Importance of Financial Goal-Setting

[ruener79]

When starting a business you generally have a business plan. I don't know if I heard right, but I heard that while many entrepreneurs make a step-by-step plan on how to go about their business, doing financial goal-setting is often neglected. That is, only a few actually sits down to write about the financial goals on their business. Do you actually have a figure in mind by which you can categorically say you have achieved success in your business or at least a figure where you determine when to cut loss and quit on the business?

 

[djentre]

I think its good to have an idea of where you want to go. I generally have a personal money goal - basically I decide how much of a cashflow I want from a business in x months or years. Also, I do develop financial projections, but I can tell you that those figures are always wrong. I don't generally quit, I find people who manage the business and then I move on.

Its not about numbers, I quit according to time and not money. So, if something should have started throwing out a good amount of cash after x months and it hasn't done that, you shut it down and move on. Or you find someone who will buy it from you.

 

[Vinaya.Ghimire]

Your business starts with an idea, for example poultry farm may be a business idea.
After you have the idea, you set up your goal, for example, your goal may be to sell 100 kg chicken every day.
Once you have your financial goal, you will have to research on how much you need to invest to produce 100 kg chicken in a month.

 

[Spirit]

A lot of new entrepreneurs start out with the big vision and great goals but are less comfortable in talking about finances. It's one thing being passionate about your concept, it's another thing working out the numbers to make the concept viable. A lot of great ideas die because of poor cash flow.

 

[Vinaya.Ghimire]

Ultimate goal of business, finance and investment is money. How much money you plan to make depends on how much you have invested on your project. A project that has just $100 investment cannot make $10000. Thus you should always set a realistic goal.

 

[Trixen]

I am not an expert on business since I am mostly exposed to the medical field. But I have a passion for business so I do my best to be as careful as possible. My financial planning will always cover the whole year. I put everything in my cash flow, estimating the maximum time for my collection and minimum possible sales in a month. By doing so, I can manage my stocks accordingly whether I buy more or less. I'm a supplier, by the way. I am new on this so please bear with me.

 

[Pablo Diaz]

I think having financial goals goes side-by-side with having a business plan. When creating a plan, having a goal to aim for can be a great motivator that helps you stick to the plan so you can achieve that goal if everything goes as planned. I personally think having long term financial goals (+5 years) and short term ones are beneficial to a business and are a practice every business owner and entrepreneur should practice.

 

[rz3300]

Well just like anything in life it comes down to goals. Having your goals clearly defined and set out makes it so much easier to make decisions when it comes that time. If you study management you will read about decision trees and incorporating risk into decision making, and that includes your finances.

 

[Jack Benoit]

Аll businеss оrgаnizаtiоns shоuld hаvе writtеn gоаls thаt аrе pаrt оf thеir businеss plаn. Thеsе gоаls саn dеsсribе whаt thе соmpаny plаns tо ассоmplish in tеrms оf mаrkеt shаrе, grоwth аnd prоfitаbility. Gоаls mаy аlsо bе sеt fоr intеrnаl mеаsurеmеnt likе еxpаnding stаff оr bооsting еmplоyее mоrаlе. Businеssеs shоuld аim tо hаvе gоаls thаt аrе spесifiс, mеаsurаblе, аttаinаblе, rеlеvаnt аnd timеly. Thеrе аrе mаny bеnеfits tо sеtting gоаls

 

[setupdisc]

Always have a goal in mind before you begin. There should be a lot of things written down, and everything you can possibly research in advance should be researched so that you give yourself the best chance for success possible.

Have a reasonable expectation of what you intend to make, and ensure that what you invest and the effort you put forth will be enough to carry you through to fiscal growth.

Some people decide to work for a while in a traditional field or job position to save up what they need and start on a shoestring, while others find that it's possible for them to get the funding they need up front with a business or personal loan to start their dreams and goals on the right foot.

