Trending Articles

Business

How to Set Business Goals and Why You Need Them

Tom is about to start his own business, a furniture manufacturing business. He knows that the first thing he needs to do is make a plan, but he doesn’t know where to start.

Jane has been developing a betting business for several years. She’s thinking about growing it further: she wants to expand the company and start competing with 22Bet Nigeria and other giants. Jane needs to develop plans for new directions, but first, understand what he wants to achieve by expanding the business.

Let’s find out how to set business goals so that achieving them will allow the company to grow.

What to Consider When Setting Goals

Every business is unique, so there’s almost no universal advice for setting goals. However, any entrepreneur should consider a few basic factors that are sure to affect the development of his company.

Clients and Market Segmentation

First of all we need to understand who will buy your products, goods or order services. From here on, we will call everything listed above simply a product.

Potential customers should be divided into groups as much as possible. This will help to offer each customer the most suitable product for him. Marketers call this procedure market segmentation.

For example, you are going to trade in clothing. Here it is not enough just to choose the men’s, women’s or children’s range. You need to detail the portrait of the buyer. It can be a student (18-25 years old), actively engaged in sports, interested in buying fashionable clothes at a discount. If this is your client, great: bring discounted collections of past seasons, make something like a sports stock store.

The Value of the Product to the Customer

It is important to understand why the customer will buy your product. Here you need to consider not the general characteristics of the product or service, but the benefit that the customer can get.

For example, a businessman should not offer customers clothes made of “warming” or “breathable” materials, but warmth in winter and comfort in summer.

Ways to Promote the Product

No matter how useful the product is to customers, no one will buy it if they don’t know about it. That is why it is important to decide how to promote the product on the market.

The ways of promotion should correspond to both the product and the scale of the business. If we are talking about a small store, you do not need advertising on central television. But to place ads in social networks and paste flyers on the nearby streets – it makes sense.

Interaction With Customers

So the customer heard about the product and is ready to buy it. It remains to organize the sale itself. There are two main options here: offline and online format.

Remote sales, in many cases, save resources. When quarantines became a habitual part of life, many businesses stayed afloat only thanks to delivery.

But not all goods and especially services can be sold online. If you can do accounting consulting remotely, you can’t do that with hairdressing services, for example.

Resources

It’s impossible to organize and run a business without resources. This is primarily staff, equipment, materials and spare cash. In addition, you may also need intangible assets, such as patents or knowledge of certain technologies.

If the business is new, you need to determine what resources are needed and where to get them. It is not uncommon for novice businessmen who find it difficult to figure this out on their own to buy a franchise. In this case, the assets and technology are provided by the parent company, and then the entrepreneur gives it an agreed share of the proceeds.

If the company works, it is necessary to assess what the businessman has at his disposal and what additional resources may be needed to achieve the goal.

Partners: Suppliers, Contractors, Agents

Any businessman buys goods and uses the services of contractors for the business. Often they also promote products through agents or commission agents.

It is necessary to think about which partners to work with and how to organize interaction with them in the most profitable way.

For example, a furniture manufacturer buys boards, fittings and other materials. He can sell his products through furniture stores or open a sales outlet.

If possible, you should try to work with suppliers with deferred payment, and with buyers – on prepayment or with the settlement of the day to day. Then the company’s money will not be withdrawn from circulation for a long period.

Competitors

Every business has competitors who do the same or similar types of business.

It is necessary to assess how they work and what advantages the entrepreneur can offer to their clients.

This can be free shipping, individual selection of goods or services, discounts for regular customers.

Revenues and Expenses

When the owner determines all of the business parameters listed above, he or she can easily estimate revenues and expenses.

For example, when planning revenues, the entrepreneur will proceed from an estimate of the market, taking into basecamp free account the material capabilities of potential customers and the prices of competitors.

Expenses will consist of salaries, raw materials or supplies, advertising, and rent. The businessman will determine all these things when he considers the promotion of goods, the evaluation of resources, and the interaction with clients and partners.

It is clear that income must exceed expenses, otherwise there is no point in engaging in this business. It is possible to work at a loss only for a limited time and in special cases: immediately after opening a business or when launching a new line of business.

But in such situations, you must carefully calculate everything, and after reaching a break-even point the profit must compensate for earlier losses.

How to Set Goals According to SMART Method

When all the basic parameters of the business are defined, you can move on to goal setting. It is convenient to use the SMART method for this purpose. 

Specific 

The goal should be as specific as possible and avoid ambiguous interpretations. This is important, because the objective criteria are already included in the specification.

Measurable 

It is necessary to define numerical indicators, which will tell about the achievement of the goal. This can be profit, revenue, number of new customers.

So, the goal should not be “increase profit and profitability,” but “the company’s net profit is at least $500 thousand, and the profitability (that is, the ratio of profit to revenue) is not less than 15%.

If it is difficult to define quantitative indicators for a goal, qualitative indicators should be used. For example, “switch to a new information system for bookkeeping.” In this case, the goal will be achieved when the old program can be removed from the employees’ work computers without affecting the business processes.

Attainable

A company should be able to achieve the set goal in principle. Here you should objectively assess both your resources and the situation on the market.

If the businessman does not have a new “breakthrough” idea, it hardly makes sense to set a goal of “increasing the revenue by five times next year.

A fundamentally unattainable goal reduces the motivation of the entrepreneur and his employees. Actual results in this case may be even worse than when working at all without a goal.

Relevant

A goal must be consistent with the overall business strategy, other goals already set, and the overall market situation.

Time-bound

It is necessary to define the time interval during which it is necessary to reach the goal. Not just “make a profit of $500 thousand, but “make a profit of $500 thousand in 2022.”

Besides, medium- and long-term goals must be broken down into shorter periods in order to keep track of their achievement. For example, annual profits should be divided by quarters, and each quarter by months.

Review How to Set Business Goals and Why You Need Them.

Your email address will not be published. Required fields are marked *

Related posts