencing with what they do differently, or similarly to you, can help identify new opportunities.
Don’t forget your objectives
Be careful to ensure your business finance goals reflect your mission and vision. If your CSR or environmental performance matters to you, for instance, you might have to accept that some of your costs have to reflect that. Include things like reducing waste or supporting the community in your goals and forecasts.
Stay on track
If you don’t monitor your progress, it’s easy to lose sight of your plan and fall into bad habits. Stick to your KPIs and regularly evaluate them to make sure you’re on the right track; and be sure to make adjustments to correct any deviation from your course.
Setting and tracking financial goals is vital for business growth that is stable and strong. Long-term success often means making decisions now that will set the company up to take advantage of opportunities in future.
Setting and monitoring goals gives business owners a plan to work to, and the confidence of knowing they have a strategy to achieve the success they aspire to.
Find the latest news and discover what’s best for your business’ financial goals with Finance help and advice today.
