In our journey to simplify business planning, We’ve covered the essential components of Vision Statement and Mission Statement. Now, it’s time to delve into Secret #3 of the 5-Secrets to Business Planning, which makes the process EASY, FAST, SUSTAINABLE, and entirely PRACTICAL – Objectives.
If you missed the previous parts, you can catch up here:
Now, let’s talk about Objectives. You might recall them as TARGETS from your past experiences in business, or perhaps they’re new to you as a business owner. Either way, it’s a topic that many of us, as business owners, may not be particularly fond of.
The idea of measuring ourselves against preset expectations might seem daunting. After all, didn’t we start our businesses to escape the confines of a boss and rigid performance expectations? It’s a valid sentiment, and if you choose not to measure anything, that’s entirely your prerogative. You can continue to work hard without seeing the progress you’ve dreamt of.
But here’s a thought – if you’re going to take that stance in your business, then it’s only fair to extend the same courtesy to others. Being consistent in your beliefs is crucial.
I don’t mean to be harsh, but that’s the reality. Just as we were measured in various aspects of life and survived, we thrived because those measurements guided us to improve. We encourage our own children in competitive activities, urging them to embrace feedback and learn from it. They, too, survive and often thrive.
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We all understand that in different contexts, measurement doesn’t set us up for failure; It sets us up for SUCCESS. So why is it that the prevailing attitude among business owners is contrary to this perspective?
So, here’s the deal – either start welcoming measurement into your business as a valuable tool, a stepping stone to your financial success, or stop critiquing the performances of others.
Assuming you’re ready to embrace the accountability that comes with measuring, let’s define an Objective for your business planning.
Objectives are specific targets that you aim to achieve in the current fiscal year. They should be set to conclude at the year-end or sooner if they are mission-critical.
The most common Objectives are financial, such as Revenue and Profit, which are mandatory in business planning. However, in a Balanced Scorecard approach, there are many other measurable outcomes to consider, including personal development, customer satisfaction, and operational efficiency measures.
Remember, an Objective is only an Objective if it can be measured. To keep things easy and fast, we suggest that an Objective only needs three elements: a verb, a noun, and a date. For example, “Achieve $3,450,000 in Revenue by December 31, 20XX (a 35.6% increase over 20WW.”
Adding the percentage increase over the prior year gives more power to your business planning process.
For most businesses, six Objectives are typically sufficient. One of them should be Profit. Now, let’s see how starting with a Revenue Objective, you can break it down into a Weekly activity Objective and create your Weekly Marketing Reality with the remaining five Objectives in your business plan.
Here’s a simplified example:
- Revenue: Achieve $1,000,000 in Revenues in 20XX
- Achieve Average Revenue Per Sale of $10,000 through December 31, 20XX
- Then we
- Add 100 new clients by December 31, 20XX
- If we
- Achieve a Close Rate of 30% through December 31, 20XX
- Then we must
- Conduct 300 Prospect Sales Meetings by December 31, 20XX
- Finally we’ll work to minimize expenses so we can
- Achieve Net Profit of $150,000 by December 31, 20XX.
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By setting these Objectives, you’ve defined your Weekly Marketing Reality and harnessed the power of math in your business planning. If you meet with 300 prospects and close 30% of them into a program or product that we sell for $10,000 then we will achieve the $1,000,000 Revenue Objective.
The math doesn’t lie, the math can’t lie!
For businesses with revenues exceeding certain thresholds, your Objectives may be more complex, but the principles remain the same.
Before we wrap up this discussion on Objectives in Business Planning, stay tuned because the next critical element is MEASUREMENT, and we’ll be addressing its role in your business planning process in an upcoming post.
WHAT’S THE NEXT STEP?
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