By Daniel Smith
06 December 2018
“Working on your business and not in it” is a commonly spoken but important expression for business owners to keep in mind, given today’s highly competitive environment of rapid change. It is critical for small business success, to regularly take a step back from day-to-day operations and work on strategic goals and objectives.
Here is a three-step approach to assist in setting SMART goals and in turn hit your business targets:
1. Understanding the Question, “Where Are We”?
A common theme amongst business owners we meet is the lack of knowledge about where their business is today. In today’s fast paced world, technology is constantly evolving and enabling small businesses to affordably attain, in real time, accurate financial information that is in an easy to understand format.
This part of the goal setting process involves using the latest technology, to take a deep-dive into your financial and non-financial business information to gain clarity about your company’s current performance. This may involve exercises such as:
- Conducting a SWOT Analysis - looking at the Strengths, Weaknesses, Opportunities and Threats of your organisation;
- Customer, employee and other stakeholder satisfaction surveys;
- Reviewing actual versus budgeted performance;
- Reviewing project/product profitability margins;
- Conducting a cash flow trend analysis;
- Performing benchmarking; and
- Analysing Dashboard reports.
2. Workshopping the Question “Where Do We Want to Be”?
Collaboration is key to success when setting goals. Organisations are more likely to achieve goals when key staff and personnel are involved in the decision-making process from the start.
When developing goals ensure the ‘SMART’ framework is used, that meaning the goals are:
- Specific - Who, what, where, when, which and why.
- Measurable - Establishing concrete criteria for measuring the successful achievement of your goals.
- Attainable - Goals should be challenging, but achievable.
- Relevant - Goals should be relevant to the organisation's overarching mission.
- Timely - A timeframe should be set.
Common issues to avoid:
- Having a Profit and Loss focus: Many clients only focus on Profit and Loss targets; however, it is important to have a more diverse approach and include goals around cash flow and the company’s financial position (balance sheet).
- Poor budgeting techniques: The most common financial budget we come across is using a flat % growth on last year. This narrow approach creates fundamental issues when setting goals, as it is not ‘specific’ in terms of how the improved financial performance will be achieved.
- Having a pure financial focus: This is important as increased financial performance is generally a result of improving non-financial objectives, such as improved staff engagement or increased customer satisfaction.
3. Regularly Tracking Progress
As a business owner, it can be easy to get caught up in the day-to-day routine of running your business and fighting fires, which takes you away from ‘big picture’ strategic planning. This step involves regularly meeting with your trusted advisers, who assist in generating accurate information, interpreting it correctly and hold you accountable for hitting your targets.