As part of writing your business plan, you should have clearly defined business objectives. However, if this not the case, a question worth asking yourself is ‘Where is your business headed?’ and ‘How do you know when you have arrived at the designed point?’
It is your business objectives that provide direction on where your business is headed, and act as a benchmark against which performance and effectiveness can be measured. Whether written on the back of a napkin, on your smartphone, or within your business plan, you need well-defined business objectives. It is enough to have these objectives defined, you also need to ensure they are being acted upon. Having defined business objectives forms the foundation upon which you can strategise and achieve success for your business.
Simple approach to defining your business objectives
While setting business objectives may seem boring or theoretical, don’t allow it to be; it can be as simple or as complex as you make them. In fact, the simpler and clearer the objectives, the easier it is to focus on achieving them. The most common and simple approach to setting objectives – applies across personal, career and business objectives – is creating SMART objectives. This is the true test in validating if your objectives are clearly defined, and measurable.
SMART – Specific, Measurable, Achievable, Relevant, and Time-framed.
Specific: Steer away from setting objectives that are general, or ambiguous. Objectives should be very clear and pointed on what you intend to achieve. Tips on setting specific objectives include the 4 ‘W’s; What, Why, When, and How.
General ‘Grow my business to a multimillion dollar conglomerate’
Specific ‘Increase business sales by 50% in year two from $100,000 – $200,000’
More specific ‘Increase sales of product x by 50% or more in year two from $100,000 to $200,000, by opening more locations in the north and east regions’
Measurable: Objectives should be quantifiable to enable you measure progress on if it has been achieved, or on track to being achieved. With the above example, a specific amount is stated (50% or $200,000) that can be measured at a specific point in time (end of year two), and we also stated the planned locations to expand to. The objective is very specific, which enables progress to be measured at any given point. Tips on setting measurable objectives include; how long, how much, how many etc.
Achievable: Objectives should be attainable, and not be impossible to meet. While you want to set challenging (stretch) objectives that take your business to the next level, this is not the place to set objectives based on optimism or positivism. When setting your objectives, it should be based on understanding the environmental and market demands/trends, opportunities available to you, and your strategic and business capability. Looking at our example above, if the North regions are already saturated with the same types of products and services you provide, you need to determine if it is realistic to expect sales to double in the second year by entering these markets. You also need to understand how much capital you need to invest in order to achieve the expected sales and expansion, and if you have access to the required capital.
Relevant: Your objectives should align with the long term vision of where you want your business to be; your short term objectives should align with your medium term objectives, medium term objectives should align with long term objectives, and long term objectives should be aligned to your strategic business vision. If your medium term objective includes diversification and expansion to a broader market, but this objective will not contribute to your long term objective, as well as business vision to develop a niche market, then you need to revisit the objective to ensure overall alignment. Objectives should be built from your strategic vision, which includes desired sales growth, market penetration, new product development etc. and are in line with where your business is heading.
Time framed: Objectives need to have target dates for completion, and should not be open ended. In the example above, year two was set as the target completion date; this will facilitate planning and focus towards a specific time, as well as setting interim milestones to monitor progress and/or revisit objective as required. Having time bound objectives will enable you plan with a target end date in mind, as well as measure progress, and revisit the objectives were required.
With this simple approach, you are well on your way to having a definite course for which your business is headed, as well as increasing your odds for success.