For a long time, I found it really difficult to turn vague plans and ideas into SMART business goals. How on earth do you set a target for turnover with no benchmark? How do you set a deadline for that target when you don’t know what’s realistic? In your first year as a sole trader, unless you are fortunate enough to have access to a mentor who can guide you in what is achievable, setting SMART goals is hard.
What I have come to realise is that I regularly set personal goals that relate directly to the performance of my business. We all have something that we are working towards; a new car, a holiday, more time with the family…something that we want for ourselves.
If you’re struggling to set business goals, this can be a great place to start. Setting a personal goal will help to incentivise success and build confidence going forward. Moreover, you’ll be surprised to find that, by breaking it down, setting relevant business goals suddenly becomes a whole lot easier!
Let’s take the holiday as a simple example
You want to go to Spain, next June. Say it’ll cost £2000 for an all-inclusive deal for two people. You buy it on your credit card, and you’ve got 6 months left of 0% interest. So it needs paying it 6 months’ time. Let’s divide the cost into 6 installments of £333.
Business is steady; every month the salary you pay yourself covers your personal costs and leaves a surplus. But it’s not quite enough to cover the holiday installments as well. What figure do you need to earn to cover those installments?
That’s your salary target. What does your sales target need to be in order to achieve that salary? Now we’ve got a business goal. You need to achieve an average of £X additional revenue every month in order to go on holiday next June. How are you going to do it?
Well, let’s work out the average transaction size made by your customers. Based on that figure, how many new customers do you need to gain in order to achieve your sales targets? Alternatively, by how much do you need to increase the average transaction of your existing customers?
You now have a number of targets that will lead you to your ultimate goal. The next stage is to develop strategies to achieve them. In this example, these will relate to marketing and sales. Cold-calling? Referrals? Promotions? These strategies can be broken down into objectives too, e.g. what percentage of the people you call need to turn into customers?
Before you know it, this process of thinking has led you to your SMART goal:
I want to go on an all-inclusive holiday to Spain on 20th June 2013. To do this, I must reach a sales target of £X every month for 6 months, which I will achieve by incentivising existing customers to make referrals, totalling an additional 4 transactions each month, starting September 2012.
Specific, because you have defined exactly what you want to achieve
Measureable, because you have assigned figures in the form of sales targets
Achievable and Realistic because you broke the total cost down into small chunks and developed a feasible action plan to earn that extra revenue
Time-bound because you set an ultimate deadline, as well as monthly checkpoints
By using a personal goal as the basis for a SMART business goal, not only will you be more likely to achieve it but, once you’re holiday is over, you will continue to feel the benefit of this growth and will have a new benchmark for what is possible if you put your mind to it!
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