This is a guest post by Jessica Oman.
Setting clear business objectives is often an exercise in frustration. It’s easy to pull numbers out of the air, or say you’re going to double revenues or hire five staff this year — but it’s much harder to explain how you’ll accomplish those objectives, and what other things need to happen in your business for you to get there.
And if you don’t set measurable objectives, it’s really hard to know if you’ve even gotten there!
Of course, real and measurable outcomes wouldn’t be part of the Prosperity’s Kitchen manifesto if they weren’t essential to your wildly successful business. Here are five ways to outline practical, valuable objectives for your business plan, so that you, your staff, and lenders and investors understand how you define “success.”
1. Before committing to the short-term, consider the long-term.
Perhaps your first year objective is to earn $100,000 in revenue. That’s a specific outcome, and an achievable one for many types of businesses. But have you considered your first year in the context of your next five? Would you try to double that revenue in your second year, or grow more slowly? If a 6-figure first year doesn’t put you on track to achieve your long-term goals (whether personal or business), then this objective doesn’t work for your business. So consider whether your shorter term objectives get you one step closer to your long-term goals (this means you should already know what your long-term goals are, of course!).
2. Get someone else’s opinion.
A review of your own writing can never be totally objective. Someone else’s perspective on the objectives you’ve set for your business can be an important reality check. Get an employee, a trusted advisor, an external consultant, or some other smart, straightforward and savvy person to tell you if they think your objectives are realistic and make sense for your type of business. And when they offer their constructive feedback, listen. Make changes. Debate. Stubbornness has no place here.
3. Make sure your objectives are SMART.
Though it’s probably not a new concept for you, it’s worth a reminder that business objectives need to be Specific, Measurable, Actionable, Realistic, and Timely. That is, an objective is a clearly defined target outcome (Specific). You will know if you’ve achieved it, because you can evaluate the results (Measurable). You have the power or control (Actionable) and the time or resources (Realistic) to take the necessary steps to complete it. And finally, it’s an outcome your business will achieve by a deadline that you set (Timely).
Don’t mess with this formula. It works, and that’s why people keep writing about it.
4. Provide context.
Too many entrepreneurs spend five minutes outlining their objectives, sit back and say to themselves, “yeah, that sounds good. Six figures, three employees and gross margins of 70%. Sounds lovely.” These objectives may indeed sound lovely, but what are they based on? Perhaps they’re loosely drawn from industry standards, or whatever the competition is doing. But in most of the business plans I review, the business objectives are based on what the entrepreneur thinks a successful business should look like. They’re not based on their marketing plan. Nor their projected costs. Nor their number of potential customers. Just vague “nice-to-haves” that sound good when you read them out loud.
When you write your business plan, you need to set the context for your objectives so that your readers understand why you’ve chosen these specific things to accomplish. Objectives need to be drawn from thorough market research, a clear marketing plan, and sensible financial projections.
5. Write. Revise. Repeat.
The objectives you have right now might change in three months. They might change tomorrow. They’re guaranteed to change as you accomplish each one. So don’t worry about whether the objectives you’ve set are the “perfect” ones, or the “right” ones. If you’ve developed them from your own research and development work, or in collaboration with a partner or consultant, then they probably meet most of the criteria I’ve outlined above. The key is to write them down, start to work towards them, and reassess them in a few months when you can evaluate how far you’ve come.
People tend to toss their business plans away once they’re written and they’ve received financing, but in reality a business plan is never finished; you’re always tweaking it, checking the numbers, evaluating your targets and seeing if you’ve reached the objectives you created. Trustworthy folks like Mike Michalowicz suggest reviewing your business strategy about every three months. You have to know if you’re on track and if you’re not, you need a chance to correct your actions before your well-intentioned business objectives fall away into the ether.
The reality is, you need to have a way of defining success in your business, and you need some kind of benchmark to evaluate whether or not you’ve reached that success. If you’re using your business plan to attract investment or other financing, this exercise becomes even more important, as a set of clear objectives is one of the best tools you can offer your stakeholders to help them assess your business.
The simplest way to define what success means for your business is to set objectives that you can look back on in a month, three months, or a year and be able to tell whether or not you achieved them. That’s why it’s worthwhile to spend some time crafting your business objectives.
What objectives have you set for your business? Share with us in a comment below.
About the Author
Jessica Oman helps entrepreneurs take their businesses from ‘idea’ to ‘open.’ Jessica launched her business plan writing guide, How to Write a Business Plan to Secure Financing & Launch Your Entrepreneurial Journey, in early 2013. Her business planning & writing firm in Vancouver, Canada, Write Ahead, works with businesses just starting up or looking to grow.