Reviewing your business goals
The start of a new year is a good time to reflect and take a fresh look at your business strategy and the direction you want to take over the coming year.
This could be particularly important in 2014 as this year is tipped to bring strong growth opportunities for many businesses. Firms that prepare now will be in a good position to catch the growth wave and come out the other side stronger and better equipped to succeed in future years.
Effective planning and goal setting is essential to help businesses gear up for success in 2014 and beyond. But it's important to test the viability of each goal you set, to see how it will impact different areas of your business.
For example, a business owner may set a goal to increase sales revenue by $120,000 over the next 12 months. This can be tested by asking the following questions:
- Will our current marketing strategy attract enough customers to generate the increased sales? This may be a good time to look at other marketing options, including updating the website or establishing a social media strategy.
- Do we have enough staff to cope with the added workload? This is a good time to review your operating systems and streamline work processes. You may find you don't need more staff straight away, just a more efficient way of doing things.
- Do we have sufficient stock or resources to cope with the increase in sales volume? This may be an opportunity to invest in new technology or equipment. For example, if you are delivering or transporting products, you may need a bigger van or even a second van.
- Can we fund the additional working capital that may be required to achieve our growth objectives? Doing a cash flow forecast will help you determine the level of revenue you'll need to generate to cover your costs and also alert you to possible cash flow shortfalls. It's better to test your assumptions at the start, rather than run out of cash.
If you supply products and services on invoice, this is a good time to review your payment terms. Be selective over who you offer credit to and manage your debtors. Statistically nearly 90% of business failures result from cash flow problems, yet two-thirds of businesses were profitable when they failed. Sales have no value until you get paid.
Putting a plan in place will give your business focus for 2014 and perhaps a competitive advantage. Statistically, only 10% of business owners have specific written goals, and it's no surprise that they achieve higher sales and profits than those who don't.
Here are some top tips for New Year business goals:
1. Write them down
It's no use keeping goals in your head: write them down and keep them where you can see them. Doing so helps you clarify your goals, and studies show that you're 25% more likely to achieve them if you write them down. You may also want to display them where your staff can see them.
2. Be short, sharp and specific
If your goals are too vague it's hard to commit and you may never know if you've achieved them. Keep goal statements brief and specific. Instead of writing "We'll be more successful at selling", try: "We'll increase sales by 12% each month for the next five months". Numbers and dates make your goal more real and motivate everyone to achieve it.
3. Make them challenging - but not impossible
Break your goals into achievable bite-size chunks, setting short-term and medium-term targets as stepping stones towards your long-term goals. This will make it easier to keep yourself and others motivated as you get closer to achieving that big goal.
4. Set a deadline
It's not truly a goal unless it has a deadline. Without one, you have forever to achieve it and you may never get there. If fact, without some time pressure, you may even find it hard to start. Human nature often leans towards putting things off. As in many fields, there's nothing like a deadline to focus the mind.
5. Measure performance
Choose goals you can monitor and measure. If you can't measure it, you won't be able to work out how close you are to achieving it.
6. Share them with others
Share your business goals with your advisors and possible strategic or joint venture partners so they can offer their feedback and assist you in achieving them.
7. Review them regularly
Many business owners write their plan and file it thinking "now that's out of the way I can get on with some real work". Your business plan enables you to continue working on your business, not just in your business. It should be a working document that you use to test your progress and review and update as required to keep your business on track. You may even find that you change or tweak some of your goals as circumstances change.
Fred Ohlsson is ANZ's Retail & Business Banking managing director.