Most advice on setting small business goals focuses on a single concept: Develop a simple process to identify and achieve those goals.
“A lot of small business owners struggle with developing a methodical plan for setting and achieving goals,” says Chris Hervochon, a CPA and owner of SOAR, a firm specializing in accounting and strategic planning for small businesses. “They start a business because it’s doing something they love, but they end up spending all their time working in their business, instead of working on their business.”
To shift the focus to working on improving and growing your business, Hervochon recommends setting goals that are achievable, but also force you to stretch in ways that will drive profitable growth.
His recommended path to get there? Answer three key questions:
- Where am I now?
- Where do I want to go?
- How do I get there?
Question 1: Where am I now?
“So how’s business?”
As a small business owner, you likely hear that all the time. But do you truly have an accurate answer?
Before you can establish strong goals, you need a clear snapshot of the current state of your business. Specifically, it’s essential to not just track your revenues, but also your net profit margin — and to benchmark your profits against industry standards to see if your profitability is in line with the competition.
That assessment helps lay the foundation for setting small business goals. For instance, if you’re hitting your top-line revenue target but your profit margin lags behind industry averages, your focus should be on creating greater efficiencies and lowering costs. Conversely, if your margins are strong but you are falling short on revenue, your goals should aim at increasing customer acquisition and sales. (See fig 1.)
Beyond getting a clear picture of your profitability and finances, Hervochon recommends surveying employees to assess your culture. He also suggests identifying any major risks that pose a threat to your business. For instance, if you’re a landscaper consider the potential impact an exceptionally rainy spring might have on revenues and if it makes sense to add winter services such as snow plowing to assure stronger cash flow throughout the year.
Once you have a clear, data-backed picture of where your business stands, you’re ready for the next step.
Question 2: Where do I want to go?
This question cuts to the heart of small business goal-setting. What do you want your small business to become over the next year and beyond?
“The questions you should be asking yourself as a small business owner should be about the vision for the future,” Hervochon says. Specifically:
- How much money do I want to make?
- Do I want to sell the business at some point?
- How much time do I want to spend on the business?
- Do I ultimately want a lifestyle where I work in the morning and can keep the afternoons open?
- What do I want to get out of this business?
- What kind of culture do I want to work in every day?
Asking—and answering—these big-picture questions helps crystallize the key goals that will help create a small business that delivers the earnings, lifestyle and personal satisfaction you want out of it. Out of this exercise, nail down three to five key goals that will move you closer to your vision of an optimal business.
Now you can take the final step to keep you on track for achieving your small business goals.
Question 3: How do I get there?
This question blends your strategic vision with the tactics and activities necessary to make it a reality. Consider the time, resources, training and financial commitment required to achieve your goals.
This is when it’s essential to develop a process for tracking progress. This will ensure you can keep your goals within reach and identify problems quickly enough to adjust if you veer off course.
Hervochon recommends establishing five or six KPI’s, or key performance indicators, that will help keep you on track toward your small business goals on a regular basis. So, if your most pressing need is increased revenue, a relevant KPI would be setting new client acquisition targets and tracking your progress on a regular basis.
A wide range of easy-to-use dashboards are available for small business owners to track KPIs. Quickbooks accounting software offers some capabilities for tracking small business metrics and platforms such as Geckoboard and Cyfe offer free trial periods during which you can assess if they are right for your small business. You can also create a dashboard simply by using Excel. A wide range of free Microsoft Excel dashboard templates are available on the internet.
Keep it simple and you’re more likely to follow through. For example:
A $1 million goal, one small bite at a time
Small business owner Jessica Hernandez’s has developed an approach to goal-setting similar to the one Hervochon recommends. Like most entrepreneurs, she struggled with setting and tracking goals when she started her small business, Great Resumes Fast, a decade ago.
Now, as each new year approaches, she puts her goal-setting process in motion. She reviews the current state of her business, maps out where she aims to go, and sets an annual, top-line revenue target that will get her there.
She then establishes quarterly, monthly, weekly, and even daily targets to keep her on track to reach her goal — and posts those targets on her desk where she can readily see them.
“Every day, it reminds me of what we are working towards,” says Hernandez. “It’s really easy to fall into the trap of setting goals and then just letting them just drop off within a month or two. I want to be reminded every single day of my goal. All I have to do is look up at my numbers on that little yellow notepad.”
The approach has paid off. In 2018, she topped her goal of $750,000 in revenue by more than $100,000. For 2019, she is aiming to top the $1 million mark. And she’s confident she has the roadmap to get there, one resume at a time.
“It’s so much easier to achieve a goal when you break it down into small manageable bites,” Hernandez says.
You can do it!
By going through a process similar to the one outlined above, you can get a clear picture of where your business has been, where you want it to go, and the actions you need to take to get there.
When you take the time to work on your business and not just in your business, you put yourself on the path to not just setting goals but achieving your small business goals.