As exhilarating as it may be to set off on an adventure without a plan, any explorer, sailor or business owner will tell you that not knowing where you want to go can be a recipe for disaster.
Setting targets for your business is not just a question of simply stating where you would like to be in a year’s time. Giving yourself accurate targets to work towards involves knowing how you are performing now and having a good idea of how you will be performing in the future.
There is real value in taking some time to make your predictions as accurate as possible.
Setting your business targets is important in a number of key areas:
- Knowing what success looks like
Establishing what you would like to happen means you understand what you want your business success to look like. The company’s subsequent performance against those targets will show you how accurate your view is in the real world.
- Increasing team cohesion
By setting goals that everyone in the company is working towards you can better ensure that everyone understands what they are collectively trying to achieve. These collective goals can then begin to underpin the decisions individuals make on a day to day basis.
- Gaining deeper organisational knowledge
Business-wide objectives can be divided into department specific ones, which get everyone on the same page about how they should be working together in theory.
- The ability to reassess
A by-product of setting yourself a target for a year’s time is that you now also have milestones that you need to have reached in 3, 6 and 9 months’ time in order to complete your goal. If by 6 months your original target looks untenable, you can reassess based on your performance.
Accurately measuring performance
A major part of setting the right kind of business targets is having a realistic idea of how your company is actually performing. Without having detailed knowledge of your performance you won’t be able to set targets or know whether or not you have achieved them.
An important aspect of performance measuring comes in the form of key performance indicators (KPIs). The Companies Act 2006 classifies KPIs as factors “by reference to which the development, performance or position of the business of the company can be measured effectively.”
The KPIs you should choose will depend on your company and your business sector. It is important to bear in mind that KPIs are not synonymous with your business goals, and have much more to do with your business processes. What is it your business does, what does it need to do it and how can your processes by changed so that you can do more?
Many people like to use the SMART criteria:
- Specific to your company
- Time phased
So, an example set of KPI’s for a shop may include:
- Capital expenditure
- Sales (sales per hour or average sale)
- Loss prevention
- Visit to buy ratio
- Customer purchase value (how much money does the average customer spend each time?).
If you wish to discuss setting your business goals and target further, contact us on 01665 710547 or firstname.lastname@example.org.