Setting a specific financial goal and target is a core aspect of any business strategy, and one that I think most people would expect all businesses to have.
Yet … when it comes to small businesses and the self-employed, very few do actually commit to any kind of financial objective, despite the amount of information and advice on the subject.
So, why is that? And more importantly … does it matter?
Well the short answer to the second question is yes, it does matter.
And the good news in terms of the first question is that the usual reasons for not setting financial goals are all easy to overcome….
Better still … defining financial objectives doesn't need to be a difficult or complex process, yet it has the potential to bring significant rewards.
Clear financial targets can help you escape the trap of the “busyness delusion”, they can save you from business overwhelm … and most importantly, they can give you the point of focus that you need in order to truly achieve financial security.
So, what are the blocks to creating financial goals, how can you overcome them, and what do you stand to gain?
The Reasons Why So Many Small Businesses Don't Have A Clear Financial Goal
One of the primary reasons for people or small businesses not having any financial objectives defined is that they simply don't think they are big enough to warrant it.
It's “obvious” that the approximate financial goal is to earn as much as possible, so sole traders, freelancers and small start-ups in particular often feel that defining something more specific isn't necessary given that they're just one or a few people, all of whom know more or less what they're striving for.
But business strategies and financial targets aren't only about being accountable to others … and they aren't only about ensuring “everyone is on the same page”.
They are about defining exactly what you or your company want to achieve, and then identifying the actions that will make that achievable.
In the same way that it would be impossible to plan a route to a destination without knowing what that destination is … or, once you know the destination, without having looked at a map to check the different ways in which you can get there … it is impossible to achieve what you want or need to achieve in business without knowing what that is … and without having a plan of some sort.
So – the size of a business is irrelevant. However, even once this is acknowledged, there are still other factors that stop businesses from defining their financial goals … and they typically come down to just not knowing how to do so.
“What targets should we set?” “What is realistic?” “What is actually achievable?”
“Do I want targets that are overly challenging so as to push me? Or easily achievable so as to keep me motivated?”
Sometimes it might be a case of having a target in mind, but not knowing how to achieve it … and so deciding it is easier to ignore entirely….
Self-doubt and lack of belief can also cause small businesses to abandon making clear strategies, as having defined what they want or need to achieve, imposter syndrome and such thoughts make them feel that it's just not possible ... so it's easier to just muddle along and see what happens, rather than trying to reach that “impossible” goal.
However, I can tell you from experience that muddling along and seeing what happens is a strategy … but it's not a strategy that will lead you to reaching your true potential. It is an easy strategy to cling to in the face of doubts and challenges and the unknown, but it is equally easy to remember and act on the fact that:
- A financial target doesn't need to be a big, complex financial strategy;
- Any target is a worthy target (not to mention that targets can be changed – nothing needs to be set in stone!);
- Working out the hows is actually much easier when you know what you're trying to achieve;
- And focusing on what you CAN do is the fastest way to overcome self-doubt and imposter syndrome … because you do have skills and expertise that others need, and all you need to do to remind yourself of that, is to DO it.
Why Not Having A Financial Goal Does Matter
The absence of a clear target or objective means you don't know what you're striving for … which means you will do lots of different things – some of which will be useful, but many of which probably won't be.
Which means you'll be BUSY, but not effective.
In exactly the same way as setting off for that destination without knowing the way will mean you are moving … you are walking or driving somewhere… but it's unlikely you'll be taking the best or quickest route. In fact, more than likely, you'll be taking a significant and lengthy detour.
The purpose of your business is not to be busy. It's to provide you with an income … by doing something you enjoy and are good at. And it's to achieve financial security, and flexibility, and freedom, and fulfilment.
With a clear target of what you want or need to achieve, you have a starting point. You have a point on a map that you know you're aiming for.
Which means you can focus on working out the best route to get there.
And from that alone, you can make big changes. You can drill down into all the things you are doing, and identify those that are really important….
Remember the 80/20 principle – that 80% of an “outcome” typically comes from 20% of the “input” … that 80% of a financial target will be achievable from just 20% of the clients, or investors, or sponsors, or even actions.
So by knowing exactly what you need your outcomes to be, you can focus on identifying exactly what your 20% input needs to be….
Having a clear financial target instinctively opens up new ways of thinking … it causes you to consider the output of your actions in relation to that goal, and to think of the solutions that will best enable you to achieve it.
Without any kind of goal, it is very easy to just “work” … to just do “something” under the guise of busy = successful.
But busy is not successful. Busy is just busy.
Success, actually, is achieving what you want without being busy.
Which brings us back to the starting point: knowing WHAT you want … i.e. what your financial goal is.
How Clear Financial Goals Lead to Success Rather Than Busyness…
One of my clients was a graphic designer who was tired of always being busy chasing job after job; pitching for project after project. He never knew for certain what he would be earning, and frequently felt overwhelmed by the sheer volume of “tasks” on his to-do list.
So he came to me for some help.
The first thing we did? We defined his financial goals. And we did that by using my FSTN map (the Financial Security Calculator).
To learn how we did this and read the full case study click here....