When you embark on a journey, you need a destination. Without something to key into the GPS, you’ll find yourself travelling aimlessly – how can you get where you want to go when you don’t have an end goal in mind?
So it is in business. Your company will be more driven, purposeful and more likely to succeed if it locks onto a destination and drives toward it. And perhaps the most important of these targets come in the form of business financial goals.
What is a business financial goal?
Financial goals for a business are tangible economic objectives that a company can aim for, whether in the short term or the long term, they help the business achieve broader organisational goals.
In order to survive, your business needs to be financially self-sustaining. In order to truly succeed, it needs to achieve a continually growing profit margin. Financial goals help to ensure the former and make possible the latter.
Business financial goals take many forms. They can be decidedly short-term and tangible, for example, saving money to buy a piece of equipment.They can also be longer-term and more numerical, such as achieving a certain profit margin over the course of a financial year. But one thing that all great business financial goals have in common is that they’re clear, measurable and achievable.
Why are financial goals important?
Setting goals is an incredibly important habit in business and it’s all the more important when those goals are financial, as the success of your business is inevitably measured by the numbers it achieves. Let us explain a little further.
They help you create a plan: Just as logging a destination into a GPS will help you to find the best route, setting financial goals will help you to create a plan to achieve them. A goal gives you the impetus you need to improve, innovate and push forward.
They allow you to track progress: With something solid to aim for, you can measure your success in increments, tracking your progress step by step. If your goal spans a calendar year, you’ll ideally be a quarter of the way there by the end of March.
They force you to prioritise: As a business leader you need to hold a number of balls in the air at any one time. It can often be difficult to know what to focus on, but working towards financial goals will help to clarify your priorities and also make you more accountable.
They give you cause for celebration: There’s nothing more satisfying in business than achieving a long-held goal. When you do, give yourself permission to celebrate!
How to set financial goals
Your business needs financial goals, so how do you set them? Here are some starting points.
Zoom out: Take a step back from the day-to-day and take a longer-term, more objective look at your business. Figure out where you want your business to be in the future, and what it needs to get there.
Prioritise: Sort through these needs and wants, separating the short-term from the long-term and the achievable from the pie-in-the-sky. Focus on the small and simple wins first, as this will build momentum. Identify SMART goals:
S - Specific: Clearly defined, unambiguous, transparent and understandable to all stakeholders.
M - Measurable: Based on hard numbers and metrics that are relevant to your goal and that push you toward it.
A - Achievable: Your goals should be challenging – you should be aiming high – but they also need to be attainable. Assign the goal to a specific team or individual who can drive the effort.
R - Relevant: Always keep your long-term vision in mind, and ensure all goals drive you toward that endpoint.
T - Time-bound: Create a clearly defined timeline that will keep you on track and create urgency. Set a start date, an end date and key milestones along the way.
Budget: Your budget ensures that you meet your financial goal while spending at appropriate levels. Gain a deep understanding of what you can afford and what you need to achieve your goals.
Monitor: With your budget in place, keep track of your progress. Create smaller, more achievable milestones that guide you toward the greater goal. Hit them religiously.
10 business financial goal examples
Now that we understand the what, the why and the how it’s time to develop the actual goals. Some inspiration can be found in the following list.
Increase sales/revenue: Perhaps it’s an obvious place to start, but more sales equal more revenue, which in turn equals a growing business. Setting a goal to sell more of your products and services will compel you to find ways to market, operate and recruit better.
Optimise pricing: Getting pricing right is about balancing the price with the number of sales made. If you sell a commodity, you should set your price at a similar level to your competition. If you sell a unique or premium product/service, you should set it as high as customers are willing to pay.
Reduce expenses: This goal aims to cut any wasteful and/or unnecessary spending while retaining your current revenue productivity.
Improve productivity: In fact, why retain productivity when you can improve it? Set goals that will make your business better, faster, stronger, or all the above.
Increase profit margins: After you sell a dollar’s worth of product or service, how much do you get to keep after all costs are accounted for? A petrol station might be left with a handful of cents, a luxury retailer might keep 90 cents or more. Whatever your starting point, set a goal to increase that number.
Save for a significant purchase: A common financial goal for both businesses and individuals is to save with a purchase in mind. Having such a clear endpoint can be hugely motivating.
Develop a war chest: A war chest is a pile of money that can be used when times get tough. An example: if you have enough money set aside to keep your business running without revenue for 12 months, you’ll be able to navigate the stormiest of economic seas.
Forecast cash flow: Cash is king in business. Set a goal to forecast cash flow, to gain a better handle on the liquidity and general financial health of your organisation.
Make smart investments: You gotta spend money to make money. Ensure any investment that you make in your business will ultimately contribute to its bottom line.
Increase investment returns: Speaking of investments, work to quantify the return you realise from any spending. Armed with that information, you can identify areas where you could potentially increase ROI.
Whatever your financial goals, Square’s complete suite of eCommerce products is ready to help you get there. From marketing to invoicing, loans to customer loyalty, there’s a Square solution built to meet any financial objective you might be aiming for.
If you’re ready to up your business finance game and set goals that light the path to business success, we’re ready to help!