To get the most out of this goal-setting exercise, ask yourself the following questions:
Is the goal in line with your business and personal values?
One of the quickest ways to cause internal or external strife, and derail potential positive outcomes, is to set financial goals that are in conflict with existing principles and values.
For example, you may want to embark on a strict cost-cutting and business rationalisation exercise, but if your loyalty to your staff is paramount, you’re headed for trouble.
Few business owners understand what they really want to get from their ventures. Many will tell you that they want to build massive businesses and be fabulously wealthy – with the mansions, yachts and fast cars that come with the tag. When it gets down to it, though, they realise that they are not actually “growth entrepreneurs” and don’t want to make the personal and family sacrifices needed to build a behemoth of an enterprise. They are actually “lifestyle entrepreneurs”, and want to be successful and comfortable – have a nice house, drive a decent luxury sedan, take two holidays every year. Their personal life is important to them, and they want to strike a happy balance. The lesson here is to make sure that what you take aim at aligns with who you are as a person, and what your business is set up to do.
Is it a short-term, medium-term, or long-term goal?
Short-term goals take less than a year, medium-term one’s take one to three years, and long-term means three to five years or longer. Different financial goals will inherently have different time-scales attached to them. Turning your business around from making a loss to making a profit should be a short-term goal, for example. Growing to a point where your business can afford a manager (freeing up your time for other pursuits) would be a medium-term goal. While building the business so that it becomes a target for acquisition by one of your larger competitors could be a long-term goal.
Is it specific?
Improving sales and cutting expenses is far too vague a financial goal, and there is no inherent accountability. An effective goal needs to be specific, so that team players are clear on what needs to be achieved. Increasing sales by 20% over last year’s figures, and improving net profit by 35%, is a much more specific goal.
Is it measurable?
You can only improve what you can measure. So know what metrics you plan to use to measure each goal, and share these with your team. Want to improve sales figures? Are you going to measure this by rand value, or by number of units sold? Next it’s a case of track and compare, track and compare, track and compare. If you’re not tracking your outputs, and weighing these up against targets, there is no point in setting goals.
Is the goal attainable and realistic?
The best goals are those that require people to stretch themselves a bit, but aren’t too extreme. Setting benchmarks that are too low won’t inspire anyone to do their best, but setting them too high will demoralise from the word go, and you’ll have zero buy-in. Are your goals realistic? Wanting to make a million in your first year might seem like something awesome to reach for, but it’s not necessarily realistic. Making a profit by the end of your first year, though, and making a million by the end of year three, now that’s realistic.
Is there a time-frame attached?
Put fixed dates to your goals – some specific moment in time to work towards. Selling the business to a competitor in the future is too fuzzy. But, being bought out by December 21, 2015, will help to focus the mind.
Source: This article first appeared in Your Business Magazine.
* Gareth Cotten is an experienced financial consultant and is the course convener for the part-time University of Cape Town Basics of Financial Management short course, presented online throughout South Africa. Contact 021 447 7565 or visit: www.GetSmarter.co.za for more information.