When drafting a business plan, it is absolutely necessary to set goals. A goal is an outcome or deliverable that can be quantitatively and/or qualitatively measured. This means you can tell if you succeeded or you failed. Your goals are the deliverable in a contract with yourself and with any investors.
Many businesses fail to establish measurable goals. This often leads to shifting strategies and loss of direction. Or, they move too slowly without a sense of urgency. Or, people get frustrated and angry.
Example: start an auto parts business
Is this goal achieved:
- When you complete a business plan?
- When you file articles of incorporation with the Secretary of State?
- When you sell your first part?
- When you make a profit?
Like the mission statement of a business, a goal should be short and easy to understand. However, it should also be clear when the goal has been attained.
Example: manufacture and sell 1,000 widgets within five years with a profit margin of 20%.
You have failed to meet your goal if you:
- Never complete development of the widget
- Fail to sell 1,000 widgets
- Take more than five years to sell 1,000 widgets
- Earn a profit margin less than 20%
If you take investment money, an investor will want to know the projected rate of return on their investment. 5%, 20% or 100% per year? Cash exit in six months, one year or three years? This is their goal. Does it match your goal?
What is your goal? Each principal in a business looks at the business as a way of meeting their personal goals:
- Provide a house for your spouse and kids
- Save enough money to retire
- Put money on the table until you can get a real job (9 am to 5 pm)
When two or more people start a business, sometimes their goals are in conflict. One may be looking for a ‘lifestyle’ business that pays the bills and frequent trips up the mountain to go skiing. One may be looking to grow the business quickly and sell it in a flip to a larger business. However, this conflict is not obvious unless all of the principals sit down and candidly talk about their personal goals.
By setting goals for a business, you can also determine when the business should be shut down if it is failing. This would be a minimum goal, which if missed, will trigger an already established process to move on to the next opportunity.
You cannot get anywhere if you do not know where you are going.