December 16, 2015
An Aim is a tangible/intangible intention, Objectives have measureable outcomes and Goals are short term achievements which make up each objective. Here are my top 4 tips for creating SMART objectives within your small business which will help you to create and realise realistic goals, aims and objectives.
By following these tips, small business owners can set realistic and achievable aims, objectives, and goals, helping them navigate their business journey more effectively and with a clear vision for the future. It encourages a proactive approach to business planning, with a focus on long-term strategies and regular reviews to ensure alignment with the set objectives.
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Be specific, measurable, actionable, realistic, and time-bound.
In terms of specific, make sure you know exactly what it is that you're going to be, or what your exact goals are going to be.
Measurable: over what time period are these going to happen? What are the key performance indicators? How do you know you've achieved that objective?
Make sure that they're actionable: so that you know that you can do them, and you have the time and resources available to you to be able to do that.
Make sure that they're realistic: it's okay to shoot for the moon, but do you have the resources to build a rocket and land on the moon? What's the closest that you might be able to get to that?
Then make sure that they're time-bound, that you're setting specific time-bound objectives, targets that are going to happen in one, three, five, 10 years' time that you can measure against.
This provides a structure to objectives, and is very difficult to falter. It’s a grounding process to go through, to make sure that you're referring to the smart principles every time you create objectives.
It determines the challenges and bottlenecks that your business will face. If you can see that something is not realistic, it gives you the opportunity to ask, "Why isn't that realistic? What bottleneck have we created for ourselves here? "How are we going to over-come that?"
A lot of people, when they create business plans, set themselves objectives, start at zero and then work their way forward three years, one, three, five, 10. I encourage clients to visualise where they want to be by years, ten, five, three, and one, and work backwards to Day Zero. It's a useful tactic for analysing the objectives, or the end objective, and identify what the steps are that you need to reach your end goal.
If your magic number is to sell your business in five years' time for 10 million pounds and for the first four years of your business's life, you've chucked along at 150K, you're not going to be able to sell your business for 10 million pounds. What it allows you to do is say, "If I need to achieve 10, my J-curve looks like five million, three million, one million, and quarter of a million". Work your way backwards to where you are now, it means that you can break down your plans in a series of manageable steps.
10 million pounds might seem like a unachievable step to place the bidding, whereas a quarter of a million pounds in your first year is more manageable and achievable. Break the objectives down into a number of smaller steps in order to visualise where your end goal is going to be.
In the coaching sessions I do, I would say that only 5% of those clients have considered an exit strategy.
For a long time I actually felt an exit strategy was quite a defeatist thing. I've now realised that an exit strategy is actually very appealing to an entrepreneur, because it gives you something to shoot for. When you're considering an exit strategy, it might not necessarily be selling the business. It might be handing that business down to future generations of your family, for example. Or as part of that exit strategy, you're going to go through a stage of growing your business, so you end up with a team, and then a management team, and then a board structure, and then finally, you sell and exit the business.
Typically, what I see is, businesses who have considered an exit strategy have the systems and processes in place, and they've documented to make their business very scalable. And over the long term, that strategy of documenting everything, does tend to deliver value to a business. And it's a legitimate objective.
Like I said, I used to see it as a defeatist thing, now I see it as, "Okay, I can get out of the business in five years' time, and move on to the next project." As entrepreneurs, we're always full of ideas, and always just want to tinker and play with stuff, and move on to the next idea. So, it gives you the opportunity to close down what you're doing now and open up the next chapter in your story.
It also helps you to determine the longer term turnover and net profit that you require to exit your business.
So, if your magic number is a million pounds in five years' time you want to have that sat in the bank for your business, you know exactly what turnover you need for have at that point, and at what net profit you need to have at that point. What multiples you need to get from an investor in order to achieve that exit value.
You've gone through a process of setting up key performance indicators, and set your SMART objectives. However, I see a lot of businesses who don't come back to objectives a year later and measure whether they achieved them or not.
If you're very clear about the fact that you want to exit, if you don't audit and you're falling below those KPIs which you've set, then you're on a course for failure. If you've checked them after a year, and you're slightly below those KPIs, it gives you an opportunity to re-evaluate where you're at.
There’s simple things you can take advantage of, free tools like Google Analyticsto help the revewing process. If your turnover for a year has to be £100,000 and your widgets cost £1000, you know you've got to sell a thousand of those, and you can start to create a sales funnel for your business. You know that it takes 10,000 visitors per month to your website to sell 10 widgets per month, you can use tools like Google Analytics to track how many visitors you're getting to your website, set up a goal conversion at the end of a funnel, then you can see that people land on the homepage. They view your widget, your product page. They click on the Buy Now button, and then they finally check out.
That's called a goal conversion. It means that you can readily check on your progress, and review back at the end of the year how many widgets you've sold through simple free tools like Google Analytics. You can analyse places where you might be underperforming against your KPIs, and this will bring you much closer to your end objectives.
If for any reason you're failing, you can question the marketplace and work out what barriers are preventing you from selling those widgets. If there just isn't a market for it, you can pivot. It means that you can put more effort into your other ideas at a much earlier stage.
Measuring and tracking your business objectives isn’t always about sales; it can also be about meeting standard practices, especially if they impact your sales. So, when reviewing your business performance, track other performance areas like sustainability if you set sustainability goals for your business. You can take advantage of various sustainability reporting tools and data-led software depending on the nature of your business. This way, you can determine if your business is performing in line with or meeting set guidelines.