Talking business with Ellen Rohr: Setting financial goals for your business
Hear from our expert on how setting financial goals can reinvigorate your business.
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Hi, I'm Ellen Rohr. I want to talk to you about setting financial goals.
It's important to set financial goals so that you have the energy and the excitement to come in to work every day and make something happen. If you don't set financial goals, you might find yourself 20 years later thinking, 'What happened?' You know, 'I started out full of all this energy and excitement, and now where am I?' So a financial goal is a way to keep the energy going.
Some questions you might want to ask yourself are: How much money do I want to make, or what would I like to pay my employees, or maybe I should add a new employee this year, or maybe there’s some expenses that I want to incur that I haven't incurred before. These questions can inform your goal setting.
When you're setting your goals, bigger is not necessarily better. If last year you did $100,000 in sales, and this year you decide, 'I'm going to do $10 million,' you might not believe that, and so it'll collapse you. Instead you might think, 'Well, what if I got another client, and what if I added another salesperson? Then maybe $125,000 this year would make sense, or maybe I could double my sales.'
As long as you believe the goal, and it gets you excited to go in to work every day, then you've got a great top-line sales goal.
So on a weekly basis, these are the main scorecards that you want to keep an eye on: The balance sheet is the No. 1 scorecard. The profit and loss, it’s also called the income statement. And then you may also run a statement of cash flows.
So when you know where you stand while the month is on, then you can take advantage of opportunities, you can check your cash position, and if cash is getting a little bit tight, you might take some steps to improve your cash flow, like make one more sale or collect some accounts receivable.
You might have to look at your expenses and make a choice not to make a purchase this month, but wait until next month. When you know where you stand, you can get creative, and make sure that your cash and your profits are where you need them to be according to your goals.
If you hit your top-line sales goal, that's terrific. More importantly is that you have that goal as something to strive for — to create a game out of — so that you stay excited and energized about coming to work every day.
When you started your business, you had goals and dreams, and they energized you to the point where you were brave enough to start your business. So your annual budget — your financial goals — help rekindle that spark, give you some point on the horizon toward which to boldly march.