4 Reasons You Need to Set Business Goals
My only goal when I first launched Formula was to ensure that I made enough money to survive the subsequent month, with little to no forward thinking or planning. Unfortunately, I think that many business owners still think that way regardless of their size, revenue or business offering. When I finally made the commitment to do some future business planning, it included many short and long-term benefits, including ensuring that my senior executives understood what we were trying to accomplish and the roles they would play in helping us get there.
Business owners should not fear setting goals or projections because there is absolutely no downside to doing so. Also, it is important to remember that goal setting doesn't have to be only about revenue. It could relate to innovation, employee retention, service offerings, or anything that is important to enhancing your business. Here are four reasons why you should be setting goals for your organization:
1. Measure Success
Good organizations should always be trying to improve, grow, and become more profitable. Setting goals provides the clearest way to measure the success of the company. When you are looking at your company from a three- or five-year perspective, you are looking beyond the tactical side of your business and instead taking a much more macro view, which allows you to see the company from a competitive, business vertical or economic perspective.
2. Leadership Team Cohesion
Setting goals ensures that everyone understands what the prize is and what they are working towards. When your leadership team clearly understands what you are trying to accomplish it provides greater rationale for the decisions you might make regarding hiring, acquisitions, incentives, sales programs, or any other financially-driven decision. This will eliminate a lot of the uncertainty that goes with not understanding the goals of the company.
3. Knowledge Is Power
When your goals have been defined, you can develop a deeper understanding of the effects of tactical decisions and how they play against the strategic goals. For example, when you have a budget that considers revenue to expenses, you will better understand the implications of a major purchase or winning a large new client. I have long believed that information is power and the more you know, the better decisions you can make.
4. Reassess Goals Mid-Year
When you set goals early and continually monitor your business against those goals, you can change course mid-year or when necessary. For example, say you have set your growth revenue goal at 20 percent from the previous year, but midway through the second quarter you find that your financial projections are not tracking like you had expected. You can modify your revenue and expense targets to reflect how your business is trending. If you hadn't set the goals, this type of information is not as apparent and decisive action is more difficult.
It is incredibly important to remember that setting business goals will not ensure success for any organization. However, there's also a lot to be said for not flying by the seat of your pants. Taking the time to look at your organization from a broader perspective will give you greater confidence in what lies ahead and how your organization will be able to optimize it. We can't predict the future, but we can certainly plan for it.