Running a Small Business

Lesson 3: Organization and Planning

Setting goals

Many small business owners plug away in their businesses year after year and, except for vague ideas about more revenue, more customers and more profit, they don't know where they are going and, as a result, they don't get to where they want to be. To make progress, you have to set goals first and those goals have to be the right kind of goals with certain important features.

To get anywhere, you have to know in which direction to go, you have to know how far to go, you have to know when to go and you have to know when you have arrived. To be useful, business goals have to have four characteristics.

1. They have to be attainable - you have to have some idea of how you're going to do the work which will result in your achieving the goal. Making a million dollar profit in two years is not attainable for most small businesses; doubling your revenue might be.
2. They have to be quantifiable - you have to be able to put numbers to the goal. Being happier is not a quantifiable goal since you can't attach a number to happiness. Increasing revenue is a quantifiable goal.
3. They have to have a deadline - without a schedule for achieving your goal, it becomes meaningless.
4. Success has to be measurable - you have to be able to measure how you're doing and be able to confirm when you've achieved your goal.

The easiest and most common goals for a small business are financial: "I want to increase profit by 20% by the end of the year". So far so good - you've got quantifiable and deadline. But how are you going to do it and exactly how are you going to measure success? You could just charge more for your products and achieve a short-term gain in profits without actually helping the business. Or you could increase the number of orders to existing customers. You could also increase the number of orders by getting new customers. What you're going to do in terms of attaining your goals is quite different and will have a different effect on and benefit for the company.

Now you can be more precise: "This year I'm going to generate additional business from new customers which will contribute a 20% increase in profit based on last year's figures." You've said how you'll do it and that let's you check the attainability. You specified a quantity. You've got a deadline. You can measure whether the business is from new customers and whether the profit on those orders reaches 20% based on last year. Now you're all set. In the next sections we'll see how you make sure you get to that goal.

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