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Goal Setting for the New Year

by: SBC Staff

 

If you haven't done so already, it's time to start planning your business strategies for the new year. You should never begin a year without knowing where you want to end it. As the old saying goes, if you fail to plan, you plan to fail.

Planning is not an exercise only for large companies. In fact, smaller businesses are probably more in need of planning than their larger counterparts. A large business may be able to survive if it doesn't plan or plans poorly. A small business normally does not have the resources to waste on poor planning.

An adequate plan for the year will include both short term and long term components. It is important to identify the overall goals for the year, but equally important to identify the small targets along the way that must be hit in order to stay on track.

SETTING YOUR OVERALL GOALS

First and foremost, be very, very specific and make sure your goals are reduced to writing. Don't write "This is the year my business will create enough profit for me to retire." You must be more specific. This phrase can be broken down into multiple goals that are easily defined, easily tracked, and easy to break down into multiple small steps to be taken during the year.

For example, the following goal statements might all be derived from the vague goal statement given above:

* We will increase sales by 20 percent during the first six months of the year, and by 30 percent during the last six months.

* While increasing sales we will hold cost of sales and expenses to a modest six percent increase for the year.

* We will use our increased profits to pay off our credit lines by yearend and be debt free.

* and so on.

You'll need to prepare at least high-level income and expense projections in order to evaluate how realistic your overall goals are. What might seem totally realistic in words might seem quite impossible in numbers. If the 20 percent increase in sales during the first six months of the year requires an increase in advertising of 20 percent, your goal of only a six percent increase in expenses might be blown. Then again, it might not. You need to run the numbers to find out.

CREATING YOUR SHORT TERM GOALS

Your short term goals are composed of the individual steps you must take to accomplish your overall goals. Take each of your overall goals and list the steps required to accomplish them. Once again, be specific.

For example, what will it take to increase sales by 20 percent during the first six months of the year? Your short term goals with respect to this one overall goal might be:

* We will increase spending on our five most effective advertising campaigns (list them specifically) by 30 percent.

* We will train our sales people to cross sell products and services to our existing customer base. We will identify at least one additional product or service needed by every customer in our current customer base.

* We will aggressively pursue "target market A" by focused special sales promotions and targeted discounts.

* And so on.

Once again, you'll need to incorporate these assumptions into your  projections to make sure they make sense and are sufficient to accomplish your goals. Set up specific time lines for each step so you can track your progress.

If your progress slips on any short term item, you'll have to reevaluate your ability to accomplish your overall goals or possibly adjust your strategy. The important thing is to enable yourself to react by knowing where you stand at any point in time.

If you haven't actively set goals and prepared financial projections in the past, you may find that your assumptions are way off base.  For example, let's say you find out that increasing advertising in your five most effective advertising programs by 30 percent only results in a five percent increase in sales, but that your focus on selling into your existing customer base simply explodes your revenue. Let's further assume that this is exactly the opposite of what you thought would happen.

Your projections will be wrong, but you will have learned some very valuable information that will benefit you for years to come.  Chances are you wouldn't have noticed what was happening without setting both the long and short term goals, preparing the projections and then tracking your results.

OTHER GOALS

The goal setting process will help you to identify other areas of your business where improvement might be required. For example, if one of your goals is to increase spending in your five most effective advertising programs, you need to know very precisely how effective your advertising programs are. If you don't have a system in place to track the effectiveness of your advertising, this will inhibit your ability to properly plan and implement your strategies. So one of your goals should be to implement such a system.

Also, don't concentrate so much on numbers that you lose track of other processes that could increase profits and make your business more valuable. Set goals for improving efficiency and building the intangible value of your business.

THE BOTTOM LINE

This article gives you some broad guidelines for plotting your strategy for the coming year. Use them to stimulate your thoughts about your own business and then sit down and dedicate some time to the process. No one really likes to set goals, subgoals and prepare projections, but it is absolutely necessary if you are going to grow your business to its full potential.

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