Small businesses come in all shapes and sizes, but the measure of success is still the same: Profit. Turning a profit takes meticulous planning and an understanding of a company’s consumer base. Since many small business owners specialize in areas other than finance, this can become a unique challenge.
A financial strategy can solve many issues and it starts by setting measurable financial goals. The right goals can help an owner break down their financial metrics and highlight areas to cut costs and increase revenue. If you’ve never set financial goals for your business, here are three reasons why you should in the new year.
Why Should You Set Goals for Your Small Business?
1. Goals Increase Your Knowledge of Finance
If finances aren’t your forte, setting some simple, actionable goals will help you become more familiar with how finances work. And that knowledge can go a long way. For example, what are some expenses that your business faces each month? Utilities, merchandise, payroll, rent? Set a goal to find out what they are and decrease their cost to your business over time. It’s an easy goal to set, easier still to measure, and gives very clear results.
These sorts of goals highlight challenges and provide a plan to improve upon them. And even if you’re not well-versed in financial theory, you’re using your finances to improve your business.
2. Goals Help with Branding and Give the Company Direction
The right goals can help you examine your own brand and the direction of your company. For example, what demographics might be interested in the product that you offer? Studies show that different demographics display changes in purchasing behavior. Those sorts of questions will have a huge impact on your finances.
Setting goals to answer those questions and appeal to your consumer base can influence your branding and the direction that the company moves. Are you committed to becoming visible within the community? Set a goal to work with charities – potentially even setting aside money to donate. How do you effectively reach out to your consumers? Set a goal to measure customer interaction online and see how it affects your bottom line.
3. Financial Goals Incorporate Everything Your Business Does
One of the biggest reasons small businesses fail is a lack of startup capital. That should show you how important financial management is to the health of a business. From advertising and marketing to building a pleasing shopping experience, it all comes back to financial planning.
The right financial goals will help you set budgets for all the different things that your company needs to succeed. You can set goals for hiring employees, for example. By measuring what you need from your employees to remain successful, you can also give them a better idea of what the business is trying to accomplish.
The key to planning financial goals is to make them specific and easy to measure. Too many variables can hinder your ability to make positive changes. But with the right goals in place, you can simplify your business and continue to grow.
Alex Briggs is a contributing author for Whalen Private Wealth.