Setting financial goals is not as straightforward as it sounds. It’s easy to make mistakes, especially when setting financial goals for your business for the first time. For instance, setting unrealistic financial goals can only lead to frustration and confusion.
In this article, we will discuss everything you need to know about setting financial goals that you can accomplish as a small business owner. This guide also features examples of financial goals you can use for inspiration.
What are financial goals?
Business financial goals refer to specific financial targets you set as guidelines. It isn’t just about making money. It should be specific to your company’s profit margin, savings, and other key metrics. The goals can be set for short-term or long-term periods.
Why are financial goals important?
Think about running a business like driving a car to a new destination. You will need a map and enough fuel to get to wherever you plan to go. If you’re going on a longer trip, you may have to make multiple gas stops.
Your long-term financial goals are the destination, so your team will know where to direct their efforts. The fuel is your financial resources, while the gas stops are the small-term goals you need to achieve your bigger goal.
Setting long-term and short-term goals will help entrepreneurs make smarter decisions. It can guide you in properly estimating and creating budgets and help you set priorities when it comes to spending, especially if you don’t have a finance manager. In many cases, these financial goals also direct marketing and sales efforts.
How to Set Financial Goals in 6 Steps
1. Think SMART.
A “SMART” goal is Specific, Measurable, Achievable, Relevant, and Time-bound. These are the parameters you should follow as you set goals for your business finances. Define clear objectives and a specific time frame, like increasing revenue by 10% in the next quarter, so you can focus efforts and ensure goals are attainable.
2. Look at your competition.
Analyse your competitors’ financial performance to gain insights and benchmark your goals. By understanding their strengths and weaknesses, you can identify areas for improvement and set targets that position you competitively in the market.
3. Learn from past mistakes.
Reflect on previous financial decisions and outcomes to identify patterns and learn from mistakes. This retrospective analysis will help you set more informed goals, avoid pitfalls, and incorporate lessons learned into your future financial planning.
4. Align your goals with your brand.
Ensure your financial goals align with your brand’s identity, values, and long-term vision. Consistency is vital to maintaining brand integrity, so setting financial objectives that support your brand’s positioning and strategic direction will contribute to overall success.
5. Create clear action plans.
Break down your financial goals into actionable steps. Develop a detailed plan outlining specific tasks, deadlines, responsible parties, and required resources. This structured approach enhances accountability, improves efficiency, and facilitates progress tracking throughout the goal-setting process.
6. Track your progress.
Regularly monitor and evaluate your progress in achieving your financial goals. Establish key performance indicators (KPIs) and metrics to measure success. By tracking your progress, you can make necessary adjustments, stay motivated, and celebrate milestones, ensuring you’re on track to meet your objectives.
8 Financial Goals Examples Every Small Business Should Consider
If you don’t know where to start, here are a few financial goal examples for businesses that you can take inspiration from:
1. Increase revenue by 10%.
All business owners want to earn more revenue. Make your revenue goals more specific by determining how much you want to make within a certain period.
To increase revenue, you will need to make more sales. This is where hiring skilled sales professionals will be helpful.
2. Achieve a net profit margin of 15%.
The net profit margin indicates a business’ financial health or financial success. When the net profit increases, there will be more funds you can keep or reinvest. You may even choose to diversify your funds. Increasing the net profit margin will also reduce the chances of encountering cash flow problems that can put your small business to a halt.
Study your business’ finances and determine inefficiencies that are eating your profit margins.
3. Reduce operating expenses by 5%.
Pull your business expenses for the last year, quarter, and month. Then examine them to see where you can make adjustments to reduce these expenditures. It’s also a good idea to identify and eliminate any unnecessary expenses.
When cutting costs, make sure to start with smaller reductions to make it easier for you and your staff to adjust.
4. Improve cash flow management and maintain a positive cash flow.
Poor cash flow management is a reason 82% of small businesses fail. You can take many steps to improve your cash flow, like negotiating short payment terms, monitoring your accounts payable and receivable, and analysing your cash flow patterns.
By improving your cash flow, your business is less likely to suffer any financial roadblocks that will prevent you from paying your employees on time or keeping the lights on.
5. Increase market share by 5%.
Market share is a measure of the customer’s preference for a service or product over similar services or products. The higher the market share, the more sales you make compared to your competitors.
Make it your goal to become the first business that comes to customers’ minds when they need a product like yours. You can do this by innovating, building customer loyalty, employing a competent workforce, and offering competitive prices.
6. Achieve a return on investment (ROI) of 20%.
To make more money, you need to spend more money. Ensure that your investments contribute to your business’s bottom line.
7. Reduce debt by 10%.
Debt only increases over time. Prioritising debt payments will save you money since you pay less interest. Your business credit score will also increase, making borrowing more funds in the future easier.
Remove all business debt, calculate your debt-income ratio, and then choose which debt you want to pay off first. It’s best to focus on the one costing you the most in interest and fees. Once that’s done, put your efforts into raising revenues or cutting expenses.
8. Increase the average customer lifetime value by 10%.
Keeping existing customers is generally less costly than acquiring new ones. So don’t just focus on your marketing efforts; nurture and build relationships with your existing customers.
There are many ways you can increase your customer lifetime value. Gathering and responding to customers’ feedback can make a huge difference in keeping customers loyal to the brand. You can also offer incentives or rewards to loyal customers.
Accomplish Your Growth Goals with Podium
These days, you can leverage these solutions to achieve the goals you set faster. Podium has many tools that could help you complete your business objectives.
From marketing to payment, Podium has everything you need. For example, you can offer different payment options to your customers using Podium Payments.
And as a growing business, you are always looking for ways to get more customers. Podium webchat and text marketing solutions can surely help you. Webchat features allow you to answer customer queries at any time, while the text tools let you easily communicate with your leads and customers through a channel they use.
Even for managing your reputation, Podium has what you need. The review tool lets you get as much feedback as possible while streamlining review management.
FAQs
1. What are the types of financial goals?
Financial goals can be short-term, mid-term, and long-term. Short-term goals can be reached within a year, while mid-term goals may take up to five years to accomplish. Long-term goals often require even more time, usually over five years.
2. What are the four financial planning goals of a firm?
The four most common goals in a firm’s financial planning are liquidity, profitability, stability, and efficiency.
3. How to set SMART financial goals?
SMART goals are Specific, Measurable, Attainable, Relevant, and Time-bound. To set SMART financial goals, ask yourself these questions:
- In specific terms, what are you trying to achieve?
- How will you track your progress?
- Is your goal doable?
- Will your current situation allow you to achieve your goal?
- When do you expect to meet the goal?
