How to set business targets: plan to achieve more in 2010
Want to do better and work more efficiently in the year ahead? Here's how.
What constitutes success or failure for the performance of your business in 2010? For all of you, profit margin should be one factor. Beyond that, it's likely to be any combination of achievements: establishing and growing revenues, orders, customer numbers, market share; the launch of new products, lines or stores; structural growth; new funding; and then a set of personal objectives.
Whatever you're aiming to achieve, you'll have no way of knowing how close you've come unless you set clear targets and measure how close you've come to hitting them.
Why you should set targets
Of course, the purpose of setting targets goes far beyond a simple benchmark to dictate if 2010's been a job well done or not. Targets provide a structure to constantly assess the performance of your business.
At the top level, targets should crystallise your vision for the year. Below that, they provide a way of breaking that vision down to outline what needs to happen to achieve it: at what rate you should expect to see progress (quarterly, monthly, weekly targets etc), and which departments and individuals or functions of your business are responsible for what.
Targets create structure. You shouldn't be able to set budgets or allocate resources until you've indentified exactly what your objectives are for every part of your business.
You should be able to stop and see if you're on track at any point if you have targets in place across your business - and if you're not where you should be, you can quickly analyse where the problems lie. You'll also be able to identify areas that are flourishing and present greater opportunity more quickly.
Christian Arno, co-founder of translation service Lingo24, creates targets for 'almost every aspect of the business'.
"It clarifies to every individual in the company exactly what is expected them in hard numbers. It's measurable and it means you've got something on which to base rewards, which is in the interest of the business and the individual."
Reward is another crucial element of setting targets. The sense of working towards something builds camaraderie and fosters determination. Getting the bubbly out in honour of smashing yet another target revitalises morale.
Achieving targets also promotes a sense of ownership among employees - particularly if you tie pay to achievement, as Arno does. "It's like our employees have got their own little business within our business, and they're trying to hit goals for their business."
Targets for the immediate future help you plan for subsequent years too. You can measure actual performance against the objectives you set, and start spotting seasonal trends. This end-of-year analysis allows you to lay out your next set of targets in a more informed way, with a set of data to work from and, hopefully, improve upon.
Before you start
Targets don't just have to be about growth and sales (though they often are). You could work on training, employee engagement, research expenditure versus return, press coverage, brand awareness, customer loyalty - the list goes on. Assess your current situation thoroughly - a SWOT analysis will help - to establish which areas of the business you need to focus on in the next 12 months to thrive. Or, indeed, your ambitions for all areas of your business.
Breaking down any bigger ambitions you have for the next few years into year-by-year goals will obviously be a good starting point, but you also need to hone in on the specific parts of the business that need attention. Think of the way the different cogs in your business jog each other into motion. If you want more sales, you may need to improve marketing and website visits, so you'll need to set targets for those to reach on overall aim for business growth.
Your targets should all be 'SMART', whichever area you're focusing on. That means each presses all the following buttons:
S: Specific: use hard numbers and definitive goals rather than fluffy aims, and focus on one part of the business per target. So, say, 'I want to see sales increase by 10%' rather than 'I want to see the business grow'.
M: Measurable: make sure you can measure your goal. Use percentages or unit numbers or another real measure. This allows you to assess performance and will show you precisely when a target has been hit.
A: Achievable: over-ambitious goals can be incredibly damaging to morale and plans. Make sure targets are within reason.
R: realistic: only create goals that you can achieve with the resources you already have.
T: time: set deadlines for each objective.
How to set targets as a small business
The way you decide on the exact numbers needed differs for new and established businesses.
As a new business, you run the risk of feeling very much like you're plucking figures out the sky. You have no sales history, and no idea really of how much you'll be able to achieve, despite what your business plan may assert.
Virginia Raemy, founder of six-month-old jobs site TalentPuzzle, investigated her sector to get a feel for what might be realistic. "We looked at what competitors were doing to give us an idea of how many [job] placements to expect." You can also look at Mintel or other market reports, and find similar businesses' annual finance reports on the Companies House website.