Let’s start with a hopefully obvious premise: anyone that wants to succeed needs a goal. This should be obvious, because the goal is just the desired result that defines the success of the entity in question. Put another way, you cannot succeed without a goal to succeed at. So, the success of a person, business, or other organization, by definition, requires a goal.
Not sure if you agree? Maybe you think an intelligent and driven group of people will blindly start a business and inevitably find success in the world by sheer force of will. Perhaps they will find and conquer undirected objectives or challenges they encounter by happenstance. That is unlikely to say the least.
How Victory Begins with Goals in Business (and Soccer)
Let’s consider a hypothetical soccer match at a crowded soccer field. Team A operates exactly as you would expect from a professional soccer club. Now imagine team B is composed of people who are excellent at working together and all extraordinarily adept at every single aspect of soccer, and more so than any other team in the world. But oddly, they are completely oblivious to the fact that the goal of the match is to win by scoring the most goals.
Our hypothetical match begins, team B gets the ball. They see the huge gathering of onlookers and start executing theatrically impressive maneuvers and tricks worthy of being members of the Futboleros Soccer Entertainers, a group also known as the Harlem Globetrotters of soccer. The crowd seems entertained but also slightly baffled. Team A eventually steals the ball. Team B watches on expecting an entertainment competition reminiscent of a dance-off, but instead team A promptly scores the first goal of the match. The crowd cheers. Team B wanting to get the same cheers, takes the ball, moves it elegantly around the field in an amazingly choreographed performance and kicks the ball into the same net that got team A all that applause. Team B is now behind by two goals.
We could continue the analogy endlessly, but hopefully the picture is starting to become clear. If you don’t know what your business goals are, you will be no more successful than team B in our imaginary soccer match. You may do some amazing maneuvers in business, but will you remain in business or achieve profitability? Less likely than the 2.6% chance of overcoming a 2-0 deficit in soccer like our team B found themselves in by not knowing that goals measure success in soccer. Just like soccer, you need goals to succeed in business.
How to Determine Your Goals
In soccer it’s obvious, the goals are the goal. Fortunately, it doesn’t have to be that much more complicated in business. Any business at its root has some sort of financial motivation. This desire can almost always be manifested as a goal tied to revenue, profit, growth, or a combination of the three. The metrics your business has as its goals are often referred to as key performance indicators (or KPIs). The goals or KPIs then become the benchmark for the company’s success.
Even other entities, like non-profit organizations, also operate with financial goals. They may have an overarching goal related to advocacy or furtherance of a social cause, but they still need money to accomplish those objectives. Even if you’re committed to social responsibility as a key part of your business, you ultimately need some level of financial success.
Goals Depend on Your Business and What Motivates You as an Owner
Your goals as a small business owner should reflect what you want out of your business. Do you just want to be your own boss? Do you want to make your existing dental practice the largest in your city? Do you just want your brand new doctor office to not go under before it becomes profitable? Or maybe you want something else. Whatever it is you can convert it into a real goal and benchmarkable KPI.
If you’re running a lifestyle business as the sole owner, you may only be concerned about how your business can help you live the happiest life possible. In that case you may have read that people’s happiness peaks at $75,000 per year. Given that a reasonable goal for your business would be to earn at least $75,000 in profit per year to pay yourself.
Another popular model is to combine two different goals. For example a dental office might want to set a growth goal of increasing their revenue by 10% each year for the next five years. At the same time they may want to maintain a profit margin above the dental industry average which was recently reported to be 14.8%. The dentist should then calculate how many patients would yield that 10% growth and include that number of patients in the goal.
Or imagine a doctor’s office similar to the dental office, but let’s say it just opened. Since they are brand new, instead of a percentage they could set their growth goal to a static number like 360 patients in the first year. In this scenario their profit margin may be very small or even negative. That is because their fixed costs will be spread among very few patients. Additionally, they will need to spend more money on marketing to acquire their first new patients. But if the physician is good, each patient will stay for five or more years. In that case, the business should set a goal to become profitable within one year, or to reach the industry average within five years.
What About My Industry?
You can do the same thing with any business in any industry. Research what sort of revenue numbers are average for a company of your size in your industry. If you can’t find revenue numbers, you could try to find or estimate how many customers you could add per year. You can then multiply that number times the average value of your existing customers.
If you are brand new, research the typical growth rate and average customer value for that industry. You may need to be creative to acquire this data if you can’t find it using Google. For example, if you’re going to open a restaurant, find a similar restaurant in another city. Grab a meal, study the menu, and ask your server what people typically order. You can use this information and even your receipt to estimate the revenue per customer. You could even watch how many customers visit the establishment during peak and off peak times. And use that data to estimate the number of annual customers. With these two figures you can ballpark the annual revenue by multiplying your estimates for revenue per customer and number of annual customers.
Success Depends on Goals and Execution
Setting goals is a necessary step to succeeding as a business, but they ultimately are just a benchmark. A goal can only tell you how to measure your success. Education, experience, hardwork, and perseverance are what ultimately allows you to turn that goal into a successful business.
Like in the soccer example, to win a professional soccer match you need to know that the goal is to score goals and play like a professional athlete. To succeed in business, you need to know your goals and operate your business like a savvy entrepreneur.
Have a story about how goals made or broke a business? Let us know in the comments. Need help setting goals or with any other aspect of business strategy or marketing? Give us a call at (800) 640-8082 or email us at firstname.lastname@example.org. We’d be happy to consult with you and your business.