The New Year is just days away; however, the best time to set goals for 2019 is now. If you’re like many business owners, you may wish to create goals and growth targets for the year ahead to get to the ultimate goal of financial freedom. More than 75% of Irish business owners were expected to make strategic business plans for the year ahead in 2018 and this trend is sure to continue in to 2019.
Create business goals you’re sure to achieve
When we set business goals, it’s done with big expectations and strong intent. However, after a few months the early motivation has disappeared or things have just got so busy, many will find it hard to stay on track. What can be missing is a good plan of action to keep us on the journey to achieving our business goals. Here is a plan to keep you on track:
1. Identify what you want. We sometimes don’t reach our goals because they are not what we want but what others say we should want. For example, you might feel constrained by risk averse financial advice where your gut is telling you to move your business in to new territory. These persisting fears in Ireland are based on lessons learned about business funding during the recession and they will not be lightly cast away either.
“What the recession did to many small businesses was make them switch from expansion mode to one where every euro was held hostage. If you are in a mode where you don’t have access to capital, opportunities are lost and you are more risk averse,” says David O’Kelly, partner in KPMG’s corporate finance practice.
2. Assess your financial situation. Once you have set your priorities and know what you want to achieve this year, review your complete financial situation. Include your recent set of accounts, bank statements, cash flow forecast and other information you deem important. The objective is to obtain a complete understanding of your business income and expenses so you can create realistic financial goals.
3. Set SMART Goals. When creating your goals keep this acronym in mind:
Goal: Prepare for Brexit by moving into new markets. The business will move in to 8 new markets within 3 years. In 2019 it will move into the USA & Canada. We will commence planning now. In 3 months we will launch a marketing campaign and assign a business development manager we aim to get €200k in sales from this market in 2019.
Each goal states a specific and written monetary amounts and the time frame in which you plan to achieve the goal. The example above takes the process one step further specifying a milestone to achieve in the year in addition to the long-term goal.
4. Make a plan. Once you’ve specified your goal create a plan to make it a reality. Instead of trying to create the perfect plan, focus on defining the activities you will do to reach your goal. If your plan requires finance to execute it BUSINESSLOANS.IE can help by comparing alternative finance options and organising multiple quotes to get you the best deal.
What do you track to achieve your goals?
A budget. A budget will provide a visual representation of your spending activities, income and expenses.
Step 1: Add Up Your Income Sources
The first element of a good business budget is figuring out how much money you bring in on a monthly basis.
Start with your sales figures first and then go further by adding other income sources you use to run your business.
Step 2: Determine Fixed Costs
Fixed costs are expenses that are charged the same price each month. As you can imagine, incorporating these is by far the easiest part of creating your business budget.
Review your past bank statements or accounting software reports. You’ll easily be able to spot your fixed bills and the total amount they cost you each month.
Step 3: Include Variable Expenses
Items that don’t have a fixed price tag each month are called variable costs.
Many of these purchases can actually be scaled up or down depending on the state of your business, using your monthly profit. Your profit each month will be determined by the earnings you’re left with after paying all your costs.
So, if your business does better than you forecasted, you can use the extra funds to increase variable spending enabling you to grow faster.
Step 4: Predict One-Time Spends
A great perk of creating a budget is now you will be able to factor in one-time purchases better than ever before. While some of these items may come up unexpectedly, like the purchase of a laptop to replace the one that crashed, others can be budgeted for months in advance, like that business retreat you’ve been eyeing, to protect your business from financial burden.
Step 5: Pull It All Together
The first four steps of this post detail the elements of a good business budget, so the last step is simply pulling it all together. Take action by using this handy checklist with specific examples so you can create your budget without any hassle:
Government and bank fees
Other Marketing Costs
Travel & events
Expenses. Closely tracking your expenses helps you commit to your budget and ensures you have extra money towards furthering your business growth. In this regard I can’t recommend highly enough reading the business classic The 80/20 Principle by Richard Koch. It will help you identify where your 20% of business efforts are resulting in 80% of your business income and brutally cutting down on wasted resources.
5. Defined steps of achievement. Create a specific plan with defined steps to achieve your goals.
Goal: Prepare for Brexit by moving into new markets. The business will apply the €3000 savings identified monthly towards the sales & marketing budget of the USA & Canada new market entry. We will also get finance pre-approval for a stocking loan through BUSINESSLOANS.IE that we have identified in our forecast will need to be drawn down in 2 tranches in March and July.
Experience a setback?
It’s normal to face challenges such as an unexpected expense or a big order getting put on hold. It’s tempting to retreat or give up on your plan. Instead of quitting, adjust the time frame in which you expect to reach your business goal. Alternatively explore some shorter term finance solutions. For example, if you have a lot of stock lying idle in the warehouse some secured finance can be arranged for up to 3 months. Or if you have a strong debtor, one-off invoice discounting is available. Or if you have a retail element to the business working capital can be advanced based on the volume of card transactions on the merchant statements. Talk to us. We can help you find a solution to stay on track.