Wednesday, 27 July 2016

Goal Setting Part 1

Business-Planning-Goal-Setting-Resized.jpg31st December is renowned for being the evening when it comes to setting goals, and waking up to a whole new ‘you’ to kick off the New Year. But what about the slightly-less-celebrated financial new year?  As 30 June brings the year to a close, it can be the perfect time to really look into your business performance and set some goals to reach for the next financial year.

While the concept of goal setting is familiar to everyone, its value is often greatly underestimated. By giving yourself a goal to reach, you’re making a commitment to do something better. Some of the common goals we hear from our clients include;

  • Creating wealth and establishing financial security
  • Creating work-life balance
  • Reducing personal and business debt

When trying to determine your overarching business goal, take the time to really evaluate:
  • Where you are now?
  • Why you are there?
  • Where do you want to be?
  • How do you get there?

Ask yourself why you wanted to establish your business in the first place.  Anyone can make a grand sweeping statement and say that’s their goal, but does that goal really have meaning when there’s nothing substantial behind it?

Recognise and evaluate the real information that your financial statements give you.  Take the time to understand what those numbers mean both for your current performance as the indicators towards where you can improve.  Taking on board industry averages and benchmarks, as well as Key Performance Indicators (KPIs) will give you a solid grounding for your goal setting.

Here is a quick checklist of all the best things to keep in mind when trying to establish your goals:

  • Make sure your goal is quantifiable – a goal that cannot be measured doesn’t assist in giving you any indicator of performance or progression.  When determining how to measure your goal, be specific about the results you want to achieve.

  • Create a time limit for when you want to achieve your goal.  Having a time frame in which to achieve your goal provides focus towards what you really want.

  • Make your goals challenging, but also realistic.  You want to continue to push yourself and your business to improve, but setting completely unattainable goals will only demotivate you and your staff when you fall short.

  • Make your goals your own.  Above everything else you must be honest – create goals that are true to you and what you really want.  In order for goals to be achieved, they must fall in line with your values and reflect you as a person.  Falsifying goals or waiting for someone else to create your passion will never work long-term.

  • Become accountable for the goal you have created.  Write your goal down and share it with your staff members, friends and family.

  • Once the overall goal has been determined, it’s time to start planning how to make your goal into a reality. What actions need to be taken on a daily, monthly and/or quarterly basis to make these goals happen?  Small short-term goals will help to create a path, as well as maintain focus and motivation towards the long-term goals. To plan your short-term goals, they can be broken down into two categories – performance and process.

    Performance goals are the benchmarks you need to reach to ensure you are on track to your overall goal.  The best way to achieve these is to break them down into short- and medium-term performances as well as categorise them in line with your determined KPIs.  For example, if your annual goal is to increase sales by 24%, then your performance goal can be to increase sales by 2% per month, or 6% per quarter.

    Process goals are the actions necessary to reach the performance goals. In the above example, what needs to be done on a daily basis to ensure there is a 2% growth in sales for the next month?  It is imperative that the processes are measured against the performance goals on a regular basis, as this is the only way to know if your processes are appropriate to your overall goal.  Process goals, although small, are by far the most important component in your goal setting. The reality is, if you can nail your processes, then you’re on track to your overall goal with very little additional planning.

    Goal setting is an invaluable business tool and something all of us here at Vivid Chartered Accountants embrace personally, and encourage our clients to take on.  Not only does it give you something to work towards, it creates a clear pathway to keep you moving in the right direction.  By evaluating, understanding and planning what you want from your business in the long-term, you will see yourself exactly in the position you want to be.

    Stay tuned for our next instalment - Goal Setting Part 2