November 26, 2019 | Grow Your Business | No Comments
Goals, stretch-goals, five-year-plans, targets, and long-term objectives—there are a lot of terms surrounding the future of your business. But how do you keep your eye on the future so you experience realistic (and successful) outcomes?
In business, we define the term targets as our long-term objectives (usually looking five years into the future), and goals as shorter-term objectives (often projecting out about a year). Now, of course, the two terms get used interchangeably, and it’s okay to set big goals stretching well into the future and, at the same time, aim for quarterly targets with shorter-term objectives.
For the sake of clarity in this discussion, though, we’ll define targets as long-term objectives and goals as the shorter-term benchmarks. Today we’re going to talk about targets, as opposed to goals. As you work toward building a successful business, you’re going to need to break down both your goals and your targets into measurable steps toward success.
A great target is essentially a SMART goal but on a big-picture scale. Once you define a big target, you can outline an actionable plan of smaller, more manageable steps, benchmarks, or goals to help you hit those significant target achievements.
Setting Actionable Long-Term Objectives
Ready to start looking to the future?
Your targets need to be measurable and should create long-term benefits in the areas in which your business needs improvement. Again, how will you define success? What numbers do you need to hit? Do you have a revenue target and cash flow target? (…and I do recommend setting cash flow objectives.) Think about it this way: what measures of success are typical in your industry? Is it sales per employee, return on assets, liquidity?
Most companies set a sales goal. For example, many years ago, a large brewery I was working with stated their target was $2 billion in sales in the next five years—a goal created to surpass a major competitor. For their company, the goal was big but realistic. It took into consideration their competition and market and had a clear timeframe for the long-term objectives.
Don’t worry if your targets aren’t quite as lofty. If you think $2 million is a slam-dunk, then set the goal at $2.5 million—not out of reach, but enough of a stretch to create a real challenge.
Your long-term goals must be ambitious but attainable. As Victor Lipman pointed out in Forbes, “Don’t set goals that are unattainable as they’ll likely just demoralize people. ‘Stretch’ goals are one thing, as you can presumably get to them with a good stretch. ‘Ambitious but attainable’ is language I like for these.”
Remember: the driving force behind each of your targets is always the wants and needs of your target market and your current customer base. When it comes right down to it, everything you do in your business is customer-driven, so set targets that reflect your best efforts to keep and expand your customer base.
Aim High with Your Targets
When choosing your targets, keep your team members and company culture in mind. Set company-wide targets for small businesses, but larger corporations should set department-wide or smaller targets. Each of your team members must see their role in achieving the target, so present each target in a relatable fashion. Transparency and team-buy-in are critical to reaching long-term objectives.
When your team invests in your success, you’ll move forward much more smoothly and quickly. If you don’t have the internal resources required to analyze and implement your targets, consider enlisting outside help. (A sharp accountant will typically provide reliable feedback within a couple of hours.)
When it’s time to pick your targets, stay clear and strategic. Each target should include a finite number indicative of success—no fuzzy math allowed. Pick no more than five targets. More targets become unmanageable and unrealistic.
What are your targets?
At the highest level, your targets typically look like revenue, profit, and cash flow. Present your team members with clear, visible, and understandable milestones to ensure your targets are relatable and seen as achievable.
Revenue is generally an excellent place to start. How big do you want to be? Or do you want to define this in terms of annual growth? 3M, for example, states 20% of revenue must come from new products, so their revenue goals are defined in terms of product development.
So, to translate this to your team, state your revenue goals in terms of production: “Five years from now, we will have shipped five million units of Product X.”
Profitability is important. All the revenue in the world isn’t worth much if you don’t earn a profit on it. One of your targets will likely define profitability, either in terms of dollars or a percentage of revenue and cost reduction.
If manufacturing costs are 80% of your revenue, your team may need to hear: “We will be exploring production layouts to reduce scrap rates and lower production times.”
Cash Flow is often more important than profitability, especially if you want to grow. Don’t forget—it takes money to make money. Cash flow is often ignored, but it’s a significant component to your long-term objectives and business success, and frequently one of the constraints to growth.
Remember, you collect money from the customer later on in the sales process (perhaps 30 days or 60 days later). Do you have enough money to purchase and pay for the goods you will sell to your customers? There are additional costs associated with the assets required to run your business (such as a particular piece of equipment you need to manufacture your products or those shelving units you use to display your products), so consider all factors.
Other Measures. These measures might be industry-specific (revenue/full-time equivalent, profit margin, table turns, number of customers), or they might be bank requirements (net worth, % borrowed against assets, the total amount of debt), etc.
This might also include risk reduction goals; for example, “No single customer at more than 20% of sales” – or – “We will have at least two vendors for each product.”
This could also refer to cost reduction goals; for example, “Reduce damaged pieces from 1/1,000 to 1/100,000.”
Additional measures might include expanding your company’s marketing channels through new online campaigns, then measuring the ROI by analyzing the increase in website hits and new purchases made through your website.
Build Off Your Targets in the Future
Your targets aren’t a “set it and forget it” situation. It’s vital that you continuously revisit your targets, track your progress, and ensure you’re on track. Once you’ve set the long-term objectives, break them down into annual, quarterly, and even monthly steps. This will help you ensure you continue to move toward your targets.
There are several ways to build targets. Make targets both achievable and appropriately challenging. You should integrate targets into day-to-day business operations. You can’t grow 50% without investment, so keep your cash flow and revenue projections in sync. Other items impacted by growth are harder to estimate, such as the number of new employees you’ll need, or how much you’ll end up spending on equipment investment. Maybe you’ll need more space, more cars, more desks, more computers—the list goes on. All of these factors impact cash flow, sometimes dramatically, so you must consider these big changes you might need to make or you’ll quickly notice you’ve impeded your quest to achieve your targets.
A quick sidebar for companies in dire financial straits—don’t ignore the elephant in the room. As you’re thinking of long-term objectives, you may realize your short-term situation is precarious. Address the financial issues in all aspects of your overall business plan and strategy with a high sense of urgency. It will NOT get better or go away. DO IT NOW! Ignoring these issues or deluding yourself into believing everything will fix itself? Not going to happen—so don’t bank on it! (Like straightforward tips? Check out my Eight Tips for Great Leadership post.)
Consider each target and the extended timeframe. While five years may seem like PLENTY of time to reach your big eventual goal, you’ll next need to break it down into actionable steps. You must stay clear on what needs to get done NOW, and every step to reach that target in your timeframe.
With careful planning, realistic expectations, and an eye on your long-term objectives, you’ll hit your targets successfully!
Featured and post images licensed for use via Pxhere.