Next Business Step? Success
Position yourself for growth in 2017—join us live at the Entrepreneur 360™ Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »
"If you don't know where you're going, you'll probably end up someplace else," Yogi Berra said. A goal is a way to make sure you don't wind up someplace other than where you want to be.
At its simplest, a goal is just something you aim for. But goals are powerful contributors to successful business growth in several ways. To begin with, the process of setting goals forces you to think through what you want from your business and how growth may-or may not-provide that. This process helps suggest directions for pursuing that growth, which can greatly improve your chances of achieving your goals in the first place.
Goals also give you a framework within which to work. This tends to focus your efforts by helping you rule out actions that won't contribute to achieving the goals you have set. A very important part of that framework is a timetable. Any good goal has a timetable, and that timetable will influence your actions profoundly. For instance, if your goal is to retire by age 50, you'll know that any growth plan with a payoff that won't occur by your 51st birthday is not one you'll consider, no matter how attractive it might otherwise seem.
It's not enough just to have goals. They need to be the right goals and ones that are appropriate to your ambitions and abilities. When entrepreneurs talk about their goals, whether they are for the past year or for a lifetime, the most frequent issue is whether those goals were the best ones to have.
If your goals appear to be holding you back or directing your efforts into unproductive areas, then there is definitely something you can do about it. In fact, setting new goals for yourself and your business is both easy and essential if you're going to grow. When looking at new goals, make sure they have the following qualities:
- Specificity. You stand a better chance of achieving a goal if it's specific. "Raising capital" isn't a specific goal; "raising $10,000 by July 1" is.
- Optimism. Goals should be positive and uplifting. "Being able to pay the bills" is not exactly an inspirational goal. "Achieving financial security" phrases your goal in a more positive manner, thus firing up your energy to attain it.
- Realism. If you set a goal to earn $100,000 per month when you've never earned that much in a year, that goal is unrealistic. Begin with small steps, such as increasing your monthly income by 25 percent. Once your first goal is met, you can reach for larger ones.
- Thinking short- and long-term. Short-term goals are attainable in a period of weeks to a year. Long-term goals can be achieved five, 10 or even 20 years from now; they should be substantially greater than short-term goals but should still be realistic.
- Income. Many entrepreneurs want growth to provide financial security. Consider how much money you want to make each year when planning your growth.
- Lifestyle. This includes areas such as travel, hours of work, investment of personal assets and geographic location. Are you willing to travel extensively or to move if that's what it takes? How many hours are you willing to work? Which assets are you willing to risk?
- Type of work. Your growth plan may require changes in the type of work you do. When setting goals for type of work, you need to determine whether you like working outdoors, in an office, with computers, on the phone, with lots of people, with children, and so on.
- Ego gratification. Face it-many people want to grow their business to satisfy their egos. Owning a bigger business can be very ego-gratifying. You need to decide how important ego gratification is to you and what size business best fills that need.
- Honesty. The most important rule of goal-setting is honesty. Building a business with your eyes wide open about your strengths and weaknesses, your likes and dislikes and your ultimate goals allows you to confront dilemmas with greater confidence and a greater chance of success.
There's no free lunch when it comes to achieving goals. Any goal you set will require some investment of time, effort and money that will cause you to forego other goals. One way you can figure out whether a goal is going to be worth it is to do a cost-benefit analysis. This doesn't have to be complicated. Simply draw a line down the middle of a piece of paper to create two columns. On the left, list the benefits of achieving a given goal. On the right, list what it will cost you to get there. You can simply count the benefits and costs columns and see which has more, or assign weighted scores to each entry and total them at the bottom. You may not want to let this quick and easy analysis make the final decision for you. And it may sometimes be the nearest thing to a tossup. But even a simple cost-benefit analysis can give you an idea of whether a given goal is worth investigating further.
