Setting measurable goals is a positive first step in getting your business on the growth pathway.
Small business confidence is the clearest indicator of the health of the economy; it’s essentially the nation’s engine room.
To ensure your business performs at its best, it’s vital to set a series of short-term measurable goals that you can check off as each is achieved over the course of the year.
Small businesses we work with like to set both short-term goals and more distant three and five-year goals. Many of these business owners aren’t 100 per cent sure what to measure to set their goals and how to set a realistic target for the future.
We’ve all seen the acronym SMART in relation to goals before – specific, measurable, attainable, realistic, and time-bound
If you use this SMART methodology, you'll be well on your way, but still the question remains – what should you measure?
More than just sales targets
Most people’s first instinct is to set a goal for revenue and work hard all year focused on growing just their sales. If you’ve ever heard the term ‘growing broke’, then you'll know that this singular focus on revenue is a ticking time bomb waiting to explode.
What happens when you land a once-in-a-lifetime contract and have neither the working capital or enough goodwill with your suppliers to fulfil the order? Or you just get a little lax with your debt collection and don’t have enough in the bank to pay your suppliers in a timely fashion?
Specific and measurable
All five areas of your business need to be firing well to achieve sustainable growth – product and service development, sales and marketing, operations and finance, customer service, and human resources.
It’s important to set goals in all areas and choose the one or two items from the ‘key drivers of profit and cash flow’ that you can use to measure your success – these are the key performance indicators (KPIs) of your business.
Attainable and relevant
Once you’ve agreed on your KPIs you’ll need to set a benchmark and then decide what’s a realistic target for delivery over a set period of time. There may be many factors that make your business unique and seemingly incomparable to others, but at the heart of things most businesses will have a fundamental framework that make them comparable to others of a similar size within their industry.
The best place to start is to look at the already established benchmarks for your industry.
Once you’ve looked at your industry’s benchmarks and decided on some realistic improvements for your business, the next step is to choose a time frame for achieving your targets. To ensure your goals are attainable, it’s best to set small increments for improvement; weekly, monthly and quarterly goals are much easier to monitor and manage than one great big annual target.
If you’ve missed a weekly target, it’s much easier to make that up, than a monthly or quarterly target. The upside of small increments too is that if you reach the small goals along the way, the great big future goal is attained by default.
Break down your annual goals for the improvement of your business into weekly, monthly and quarterly targets and deal with the little slips off target as they arise. Keep everyone in the loop of how the business is progressing towards the goals with regular weekly, monthly or quarterly updates to keep momentum going.
Your team will be a key component of the success of your goal setting and achievement. Involve them in the process. Consult with them firstly to decide what the KPIs should be for their area of responsibility, and how the targets can be achieved.
Sue Hirst is a director at CAD Partners (CFO On-Call), financial and business advisers.