How to Set Realistic Financial Goals for Your Small Business
Small business owners know that they need to set financial goals to keep their business on track. However, to be successful, the goals small business owners set should be realistic and it’s important that entrepreneurs take consistent steps to help themselves and their staff achieve them.
The following are six tips to help small business owners set financial goals that align with their business strategy.
Make Time to Set New Goals & Adjust Current Ones
While it can be easy to get caught up in the day-to-day activities of your business, your efforts won’t be as impactful if you don’t regularly make time to set new goals and ensure that your current goals still make sense. Even scheduling a couple of hours at the end of each month for this activity can make a difference. You’ll want to review your financials and ask yourself what’s working and how you can make improvements.
Set S.M.A.R.T Goals
Effective goal-setting requires more than writing down your hopes for your small business. You can get the most out of your goals by making them S.M.A.R.T., an acronym for goals that are specific, measurable, attainable, realistic, and timely.
The type of goals you make for your business will largely depend on whether it’s a new or existing business. If you’re just starting off, you’ll want to research financial data about the market, while someone with a more established business will need to make goals based on their historical financial information. Setting S.M.A.R.T. goals with this information in mind will help you determine where you’ll need to be financially in the short- and long-term.
Know Your Numbers
As a small business owner, it’s important to know basic accounting principles. This type of knowledge is a tool that allows you to understand the narrative your financial data tells. When reading financial documents, such as an income statement, you’ll want to be able to identify how each line item impacts your overall financial picture.
If you’re not familiar with accounting principles for your business, a Certified Public Accountant (CPA) may be able to help. A CPA can also help you make tax-efficient decisions that support your business in the long-term. For example, a CPA may make suggestions about the age of certain equipment you buy or use because depreciation can influence the amount you pay in annual taxes.
Once you’ve identified the best goals for your small business, it’s critical that you execute what’s stated in your plan. Whether your goal is to bring in more revenue or reduce expenses, you won’t be successful unless you implement actionable measures to help you get there.
As you’re carrying out your business strategy, you can rely on your team of small business advisors, including your accountant, insurance agent, and banker. These professionals can provide the guidance you need to stay on track toward your financial goals.
It’s a good idea for small business owners to have a way to pull financial information on an as-needed basis. Accounting software is one tool that can help small business owners monitor their cashflow. The type of resource you choose should allow you the option to build reports, which can help you compare and track your progress more easily and frequently. To get the most out of your goals, you’ll want to review this information on a consistent schedule. This is because someone who documents their progress month-by-month will be able to identify opportunities and make improvements to their business strategy more quickly than someone who documents progress every six months.
Don’t Get Comfortable
It’s important to avoid becoming complacent after you’ve set financial goals for your small business. While anyone can set goals, change won’t occur unless you keep up with the strategy you’ve created for yourself. Additionally, experiencing a financially good year doesn’t promise financial success for the following year. When you’re setting goals for yourself, you’ll want to establish a plan for the future in case your small business experiences challenges. For example, setting some of your profits to the side can help you offset potential financial challenges in the coming year.
Setting realistic goals for your business shouldn’t be an activity you only do once. You’ll want to regularly set time to review the progress you’ve made and determine where you stand in pursuing your goals. At that point, you’ll need to make adjustments if you want to welcome positive change into your small business.
To learn more about how PlainsCapital Bank can help support your small business, call us at 866.762.8392 or visit your local bank branch today.