If you’re like most business owners, you’re probably thinking about your goals for the upcoming year. While it’s important to continue setting goals and planning for the future, it’s also necessary to take a step back and review how well you’ve done in the previous year. In today’s dynamic business climate, it’s important for business owners to reflect (and measure) successes and failures at regular intervals to allow for any course correction where necessary and to maintain forward momentum. No matter what industry you’re in, there are three components of a meaningful goal setting plan.
Review your previous business goals and evaluate your progress
As we start this new year, now is the ideal time to take a moment to review the goals and objectives made for your business the previous year. Assessing which have been achieved and identifying those that need further focus will enable you to create an effective and achievable plan for the following year, enabling you to ensure continued growth and development. Taking this approach provides clarity on what needs to be done in order for your business mission to be successful. Setting aside time now will help identify any changes or adjustments needed so that you can move forward with confidence in 2023.
During your business review, ask your team and yourself what has worked, what hasn’t worked, and what needs to change? How well have you stuck to your original goals? And more importantly, have your goals changed as your business has evolved over the past three quarters?
When reviewing, If you find that you did not meet your goals, don’t panic. Failing to meet your goals can be a difficult and disheartening experience, however by considering what changes might need to be implemented in order to get back on track, you can turn a negative into a positive. While it may require bringing in additional staff and changing up your approach, having a sound plan of action will ensure that you keep progressing towards reaching the desired outcome. Take the time to really assess where improvements need to be made and create an executable solution–this will help you stay focused moving forward and allow you to reach your targets.
Update/set new goals for this year
In addition to looking back, this business review is the ideal time to set new goals for the upcoming year. Think about what areas of your business you’d like to improve and focus on.
When setting these goals, it’s important to be realistic and achievable, especially in today’s changing economy. Try to avoid setting goals that are too ambitious or unattainable, as this can only lead to frustration and stress within your business.
If you don’t know where to start, I recommend setting specific goals based on The Profit First System, developed by author Mike Michalowicz. This system provides a comprehensive guide to business evaluation that is focused not on profit and loss statements or bank balance, but rather on five “buckets.” After decades of successful business consulting, Michalowicz developed this innovative approach to financial management as an alternative to the traditional methods employed by many entrepreneurs. This system allows users to gain insight into the overall financial health of their business quickly and accurately in order to make strategic decisions for long-term prosperity. The Profit First System has been widely praised for its easy-to-follow instructions and comprehensive approach to evaluating businesses. The five buckets are:
- Income – Proactively monitoring income is a sure-fire way to keep track of your revenue goals. Not only is it easy and efficient, catching budgeting discrepancies or high spending immediately, but it can also help identify areas where money can be better spent elsewhere. Making sure to regularly and effectively monitor income is a great strategy for staying financially secure and on track to meet your financial targets.
- Profit – When it comes to making sound financial decisions, setting aside a portion of your income each month is one of the smartest moves you can make. The Profits bucket allows you to do just this—a fixed percentage of all earnings will be put away safely, allowing you to save for a future goal or for any unexpected costs that may arise. Knowing that your money is taken care of gives far greater peace of mind and security than trying to manage funds yourself–avoiding running out of cash mid-month. With The Profits bucket, you’re well on your way to achieving fiscal success.
- Owner’s Comp – Understanding the amount of money that is available to take out of a business as income can be crucial to its ongoing success. The owner income bucket within a business provides an important tracking system, ensuring that owners are aware of the funds available for their own benefit. This detailed approach helps businesses strike the right balance between reinvestment and rewarding those involved with enjoying their own financial rewards. By accurately monitoring this critical aspect of the business, owners gain the knowledge necessary for making sound decisions about how much to leave in the company and how much to draw out.
- Taxes – The Tax Obligations bucket is the perfect way to ensure quarterly taxes are paid on time. By storing the required money before due dates, customers can be certain they will remain in good standing with the IRS. Be sure to check in with your accountant frequently to make sure you are on track.
- Operating Expenses – Set goals for this ahead of time. If you’re finding your cash flow temporarily impaired, there are ways to swiftly increase the stability of your finances. An efficient option is to reduce expenses; this allows you to adjust quickly and gives you more control in a tough situation. Though it may be tempting to look into increasing sales in order to recover, cutting costs is often the most direct route. While increasing sales will eventually contribute to a healthier financial state for your business, reducing costs has the quickest turn-around time, making it a sensible choice when dealing with a pressing financial issue.
Using this system promotes financial discipline allowing businesses to properly assess their cash flow and make better-informed decisions based on meeting their goals, or not.
Create an action plan for how you will measure these new goals
Once you have a good understanding of what you want to achieve, start putting together a plan of action. Create an action plan detailing how you will achieve these goals which includes specific steps and deadlines. Include who is responsible for delivering each step of the plan. Make sure to review and revise your action plan regularly to ensure that it remains on track.
If you do not have a measurement process in place to monitor your company’s financial health and goals, it can be a good time to outsource these services. Put in place the proper team or tools to track cash flow, balance and income statements, OpEx and CapEx, as well as associated KPIs and a visual dashboard of your company’s progress this year. By combining this information, you can make smart, informed decisions to ensure the health of your company – or take corrective action.
About Jennifer Tierney
Jennifer comes from a discipline of Operations, including Finance and Technology. Having worked in operational and financial management for more than fifteen years, Jen has a distinct set of skills and is known for complex analysis of operations, finance, and technology to improve core business strategies. She believes in using technological advances to improve daily functions, along with overall company direction and growth. She is trained in project management and process improvements having participated in several Six Sigma projects, has a Masters in Technology Management, and teaches college business and marketing courses.