How to Set Business Financial Objectives and Goals, Manual

We all know the success rates for new businesses is pretty grim. Perhaps the single-most reason for this is that most business owners don't know how to set realistic goals for their business. Without realistic goals, you and your investors can't predict your ROI [1], and pretty soon the year-end reports sink further and further into the red. 

Some of the most important business finance tips you'll learn are the ones that guide how you set your financial objectives. The financial objectives are integrated in Your Company Strategy Map > Financial Perspective [2] and are most of important parts of your company strategy. Using SMART objectives is a great place to start. Your business's financial objective should be:

VERSION # 1 The born of THE objective.

Specific. Make it a point to move from general statements to specific ones. For example, a general objective might be something like: Increase our ROI from digital marketing. A more specific strategic objective is:

example, draft version #1: Objective:  Hire a professional marketing team to increase the ROI from our Facebook campaigns.

Measurable. Your objective should be measurable. Don't state that you want to reduce your business debt by next year. State that by next year, you plan to reduce your business debt by 30%. Then outline the goals to achieve that objective.

example, draft updated version #1: Hire a professional marketing team to increase the ROI by 30% from our Facebook campaigns.

Attainable. Make sure your objective and goals are attainable. Do your market research. Don't think your business will be the exception to the rule. Plan on it being similar to other, similar businesses and then be pleasantly surprised if you dramatically exceed your objectives.

example, draft updated version #1: Objective:  Hire a professional marketing team to increase the ROI by 20% from our Facebook campaigns.

Realistic. This is not the same at attainable. Attainable means other people have done it. Realistic is more about you. Are you able to accomplish the objective and goals? If you struggle sticking to a budget in your personal life, odds are it will be difficult for you in your business life. Acquire the tools and human support you need so your goals are realistic for you.

example, draft updated version #1: Objective:  Hire a professional marketing team to increase the ROI by 15% from our Facebook campaigns.

Trackable. If you can't track your objectives, goals, and tasks they aren't Measurable (See the Letter M above). You should be able to set benchmarks for every financial goal set for your business so you remain in touch with where you have been and understand where you are headed.

example, draft updated version #1: Objective:  Hire a professional marketing team to increase the ROI by 15% from our Facebook campaigns.

Looks simple but it is only version #1. Objective is not real if it is not supported by goals.

Move on! The more objective versions you pass through the more realistic objective you will make and as bonus you will get an accurate action plan.

 

Remark: you may always outsource it to BIG consulting firms, spent BIG thousands. Better to do it yourself at list first times.

 

VERSION # 2 Objective supported by goals.

You and teams managers have to divide your objective by pieces. Each goal has to deliver result supporting objective.

example, draft updated version #2: Objective:  Increase the ROI by 15%  from our Facebook campaigns.

goal #1. Hire a professional marketing team.

goal #2. Set up the performance control metrics.

etc.

Looks much better. But still need more details to draw realistic objective. Objective is not real if it is not supported by goals.

 

VERSION # 3 Goals supported by tasks powered by performers and managers.

After the list of goals is in place. You and your team have to divide goals by tasks with manager and performers. It is team involved version. In this version you not only crystal your goals > objective you will understand the level of reality to accomplish objective.

Fig #1 Shows an example how you may program you Financial objectives using PaperFree.com Portal

 

Contact Us at PaperFree to learn more business finance tips to reach your company's SMART goals.

 

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References

[1] ROI = Return On Investment

Calculation

Divide the net profit by the investment (resources that were committed). ROI counts by periods.

ROI(Tn)=Return On Investment (%) (Tn) = (Net profit / Investment) × 100

Where

Tn - single period, 3 months, 6 months or 12 months.

Net profit = Gross Profit - Expenses

Investment = Stock + Market outstanding + Claims

Then

Return On Investment = (gain from investment - cost of investment) / cost of investment

 

[2] Strategy Map. It is tool helping organizations to focus on strategy goals and objective. Read more about strategy maps.

 

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Saturday, February 28, 2015