Setting performance goals is an essential part of the planning process for any business. In small, privately held businesses coming off a tough recession, it”™s more important than ever. You need to know if you”™re biting off too little, too much or just right, in every area of the business.
That said, most experts find fewer than 10 percent all of small-business owners have a written set of goals they refer to regularly.
What is it about goal setting that is so tough? There are a lot of challenges, actually. First, you have to figure out some of the big metrics of the business. Second, most people do better at setting and following up on goals if they”™re accountable to someone else ”“ which most business owners aren”™t. Third, building a goal-planning template, to use year after year, is a challenge that overwhelms many.
Let”™s get to work
Every business has major success drivers. Identifying revenue categories that lead to the greatest profits is a big one. Best-customer attributes help the organization figure out how to find more great customers. Efficiency measures in operations help staff to figure out what”™s working optimally and where to make improvements.
Monitoring the depth of the company”™s sales pipeline can tell you a lot about how well marketing efforts are producing, or not. Comparing employee compensation to individual results and market standards, done right, rewards performers and helps weed out underachievers. Figuring out your company”™s drivers will help focus time, money and effort on best practices.
When it comes to setting and reviewing goals, the truth is most business owners are accountable only to themselves. That”™s part of the problem.
We all do best when we answer to someone else. If we”™re questioned about the goals we choose, we”™ll be clearer about what we want to accomplish, why and how we”™ll do it. We”™re also more likely to check on how things are going if we know someone is looking over our shoulder. Who are you accountable to?
Measuring success
Let”™s say you have a good understanding of what drives success and a support structure to make sure you pay attention. You can still miss the boat when putting plans together. It”™s all about the template.
A goal-planning template is a structured way to forecast and compare results in the business from period to period, and year to year. Acceptable and unacceptable year-over-year growth rates, percentage increases in overhead factors, and calculated point decreases in cost of goods sold mirrored by increases in gross profit are all examples.
Measures for the balance sheet are just as essential as revenue, gross profit and net income. Set goals for improving cash on hand, building reserves compared to overhead expenses, and increasing the current assets/current liabilities ratio. These will help to ensure the business has the resources to implement the goals set for boosting revenue and profit.
Add to the template a place to figure additional products or services and acquisitions. Do so in quantities designed to limit risk, enhance learning and contribute to profit over time. Use these calculations to ensure the company has a way to hit its growth goals, no excuses.
Comparing results to goals can help an organization figure out if it”™s on track or not, and diagnose what has to happen next.
Looking for a good book? Try “Make Success Measurable: A Mindbook-Workbook for Setting Goals and Taking Action,” by Douglas K. Smith.
Andi Gray is president of Strategy Leaders Inc., www.StrategyLeaders.com, a business consulting firm that specializes in helping entrepreneurial firms grow. Questions may be e-mailed to her at AskAndi@StrategyLeaders.com or mailed to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514. Phone: 877-238-3535. Visit www.AskAndi.com for archived Ask Andi articles.
