It goes without saying that every business owner wants to be successful. However, what it means to achieve success is quite a vague notion. Businesses must define and deconstruct their long-term goals to be successful. SMART goals for businesses allow you to convert your abstract ideas of business success into tangible, concrete, and achievable targets.
In today’s blog, we’ll go through how SMART goals work and why your business should consider them.
What are SMART goals, and why are they important?
SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound. Based on these parameters, goal-setting becomes much more efficient. SMART financial goals give you a clear picture of what you want to achieve, how realistic it is, whether it aligns with your broader business objectives, and how long it might take.
Let’s examine what each of these elements means individually
Specific
To make your financial goals more specific, you must think about the who, what, where, when, and why. The devil is in the details when it comes to setting goals. If you don’t sufficiently examine your goals, you may encounter unexpected problems, sending you back to square one. To avoid the pitfalls of planning, consider the following questions:
Who has involved in financing this project? Who do I reach out to for additional funding?
Where should I start this project? Where will it end?
What am I trying to achieve? What resources do I have at my disposal?
When can I start seeing results? When do I need this done by?
Why am I trying to achieve this? Why is this goal important?
After working out the specifics, you’ll have a clear idea of your goal. For example, “I want more revenue” is an unspecific goal. A more specific example would be “I want to increase my sales revenue by 20% in the coming quarter.” To take it one step further, you can ask yourself, “How?” and then make it more concrete: “I want to increase my sales revenue by 20% in the coming quarter by securing an equipment financing loan and upgrading the plant machinery.”
Measurable
A goal without a measurable outcome is like a sports competition without a way of keeping score. In the business world, numbers are essential. Having a quantifiable element to your financial goals will help you gauge your progress re how you are doing, what needs improvement, and what you have accomplished. So how can you measure your goals?
Metrics and analytics are an efficient financial management tool and an excellent way to measure success. You can chart your organization’s performance through easy-to-read infographics using key metrics such as liquidity, profitability, and revenue growth. Once you know how teams are performing, you can reward high-performers, intervene in low-performing teams, and address problems seamlessly.
To further break down performance, you can set monthly Objectives and Key Results (OKRs) for your teams. Four to five measurable key results should follow each objective. Measure each Key Result on a scale of 0-100. Depending upon the outcomes, you can adjust your short-term targets to suit your long-term goals better. This will help you improve your bottom line without over-burdening your employees.
Keep in mind that communication is vital when striving to achieve your goals!
Achievable
Before you confirm a target, make sure that it’s achievable. The reason for setting SMART goals is to avoid the disappointment of failing to achieve your business objectives.
This does not mean setting easy targets, as you need to challenge your teams to achieve organizational growth. However, there needs to be a balance, which is why achievability is a crucial element of SMART goals.
Achieving this balance can be tricky. You’ll need to understand your teams’ existing skills and capabilities as well as their growth potential. Utilize business analytics and accounts to conduct in-depth research, or hire a professional for expert help. Once you have the findings, you can set goals that are both formidable and attainable. Building on the previous example, a 20% growth in quarterly revenue is a realistic target; however, if you set a goal of 80% growth, you will likely demoralize your employees before they even set out to achieve it.
Relevant
Creating a business is like embarking on a journey. If you don’t want to get lost, you should regularly check your compass to make sure you’re moving in the direction you want.
Making sure your goals are relevant to the overarching organizational objectives is another important aspect of SMART goals. If your plans are relevant, you’ll continue to progress toward your intended destination. However, if your plans are irrelevant, you run the risk of losing your bearings, resulting in inefficiency and revenue loss. For example, if your business has a short-term liquidity problem because of a low receivables turnover, a relevant plan would be to apply for invoice factoring.
Time-Bound
Stephen R. Covey famously said, “The key is not in spending time, but in investing it.” There’s only so much time a business can invest in its many aims and objectives. For this reason, it’s immensely vital to position each goal by a relatively fixed time-frame. This will help you gauge how much the company can achieve each quarter and prioritize some goals over others. For example, if you have an unfinished project nearing its projected deadline, you can focus your resources to complete it on time. If you require additional finances and have exhausted conventional options, you can apply for alternatives such as Merchant Cash Advances or a Business Line of Credit.
Conclusion
Ultimately, SMART financial goals distinguish average businesses from outstanding ones. Having a clear and realistic picture of your targets is essential to organizational growth. Additionally, when you know what your targets are, you can tap into the relevant resources to meet your financial requirements.
Targets must be measurable and time-bound to quickly measure and track progress, and make necessary adjustments. Ensure that your goals are relevant to your business objectives and realities so that you can prevent mismanagement and organizational inefficiency.