If you have enough to start on a shoestring, then you never need to worry about loans or asking for help later financially. The only exception to that is if there is an emergency or there is a need for immediate growth not initialy covered in the amount set aside to get a business started.

Most people aren't in a position to do that unless they start small and see the big picture on the horizon ahead of them before they get there and keep working toward that goal.

If things don't go as planned, the end result would happen that the business might close and the funds would need to be repaid which, in either case to the entrepreneur, would not be favorable. So those starting a business as a proprietor would either have to work a long time to build up the funds they needed to start out, or get a loan but be obligated to pay it back at the risk of their credit history. Or worse, it would be divided between the entrepreneur and a partner to pay back, which can strain or ruin friendships (I wouldn't advise that either if given the choice).

The escape from that is (on some rare occasions) if the business is a non-profit venture or an LLC, or if there is some other legal means of absolving any financial responsibility to it...but the laws are changing on some of this too to where being able to start again or get funding is not as easy as it used to be. It's generally frowned upon for anyone to do that too, even if they are able to. Both in business circles, and in everyday life since defaults and unpaid dues often go back to us as taxpayers to cover for them depending on what the business is and what was done before Chapter 11, Chapter 13, or anything else was claimed for it.

Even though you may not be personally liable for what may come if things don't go as well as envisioned with a business attempt, it can still be a grey area and a hit below the confidence belt when you really want and need your latest and greatest to succeed for you.

I would recommend that you always have a solid idea of what you want to do, and outline as many ways as possible to do it before you get started. Weigh out and take seriously the advantages and disadvantages of each one, and if you need to chart it, draw an outline of each one on a sheet of paper to visualize how they may connect, how they may support each other or prop an area up if one part of the business doesn't go as planned, and just as importantly, damage control and recovery options if the financial, hiring, management, or sales and figures for income don't go as well as they were supposed to.

If you're able to get everything going well and stabilized, then growth to the next level and next step are certainly in reach. Just be sure to use wisdom and discernment in making that next step even more than your excitement to do so.

When people smile too much following the warmth and light of the sun on the horizon, they may not see the serpent at their feet or the rock that will trip them if they're not careful.

Be eager and ready to make that step, but always be aware of your surroundings, be it in business or anything else you decide to do.

 

[Corazon]

I think most businesses are geared toward the profit meaning the financial goal is defined. From my viewpoint, handling a business is partly planned and partly played by ear. But the financial goal is always there. It's like having a figure on how much you should earn in the first month or in the first year. And if the goal is not met then you have to innovate to reach or even surpass your goal.

In my experience, I was really dismayed when the actual figures were so low compared to my goal. And in spite of the radical innovations the business still didn't pick up that much. At least I had a gauge of the revenue that would help me decide on what step to make.

 

[bhu]

I tend to be a pantser and intuitive in business. While I do try to plan a certain amount, I'm not as logical and in depth about it as most seem to be. I'll take a risk much faster than others, if I feel it's the right way to go. Since I keep my organization small, mainly me, it's easier to fly this way and I can respond to opportunities and market shifts, both foreseeable and not. Some people I know who planned meticulously and got business loans in industries they had plenty of experience in, and despite knowing what numbers they needed to make each day, each hour and devoting themselves to being there daily, taking excellent care of their customers and staff alike, still went bust. So there are no guarantees whether you plan or not. It's good to have fail safes, like exit strategies and ideas of who to sell to.

 

[Vinaya.Ghimire]

Doing business means you want to make money. Since business is related to making money, you need to set your financial goals such as how many products you will be selling, what is the production cost, what is the profit margin etc. However, you must always set a realistic goal.

 

[Nancy]

I am sure I do it all wrong, but it works for me! I keep most of my plans and goals in my head. I crunch numbers on paper like crazy, constantly. Like daily! That way I can change direction easily if something is not working financially.

If you have partners, investors, loans, etc. my way would definitely not work! You would need a solid, written business plan. I can see how it would be good for some to have it written down. But for me, it is churning in my head constantly anyway.

