How to Set Financial Goals for Your Business

Have you ever heard the saying, “Failing to plan, and you’ll plan to fail”? Well, in business, it’s very rare to see a business become immensely successful without a well-defined plan and goals. Unfortunately, for new business owners, drawing up an effective business plan and setting goals might be confusing, but still, it’s essential. 

In this article, we’ll discuss how you can set financial goals as you draw up a simple yet constructive business plan to help your business become successful and stay that way. 

 

What are Business Financial Goals?

 

When we refer to financial goals for a business, we’re talking about the economic objectives that help it develop as a business in its industry. Ultimately, you want your business to be successful, right? As one of your forms of income, you’ve probably invested loads of time and money into getting your business operational. Thus, it’s only natural that you’d want to see a return on your investment. Right there, getting a return on your investment can be a goal. 

 

However, financial goals need to be a little bit more specific than simply getting a ROI. They set vision and direction for the company, helping you and your employees understand their roles within the company and what they’re striving towards as a team. With that in mind, business financial goals would be short or long term financial goals that create a milestone for the company's growth whether physically or financially. 

 

Why is it important that you set financial goals for your business?

 

Setting financial goals is an essential part of running a business because it helps you incentivise staff, track progress, and essentially prepare for the business to grow. When you set realistic goals, how the company operates would be centred around achieving these goals. 

 

This means that the way employees work, how decisions are made, and the various products and services the business provides will all be filtered through the lens of the goals you’re trying to achieve. Without goals, businesses would simply operate. The likelihood of growing that business is limited because there’s no ambition or striving towards something. 

This is why setting financial goals is so important.

 

How to set financial goals for your business

 

A great system to help you set goals is the SMART goals analogy. Before we look at how to set financial goals for your business, let’s look at what SMART goals are:

• Specific: the goals you set need to be specific. They can’t be broad like you want an ROI. They need to plot out what that ROI would look like
• Measurable: you need to be able to measure how your progress toward achieving those goals
• Achievable: if you set goals that are unachievable, you’re setting your business up to fail
• Realistic: in the same light as achievable, your goals need to be realistic and relevant to your business. For example, getting a Ferrari as your goal has no benefit to your business if you own a cafe
• Time-based: finally, your goals have to have a deadline to achieve them. If they don’t you won’t really be able to track your progress. This will also create a sense of urgency for you to achieve them

 

Setting financial goals

 

     1. Design a business strategy

Think about it, when we travel somewhere, we always set the destination before we set off on the trip, don’t we? The same applies in business. It helps to take a step back from daily tasks to take an objective look at where your business is currently and where you want it to be in the future. By considering this, you’ll give yourself a guideline to set your goals on. 

 

     2. Design a business strategy

Now that you’ve established your business's current status, it’s time to set long-term goals. Ask yourself where you want your business to be in 5 to 10 years. Then, consider your current financial situation and how you can utilise them to achieve your goals. Often, this is when the short-term goals come in.

 

     3. Plan short-term goals

Your short-term goals should feed into the overall business strategy of the company. They need to be easy to adapt and, in some way or another, help you achieve your bigger goals. For example, say you’re in a delivery company, but currently, you only have one vehicle. Your end goal would be to have a fleet of, say, 20 vehicles. That’s your long-term goal, however, purchasing one vehicle at a time could be a short-term goal that naturally feeds into your long-term. 

 

     4. Orientate your business around these goals

Now that you’ve set your goals orientate the way your business operates to help you achieve them. Consider talking to your accountant or financial planner about how to allocate financial resources to different areas to achieve these goals. At this stage, we also suggest keeping a close eye on your budget. In business, it's easy to overspend or mismanage your income. Unfortunately, the result of this will negatively affect your progress in achieving your goals. 

 

     5. Track your progress and reset

Track your progress towards achieving your goals closely and when you do achieve them, celebrate with those in your company. If possible, award bonuses to those who were instrumental in helping you. Once your goals have been achieved, it's time to set new ones. A common mistake that new business owners make is not reassessing their goals when they’ve achieved them and setting new goals. If you want your business to continue growing, consider setting new goals, even if they aren’t huge. 

 

Final Thoughts

 

Having goals helps you set a vision for your business, giving you and your employees something to strive towards as a team. They also ensure that your business is constantly growing and adapting as the years go by. So remember, set appropriate short and long-term goals that are reachable, realistic, and time-based. Working alongside a financial planner and accountant is another great way to ensure that your goals align with your business plan. By doing this, you’ll set your business up for success.