Part 1 of 7 in the Smart Business Planning series
________________
Setting business objectives
Business objectives are the specific, measurable results that companies hope to maintain as their organisation grows. When you create a set of business objectives, you focus on specifics. This means analysing, assessing, and understanding where you are now and where you want to be in the future.
Get instant value from an objective-setting exercise
You will always reap the benefits of time spent in self-reflection. It’s a lot like getting ready to paint a masterpiece in carefully-mixed oils on a well-stretched canvas: the more time you spend in preparation – examining your work today, identifying what you’d like to achieve tomorrow – the smoother the outcomes should be all round.
However, this exercise does take time. As you define your purpose though, the motivation for doing it should become clearer not only to you but also to people you’re working with, your employees, backers or investors. Clear business objectives are a set of signposts, pointing the way forwards to a successful return on everybody’s investments.
Commercially, clear business objectives can help you to outperform your competitors and explain your proposition better to the market. Operationally, they’re a powerful means of direct communication with your team: what you’re doing, why, and how.
Business objectives in three parts
Part 1 – what you’re trying to achieve
Firstly, what are your actual objectives for the business? It’s useful to note that goals and objectives aren’t necessarily the same. A goal is an outcome, while a business objective is a measurable step that you take to achieve your goals.
For example: you might say, “We want to become the UK’s most popular choice for getting flowers delivered to the workplace”. That’s a goal. It sets a target but doesn’t explain what you want to achieve in a way that can be measured.
Business objectives, on the other hand, look like this: “This year, we want to see online orders of our business-bouquet flowers increase by 23%. We will expand our packaging range to include seven new options. We will develop relationships with new tulip suppliers to bring down the cost of our bulbs by 10%.”
Objectives give you something to work towards. They focus your attention and make sure your resources are directed to appropriate actions. That said, some business objectives might seem to conflict with each other. Long-term growth and expectations about short-term profits may be hard to reconcile, for example.
Objectives can be and should be set at every level in your business, no matter how long you’ve been trading or how large (or small) your organisation is. Business objectives include overall company targets, team objectives, and individual objectives. When they’re created in a way that makes them easy to measure, they become an excellent framework against which to check your progress. By defining objectives clearly, you’ll be in a better position to understand what’s working – what’s not – and what you need to change as time goes on.
Part 2 – why you’re trying to achieve those objectives
Why do you want your business to succeed, overall? There could be several reasons. Some are likely to be obvious – such as attaining financial stability for you and your family, or meeting the expectations of your employees and creditors or investors – while others may combine to have a complex influence on the way you set your business objectives.
Personal goals, for example, might include having the opportunity to leave a legacy for your family. You may want to ‘make a difference’ to a good cause, whether through direct action or a contribution of your business’s profits. Or you may want to just ‘grow the business, because it feels like the right thing to do’, making it more about personal job satisfaction.
On a day-to-day level, clearly-stated business objectives provide clarity and structure for your employees. They are the crucial link for many people between the focused purpose of what they’re doing as an individual, and the outcomes for the company. Measurable and meaningful.
Part 3 – what makes a good business objective?
It’s worth re-stating that goals are general but objectives are specific. When you’re setting business objectives for your company, even if you’re doing it informally rather than through a series of scheduled meetings with colleagues, it pays dividends to ensure your business objectives are all SMART: Specific, Measurable, Achievable, Relevant and Timely.
You may be an owner-operator of a local, small company. Or you may be part of an expanding team, running a business with international aspirations. This ‘Business Bouquets’ example should help to explain the benefits of SMART business objectives.
S – Specific
As a first step in qualifying your business objectives, being specific about what you want to achieve is essential. Quite simply, your business objective must be precise. Ask yourself, “What do I want to accomplish, overall? Who will be responsible for this happening, and what steps will we take to achieve this objective?”
Poor example:
“We want to sell more bouquets to people who work at businesses in our area.”
Good example:
“We want to increase the number of ‘business bouquets’ we sell locally by 10%.”
M – Measurable
Time. Quantity. Weights, measures, and profit margins. Up and down, more and less. You may want to increase the sales of a specific product line, or you might want to reduce the amount of waste being created in the manufacturing process. Both of those outcomes are easy to measure. What’s important is that, as you decide on a suitable measure, you take into account how (and who) will be measuring the outcomes and how often they’ll be measured.
Poor example:
“We want to reduce the carbon footprint of our van-based, flower delivery service.”
Good example:
“We want 100% of our delivery vans to be powered by renewable energy by 2022.”
A – Achievable
Good objectives provide motivation not disappointment. Put simply, ask yourself, “With the resources I have to hand, are these objectives for my business achievable?”
Business objectives should be targets that you can accomplish. Think about the factors that would stop you from achieving those objectives. If you realise they’re too large to measure easily (or they’d be hard to measure over a reasonable period of time to make them effective), then it’s a good idea to break your objectives down into multiple steps.
Poor example:
“Our objective is to be the preferred supplier for every business in a 20-mile radius.”
Good example:
“We want local sales to go up by 70% and represent no less than 40% of our turnover.”
Poor example:
“We’d like everyone in the sales team to increase their sales by 250%.”
Good example:
“We’d like our team to make 20 extra calls each week, converting at least 50% of them.”
Find the right balance
If you set your objectives too far in advance, or too high, then you run the risk of demotivating and demoralising your workforce. It is better to set SMART objectives you can achieve relatively easily than it is to ‘shoot for the moon’ and decrease your chances of success. That said, it’s good to have objectives that push you to make significant progress – personal and professional.
R – Relevant
Nobody wants to put time and effort into defining business objectives as a paper exercise. There must be a real benefit to actually achieving those specific, measurable, achievable targets. Your business objectives need to be relevant.
Plus, to maintain control over your finances, it’s advisable to ensure that all of your business objectives are relevant to your common aims – it’s all too easy to be distracted by ‘nice to have’ or ‘nice to achieve’ rather than ‘necessary’.
Altruistic aspirations can be applauded, but to stay in business, your objectives should be focused on outcomes that benefit the company’s bottom line. Successful business people don’t become successful overnight, but they do make progress by identifying the milestones that will matter in the coming months and years.
Poor example:
“We want a viral post that will get 500 new followers on our social media accounts.”
Good example:
“We want to increase awareness and loyalty by enriching our online relationships.”
T – Timely [time-bound]
When it comes to achieving objectives of any kind, deadlines aren’t usually something we warm to, but they are necessary. Deadlines help us to define success.
With that in mind, business objectives do need to be achievable within a reasonable timeframe. They shouldn’t be set years into the future. Defining that timeframe may, in itself, need you to invest energy in researching which objectives are possible and how you’ll go about achieving them.
Timeframes have a direct impact on an objective being achievable or not. It may be useful to set some business objectives for your business by the quarter, rather than by the month or by the year.
Poor example:
“We’ll be selling more roses next year.”
Good example:
“We’d like our Valentine’s bouquets to all be pre-booked, every year, by January 31st.”
In summary
Commercially, setting clear business objectives can help you to outperform your competitors and explain your proposition better to the market. Operationally, they’re a powerful means of direct communication with your team, as they can help employees to focus on what’s important and manage resources more effectively. With well-defined business objectives in place, you may even outperform competitors by being in a position to explain your company’s longer term proposition more clearly.