 

[puneeth8994]

I think financial goals are one of the most important things you gotta keep in setting up any plan which is going to get you profits.
I usually just do it to keep me motivated. It also let's you evaluate risks before taking any chances which might yield you with a larger bonus or profit. If you are sharing a business with someone else, it's more important to set up your financial goals first just to know everyone are on the same page.

 

[Jack Benoit]

Priоritizе еасh оf yоur pеrsоnаl gоаls in оrdеr оf impоrtаnсе, аnd thеn dеtеrminе hоw lоng yоu hаvе tо sаvе fоr еасh оf thеm. Rеtirеmеnt соuld bе mаny yеаrs аwаy, but yоur shоrt-tеrm gоаls соuld bе in а yеаr оr twо. Nеxt, еstimаtе hоw muсh intеrеst оr саpitаl gаins yоu’ll еxpесt tо sее in thе ассоunts whеrе yоu аrе sаving yоur mоnеy. Whilе саpitаl gаins аrе nеvеr guаrаntееd, yоu саn usе аn еstimаtеd аvеrаgе fоr thеsе purpоsеs.

 

[Valerie]

Do you actually have a figure in mind by which you can categorically say you have achieved success in your business or at least a figure where you determine when to cut loss and quit on the business?

Huh, you know, I never thought of a financial goal, just the goal of "I want to run a successful business by doing x, y and z." To me the successful part isn't about the money but knowing I don't have to worry about how much money I'm making. In other words, am I drawing enough opportunity to myself? When that's stable, I'll have reached my goal--and possibly the implied one of financial stability too.

 

[ruener79]

Huh, you know, I never thought of a financial goal, just the goal of "I want to run a successful business by doing x, y and z." To me the successful part isn't about the money but knowing I don't have to worry about how much money I'm making. In other words, am I drawing enough opportunity to myself? When that's stable, I'll have reached my goal--and possibly the implied one of financial stability too.

It's kind of liberating to not think about money when running a business. I guess with the flurry of activities, then you're right business must be doing good and ergo there is the implication of financial stability. So, if it's not figures that you're focused on. I'm truly curious as to how you gauge if you are drawing enough opportunities for yourself. How does that look like? Pardon my lack of imagination, but how is it measured? Like, a person could be doing and exerting much effort in his/her business - there is that flurry of activities, but in the end the activities don't translate to the profit needed.

 

[T J Tutor]

When starting a business you generally have a business plan. I don't know if I heard right, but I heard that while many entrepreneurs make a step-by-step plan on how to go about their business, doing financial goal-setting is often neglected. That is, only a few actually sits down to write about the financial goals on their business. Do you actually have a figure in mind by which you can categorically say you have achieved success in your business or at least a figure where you determine when to cut loss and quit on the business?

Financial goals are a part of the business plan. If anyone has claimed to have built a proper business plan and not done any financial goal setting, then they have not actually completed a business plan.

Financial goals are an integral part of any business at any point in it's development, planning, and execution.

As for having a figure in mind, business is not a "shoot from the hip" endeavor. You don't have a figure in mind to guide you when making a decision to press on or quit. Business is all about the financial goals and planning you first mentioned. For example, Jeff Bezos has only in the last year reported profits for Amazon, and it was always a part of the plan. many companies don't allow for massive profits for many years as any earnings may be used for ongoing development and growth. Of course this is the dumbed down version of a proper explanation.

As for a moment when you can say a business is categorically successful based on a single figure is a ludicrous thought. It just doesn't make any sense. The success of a business is measured by more than what you indicate. For example, the company and people that spent decades getting to the point of mapping DNA were not profitable in any way as researches reaching their goal, but they were hugely successful!

 

[yemi]

A lot of businesses fail because of lack of goal setting. It's one of the main ingredient for success. I've met small businesses that have no clue what their numbers were. All they care about is the daily bank balance. No planning of any kind. It's hard to succeed in competitive markets without a concrete plan. Don't forget, business is risky; goal setting help monitor it.