Creating a Road Map for the Future
The difference between a dream and a plan is that the first simply expresses a desire to be someone or to achieve something, while the second expresses a method for accomplishing the first. If you really want to achieve your dreams, you need a plan or a map that is going to show you how to get from here to there. A good road map for future growth needs to have the characteristics of specificity and realism, just like a good goal. It should also contain benchmarks to measure your progress and tools to measure how well you're doing.
An important part of any growth plan is establishing a way to tell when you have reached important points in the process. These mile markers can be composed of any number of benchmarks. Overall sales revenue is a common one. Many companies recognize the first year they topped $1 million, $5 million and $10 million in sales. Sales is an obvious, important, easily grasped benchmark. You can look at sales growth rates and overall sales volume as valuable benchmarks.
Sales, however, are not the only benchmark. You can also look at benchmarks for such critical variables as number of stores, number of customers and transaction volume. Many industries have benchmarks unique to them. For instance, air carriers think in terms of percentage of seats filled and revenue generated per mile flown. E-commerce businesses measure Web page views and time spent on each page. Your business may be concerned with even more esoteric benchmarks, such as percentage of repeat customers or average sale amount per customer.
Not all benchmarks have to do with growth. You can set benchmarks related to cost savings, error rates, employee turnover and many other aspects of your business. About the only characteristics all benchmarks share are that they should be significant, relevant and measurable.
Establishing Measurement Tools
One of the biggest differences between small companies and large ones is the amount of effort each devotes to measurement. Big firms are famous for generating mounds of reports containing measurements of all kinds of performance data. These reports describing what is happening in a company are handy for enterprises with thousands of employees that may be spread all over the globe but still need to be guided in the same direction.
If you're a one- or two-location venture and you've personally hired all the employees and see them every day, doing a lot of measurement and creating reports may seem like a waste of time. And it probably isn't necessary for small firms to spend as much energy tracking performance as it is for big companies. At the same time, most entrepreneurs go out of their way to avoid paperwork. More so than large company executives, entrepreneurs' decision-making is hamstrung by a lack of adequate information about their companies. Although their intuitive knowledge of their companies may be superior to the grasp exhibited by Fortune 500 CEOs, entrepreneurs could generally do a better job of gathering data about their companies. Entrepreneurs often lack enough data to be able to answer questions such as: What is my most profitable product? What are the traits of my best customers? Which types of promotions have the highest payback?
You will find your growth plan much easier to implement if-along with setting up financing, hiring and other functions to achieve it-you create measurement tools to tell you how you're doing along the way. These need not be overly complex. You need to decide the things that are most critical to achieving your growth objective and then find a way to measure them. If, for instance, competitive pricing is the main thing you feel will determine your fate in the marketplace, you could assign one employee to make a weekly or daily trip to an outlet where your products are sold alongside those of competitors, just to make sure you're not being undersold. It's easy to overdo measurement, spending valuable resources collecting data that isn't useful. But that doesn't mean all measurement is bad.
The value of a goal lies in the way it provides you with a relatively steady, unblinking light toward which to steer in the fog of everyday business life. But that doesn't mean a goal should be as immovable as a lighthouse. You should periodically take a fresh look at your goals to see if they need to be changed or, perhaps, dumped. Changes in your personal situation, such as a desire to spend more time with family, may cause some goals to become irrelevant to your true desires. Of course, the best reason to scrap a goal is because it has been accomplished.
The last thing you need to know about goals is that they are just that-goals. They aren't preordained events that will occur whether or not you work toward them. In other words, just having a goal of reaching $10 million in sales doesn't mean you'll achieve it. Nor should the accomplishment of a goal be considered absolutely necessary to your personal well-being. Some goals are more important than others, but it's not wise to be so committed to a given goal that, if you don't achieve it or it's not all you hoped it would be, you'll be emotionally destroyed. Remember, as that great philosopher Yogi Berra also said, "The future ain't what it used to be."
Excerpted fromGrowing Your Business