FORMIDABLE Business Blog

How to set SMART Goals

Overview

There are a number of simple skills a business owner can learn that will have an immediate impact on the performance of their business – one of them is setting SMART goals. High performing businesses use goal setting to complete tasks and direct the business. It is the basis of performance management and ‘getting (the right) things done’.

 

The First Step

The first step is to actually set goals! Many owners have their goals loosely defined in ‘their heads.’  This is not an effective way to manage the business. Every owner must have a set of written goals that they refer to – ideally with a number of quarterly goals so every 90 days they implement positive changes. Managing without goals causes a business to be inconsistent and to often only focus on short term problems.

 

SMART Goals Defined

SMART is the acronym of the following five steps in setting goals;

Specific

Ø       Goals must be exact and clearly state the desired outcome.

Ø       A goal must not be vague or open to different conclusions. For example, ‘We will grow our business by 20 percent next year’ is a vague goal. Are we referring to profit, sales, number of clients, etc? Is ‘next year’ referring to the financial year, the calendar year or the next twelve months?

Ø       Goals are specific in terms of – what is to be achieved, who is responsible, when it will be completed, how it will be achieved and why it is important to achieve.

 

Measurable

Ø       There is no point setting a goal where your progress and the ultimate outcome cannot be measured.

Ø       There must be benchmarks for assessing progress and for knowing when the goal has been achieved and what a successful outcome is.

Ø       Some goals will be difficult to measure, particularly where the outcome is subjective. This requires that there be more frequent reviews of progress and feedback from the key participants.

 

Action-oriented

Ø       Goals must have a natural bias for action – don’t make the mistake of having long, wordy goals.

Ø       The wording and tone used in stating the goal must be positive and action oriented.

 

Realistic

Ø       Must stretch the business but be achievable.

Ø       Realistic in terms of your resources and capacity, challenging in terms of testing the willingness of you and your employees.

Ø       Unrealistic goals result in a culture of failure and the goals becoming de-motivating.

Ø       Employees will not strive for a goal that is out of reach from the beginning.

 

Timely

Ø       Set deadlines for the key stages of each goal and for its completion.

Ø       Many goals are not achieved because deadlines are not enforced. When setting the objective ensure you have the resources and commitment to achieve it within the agreed timeframe.

Ø       Don’t just focus on the urgent goals; work on the important and longer term goals.

(You will find that some definitions of SMART use alternative words to explain this acronym. The definition above provides an excellent approach that is suitable for business owners.)

 

Example

A non-SMART Goal;

‘Grow business by 25% next year.’

 

A SMART Goal;

‘For the financial year ending 30^th June 2010, the Internal Sales Manager is responsible for sales income

 

 for widgets increasing from $310,000 to $400,000 through email marketing to 1,200 existing clients and

 

the recruitment of 2 additional part- time telemarketers.’

 

SMART goals are a powerful tool for improving performance.

 

For a PDF copy of this document visit www.smallbusinesshelp.com.au and click on SWOT Downloads.

 

Make sure you have an abbreviated business plan that follows the 15 key rules!

Business planning is the key step for ensuring your business has focus and can achieve outstanding results. The traditional lengthy business plan does not work. – it takes too long to complete and the vast majority of business owners want a much shorter document that lists the goals and the actions to be taken. This will be covered in a future Blog - The ‘Key Outcomes and Activities Statement’. This explains how you must have a shorter document that states your goals and the projects to be implemented to achieve success.

If you are going to write a business plan, listed below are the 15 rules to make it work for you and your business;

1. The business plan must be a 'Working' document - it is the key agent for directing and managing the business. The plan must be the key source document used by the business owner and senior staff to guide the business forward. The plan must be in a format that the business owner finds to be engaging and is easy to use on a regular basis. The plan is the road map for taking control of your future - it is only of value if it is used.

 

2. The business plan is a 'Living' document - it must be updated and kept relevant. The plan is not set in stone. It must be flexible in adapting to outside forces and changed circumstances. Often the end goals will remain the same but the resources and the strategies being used need to be adapted to unforeseen circumstances. An example is the decision of a key employee to resign - the three year objectives of the business do not change but there may be a need to redirect priorities in the short term towards reassuring existing clients and recruiting a replacement.

 

3. The business plan must be succinct - with key information being listed in point form. The greater the number of pages in a business plan, the less likely it will be used in practice. When the owner or key employees need to use the plan, they must be able to find the key points readily and be able to act on the document immediately. Huge tracts of text buried in a large document that resembles the telephone directory is not user friendly and will not be used.

 

4. The focus of the business plan must always be on achieving the desired outcomes. The plan's role is to direct activity towards the achievement of the desired goals in the plan. These goals must always be listed at the front of this document.

 

5. The business plan must list the key actions and the performance benchmarks. The implementation of a business plan is all about having a clear path of actions to take. The plan details how momentum will be created and maintained.

 

6. Key individuals in the business must be actively involved in the development of the plan.Involving key staff means you receive the benefit of their knowledge and experience, but you also gain their commitment to the plan's implementation through their involvement in its construction. The plan should not be an alien document to those responsible for its implementation.

 

7. Potential barriers to the successful implementation of the plan must be identified and acted on. The initial implementation of the plan must be managed and momentum must be built for its ongoing success. The plan is about introducing change into the business - and change will face resistance to varying degrees from staff.

