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Setting financial goals for your business is like entering a destination into your GPS. Once you know where you are going, you can figure out all the turns you need to make to get there.
Business financial goals are any distinct objectives connected to your company’s key metrics, for example, profit margins, expenditure and revenue. These goals could be long- or short-term.
Financial goal-setting enables business owners to step away from the day-to-day operations and look at the bigger picture: Where the business comes from, where it is currently standing and, most importantly, where it is heading.
• Motivate a team.
• Help with decision-making and direction.
• Prompt creative plans needed to reach these goals.
• Grow a business.
• Protect a business financially during hard times or an emergency.
• Curb unnecessary or extravagant expenses.
The following steps may be helpful to entrepreneurs who take the financial health of their businesses seriously.
Even if you have a small start-up, you need to know precisely what you are earning, spending, owing and saving. Proper insight into your current financial situation is crucial before you can plan for the way ahead.
After a financial overview, you can now pinpoint areas of concern from which the business should steer away (e.g. over-spending). You can also identify positive trends, which can be boosted even further (e.g. slow but steady growth in revenue).
This is also the part where you get to daydream a little. What do you envision for your business? You can include long-term visions that need not be attainable in the near future.
Write down your financial objectives. Make sure they are:
• Clear and specific. You cannot effectively pursue or meet vague goals. It’s like saying you want to go on “a European vacation” – it can mean a million things. Define goals well and keep them measurable.
•Realistic. Although long-term goals can be audaciously ambitious, keep short-term goals attainable. For example, wanting to increase your revenue thirtyfold in the next year is probably not reasonable.
•Defined by a deadline. Where there is no hurry, there is no worry. Do not set goals for an indefinite time in the future. Instead, place limits on them – e.g. we need to reach this goal within six months, a year, five years…
An example of a financial business goal that meets these criteria would be: By the end of June 2023, my business expenses need to be 3% less than the 2022 monthly average, and by the end of December, 5% less.
Goals would be pretty useless if they are not backed with a solid strategy to achieve them. Business owners need to compile an action plan outlining each small step they need to take to reach their objectives. And then, obviously, they need to follow this plan.
As the business and the environment in which it operates change, goals should be re-evaluated and assessed. Celebrate each goal you reach. Do an “autopsy” on the ones that failed. Set new goals. And repeat!
Many small businesses fail due to a lack of proper financial planning and management. The best way to prevent this is to have a dedicated and experienced accountant who can manage your books, consult you in financial decisions and help you reach your financial goals.
If you require such a partner, our expert team at Huysamen Westraad Inc will happily come alongside your business. Feel free to contact us.
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