 New Year, New Resolutions - Are You Serious?
(New Zealand) - January 2010
By Catriona Knapp
My partner thought that setting a goal for his business was cliché and the most unappealing task to kick off the New Year. Until I presented him with an achievable target.
Many of us set New Years resolutions that include things like switching to a healthier diet, exercising more, working smarter not harder. But, what resolutions do we set for our business? The start of a New Year is an opportunity to map out goals, not only for ourselves personally, but also for our business. For many this is the most unappealing task we could possibly choose to start the year with and my partner is one who, up until the time I presented him with his (achievable) target, shared this view.
You don't need to be an accountant to do this
Perhaps it is only we accountants that reach for the calculator after recovering from our New Years Eve celebrations and start tapping away excitedly, wondering what financial success we can strive for and achieve in the year ahead. But, even my partner had to admit that the target I calculated for his business is very achievable; and it provides some certainty as to what to aim for.
How many of us get an enhanced feeling of satisfaction when we know we have achieved a target or ticked off a goal? By setting a target for your business now you are not only providing yourself with the opportunity to celebrate success regularly and feel good about your achievements, but you are also providing yourself with clarity around how much will be available to spend and whether you can afford that new piece of equipment, additional staff, or even that trip away.
People don't set goals because they're afraid of the outcome
Setting a target is not a difficult process. So why don't we do it? Many people are simply afraid of the outcome, that they are setting themselves up for failure - and we all know that sinking feeling. But isn't it better to know in advance if something is not going to work and that you need to change your strategy, rather than learning things aren't working further down the track and potentially losing everything?
Most people find when they look at the numbers that their target is actually very achievable, provided they focus on the right thing at the right time. TARGETS GIVE US FOCUS and therefore we start WORKING SMARTER NOT HARDER and thus one New Years Resolution is achieved!
It takes less than half an hour to calculate a target for most businesses and despite the fact that my partner thought I should be committed for doing such a thing for his business during the holidays, he admits that having a target has meant that he has started the new year with focus and direction. By working to hit a target you also achieve clarity on how much you can spend on such things as new equipment, entertainment and the amount of salary you can draw. Better still, a meaningful target will allow for a holiday and time away from the business, which is something we all need but many business owners fail to allow for and factor in.
Now that you are convinced, let's talk about the "how"
How can you possibly gain more clarity and focus in your business in just half an hour? Now you don't need to be an accountant to do this!
Step1. All you need to understand is your monthly expenses (including the level of salary you are striving for, or as a minimum, the level of salary you require to pay your personal expenses) and the one off annual costs you need to cover. You will also need to enter your gross profit margin or if you are a service based business, your average hourly rate or selling price.
Step 2. Your next step is click here to DOWNLOAD the simple tool I put together to help my partner. Note one sheet is designed for use by PRODUCT businesses, the other by SERVICE businesses - make sure you are using the right one.
Step 3. Now plug the figures from Step 1 into the financial goal setting tool to work out your target and set your business on a strong path for 2010!
Good luck with your new target! You may also be interested in our Planning for Success in 2010 service.
Please note that the information provided is general and should always be discussed with your accountant, lawyer or trusted business adviser who will be able to put it into context around your business needs.
Catriona Knapp is a Principal of WHK. For more information please visit www.whk.co.nz and www.whkbusinessgrowth.com.
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