Q1 is a time for businesses to reflect and begin afresh. One way to achieve this is by creating new financial goals to remain organized and on the path to greater success. However, for many beginner entrepreneurs, financial planning is often a challenging path paved with frustration and confusion.
Here is everything you need to know about setting realistic financial goals for your small business.
A Clutch report found that a staggering 46% of small businesses in the US do not have a financial plan. These numbers don’t come as a surprise, given that 45% of new businesses fail within their first five years of opening, according to a U.S. BLS report. Success is utterly unattainable without knowing where you are, where you are coming from, and where you are going.
When setting financial goals for your business, you should ask yourself how your business is doing financially. Analyze current data about your revenues, profits, expenses, debts, and cash flows. Compare this information with your performance last year. Then, from your analysis, you can determine which objectives you need to set for the new year.
After identifying the most critical financial goals for the new year, you need to make these goals S.M.A.R.T. (specific, measurable, attainable, realistic, and timely).
For example, you may have set a target to increase your revenues. But merely increasing revenue doesn’t meet the SMART criteria because it isn't specific. Instead, you can restate this goal by setting a target to increase revenues by 20% over the next six months through cost-saving measures.
After setting SMART goals, the next thing to do would be to break down the goals into smaller milestones achievable over the short term to remain motivated and keep track of your progress.
Setting S.M.A.R.T. goals isn’t enough if you don’t have the right KPIs to track. A Harvard Business Review study revealed that businesses that track their progress toward financial goals on a consistent schedule are three times more likely to achieve them.
Therefore, remember to identify the most critical key performance indicators to measure success. Whether it’s sales per quarter, total revenue, or profit margins, these metrics will enable you to make needed adjustments and celebrate milestones achieved along the way.
If you want help to set and plan your financial goals for 2024, you can consult professional advisors, consultants, and CPAs. Barry Pennett, a Forbes Council member, emphasizes that these experts can benefit your business in the long run when navigating your financial goals.
For instance, a tax relief consultant can help you claim tax credits and deductions your business qualifies for. A tax deduction reduces the taxable revenue, while a tax credit deduction directly reduces the amount of taxes your business owes. Leveraging the two can save you thousands of dollars, which you can reinvest to expedite your business's financial goals.
Realistic financial goals are critical for any small business to run its operations successfully. But remember, no business achieves every goal. Therefore, evaluate your actions, track what’s working, and recalibrate your strategy for better outcomes.