In order to get anywhere in business, you have to know what you want and how to get it. That's why setting your goals — both long- and short-term — is the first step to getting there.
By J.D. Piland
You can’t get lost if you don’t know where you’re going.
Well, yes, but that really only applies if you’re an adventurer/explorer and have a lot of time on your hands—not if you’re a business owner. Framing your company around that saying won’t get you far at all—and more than likely will lead to a dead end. And then there is that little problem of not getting any loans or financial backing of any kind from anyone.
But, unfortunately, you may succumb to “the overriding weakness among entrepreneurs,” says Karen Graff, a consultant with the Central California Small Business Development Center, who has more than 25 years of experience guiding small-business owners. “Most entrepreneurs don’t have a set of clearly defined goals or objectives when they start their business. They can skate around, but that is a road map that will get them nowhere.”
The overarching characteristic of business owners—especially new ones—is naïveté, she adds. “We counsel them to live in the entrepreneurs’ or business owners’ mindset. It’s not for the faint.”
Entrepreneurs should have their goals in mind when starting a business, and established business owners should revisit their goals so their purpose remains focused. The goals—or objectives, as Graff prefers to call them—are a part of the business plan.
The business plan, in most instances, boils down to serving as a goal-setting tool. The components of a plan—mission statement, company profile, marketing research and sometimes a financial report—all help determine what the company is meant to do and how it will do it.
From the Start
Starting a business is all about direction and planning. Remember that little light bulb that flashed in your mind? That “Eureka!” moment when you knew you wanted to start your own business? From that moment on, you were setting goals and looking to achieve them.
“Goals are guidelines and without them—and without having realistic goals—we are defeating ourselves,” Graff says.
Setting your goals is quite easy, actually—it’s all about your style and preference. Graff says she has consulted people who come in with highly detailed goals—broken down to daily objectives—and some who simply function off their mission statement and go with the flow of business.
But, “a successful entrepreneur, by nature, always wants to plan,” says Doug Williams, president of business consulting firm Doug Williams & Associates. He suggests setting your goals at a three- to five-year horizon when starting out.
Goal setting helps you prioritize where financial resources should be allocated, and what aspects of the business you need to focus on. It also allows you to align short- and long-term decisions within the context of your overall objective.
Business owners need to spend time thinking about and planning what they are going to do with the business, Williams says. “What are you going to offer and how? How do you plan on doing that?” he asks.
These questions are for you to consider, and will show lenders you are serious about your business. Graff says bankers and lenders “don’t look for the better mouse trap.” A lot of owners think that because they have the next great product or service, they will be set for life; they think customers will flock to them, no questions asked. However, a banker or lender looks for the customer base that will drive your company; the lender wants to know that you will have sustained business before handing over the funds, Graff says.
Put it in Writing
With only about 30 percent of business owners compiling a business plan, the goals and objectives of the company generally are confined to the owner’s mind. That’s not a good place for them, Graff says. “A good idea is not enough,” she adds. “Goals not published or written down are not worth anything.”
Williams agrees. “Without question, your goals must be on paper,” he says. “When you put it in writing, you formalize it and remember them. It’s like taking notes during a lecture; you can just listen, but you don’t retain as much information as when taking notes. Rarely do you see goals realized if they are not written.”
The next question becomes whether to distribute the written goals. Graff recommends that they be distributed, but the manner in doing so is of personal preference. Post them on a wall, print and hand them out, include in an employee handbook, whichever way suits you is probably OK. “Anything that builds team spirit,” she adds.
The Long and Short of it
Moving forward, you should set your goals for the future, not just the first year of business.
Remember, though, that these extended goals hinge on how quickly your initial, short-term goals are realized. This runs case by case and depends on your market, your customer base, and your products or services.
Because your goals can change in no time, Williams suggests business owners, especially new ones, check and update their objectives and plans quarterly. “And then, at least every year, plan and re-plan what you are going to do,” he adds.
Consider setting a five-year plan. According to the National Federation of Independent Business, “five-year goals address broad, fundamental aspects of a company’s growth and differ from quarterly or one-year goals in that aspect.
“While a one-year goal may be to add several sales staff and increase revenue by 5 percent to 10 percent, an appropriate five-year goal may be to establish an efficient and broad network of distribution that allows a 50 percent or greater percentage growth in revenue,” the NFIB says. “Five-year goals that address the fundamental long-term growth of a company can be established only by objectively examining the company's present strengths and weaknesses.”
The NFIB published these tips to help you set your five-year goals. Remember to get feedback from your employees when setting your goals:
- Determine your company’s current strong and weak points.
- Consult marketing professionals and others in your industry to determine trends and potential areas for business growth.
- Work with your financial partners to determine how the company realistically can achieve these longer-term goals.
- Create a short mission statement. A mission statement lays out the company’s activities—not necessarily strategic plans—to achieve these goals. “You can set long-term goals all you like, but it is about how you will achieve them that matters,” Graff adds. “You should be more interested in the action plan.”