 

8. The business plan must have operational relevance for its ongoing implementation to be successful.Operational staff must be able to see a link between their activities and the stated goals. Too often plans are written at such a strategic level that operational employees are unable to see any relevance to what they do in the plan.

 

9. The business plan must be the key reference point with all major decisions. Whenever a major decision is made, reference must be given to the business plan. Is the decision consistent with the goals of the plan? Does the plan need to be updated? The business plan will be dramatically undermined if key decisions are made without considering its relevance.

 

10. The information used in the construction of the plan must be factual, accurate and relevant. The plan must be built on facts and objective reasoning. where the plan becomes a 'political football' or is biased in any way, then far too much effort is wasted on secondary issues.

 

11. During implementation of the plan don't become trapped in trying to have the perfect implementation.There always exists a danger that the focus of the key participants becomes the perfect execution of the implementation stage rather than the plan itself. This often takes the form of each action being painstakingly reviewed prior to action being taken.

 

12. The goals in the business plan must be challenging and rewarding. There is a balance to be struck between overly optimistic goals and goals that are not challenging because they are set too low. The goals must be exciting and stimulating. They must have meaning and really be a source of motivation. Goals that are set low and would be achieved in the normal course of events really raises the question whether there should be a business plan in the first place.

 

13. Does the plan detail the innovation strategy that the business will use to capitalise on change?Innovation is a key element in the growth of any business. There needs to be processes in place to ensure the business capitalises on change and new opportunities.

 

14. External resources must be engaged at all stages of the business plan's development and implementation. Use a mentor or coach to challenge your ideas and to assist you with implementation.

 

15. Project manage implementation.The best approach to implementing the actions listed in a plan is to establish a set of projects linked to each of the major goals. An approach based on individual projects is an effective means of implementing the desired actions and makes everyone accountable.

In the next blog I will discuss the 'Key Outcome and Activities Statement' as the easy alternative to the traditional business plan.

 

Mark Laing - Business Coach

 

 

 

 

 

 

Why Financial Planners must choose 'Advice Sensitive' clients.

For those businesses which provide advice as their ‘value-add’ to clients, e.g. professional service providers like accountants, lawyers and financial planners; it is important to be dealing with the right type of client. The ‘right’ client is not only profitable, but has needs and expectations that are matched to the offering of the firm. Too often business operators make the mistake of viewing any prospect as a potentially good client because they look at the immediate perceived financial gain. They do not understand or focus on the client characteristics that are the right match for their business, and the basis for a long term relationship.

Determining the criteria for classifying clients and determining the niche markets you want to serve is an important decision.  With my Financial Planning Adviser clients, we start the client classification process by using the example of a market where there are two types of clients - price sensitive and advice sensitive.

 

'Price Sensitive' clients are only concerned with the price they pay for your service or product. The characteristics of this type of client are that they;

• Want to pay the minimum price - the bigger the discount, the more satisfied they are!
• Don't want to pay fees for advice as they don't value expertise or experience
• Only see products as commodities
• want to go direct (cut out the middleman) and negotiate on price
• their loyalty is to the lowest priced provider - if they identify a cheaper supplier they will change to them

The problem for advice-based businesses is that this type of client will rarely be profitable. They will always question the fees being charged and not be focused on the outcomes or benefits being provided. This type of client can take up an enormous amount of time and resources, particularly if they are charged a flat fee (they want to get maximum value for the money spent.)

 

'Advice Sensitive' clients value expertise and experience. Their focus is on receiving a tailored solution matched to their needs. The characteristics of this type of client are that they;

• Want long term relationships where they can build trust with the adviser
• Have high expectations - they will pay fees for quality advice to achieve their goals
• Recognise the importance of quality and can define it for their own needs
• Are more fashion and lifestyle oriented
• Are vulnerable to better solutions if they perceive the current advise as being average
• Like the person touch and value proactive communication

The advice sensitive client knows that expertise and experience come at a cost and they are prepared to pay these fees if they believe they will achieve higher level outcomes. The key is that this style of client wants to have a relationship with an adviser they trust. They hate to phone a service provider and push buttons to speak to a person.

 

The two types of clients discussed above are at opposite end of the spectrum. There are many clients who fill in the space between these two positions. The key for any advice based business is to position their business so that they attract clients who have expectations and needs that are matched to their service offering and fee schedule. You do not want to provide a high level of advice to price sensitive clients or a price based service to advice sensitive clients. The outcome in each case is the same – dissatisfied clients and unprofitable business!!

 

The actions you can take to match your clients with your value-add are;

• Survey your top 20 clients. What words do they use to describe your business? Why do they do business with you? (Also consider - What criteria did you use to identify your top 20 clients?)
• Create profiles of your ideal clients. What attributes do they have? What makes them advice sensitive? Who do you like doing business with? Do they give you referrals?
• Answer the questions - What is a profitable client for you? What services/products do they use? What training and development do you need to be able to provide the advice that your clients need?
• Write a marketing plan that focuses your practice on targeting prospective clients with appropriate messages based on client feedback.

Now is the time to review your practice to determine whether you are focussing on 'advice sensitive' clients. This type of client represents the best way for you to maximise the potential of your financial planning practice. Working with 'price sensitive clients in today's high compliance environment and with the competition from the banks is likely to mean you are going to have to survive on low margins and be more vulnerable to shifts in the economy - particularly downturns.

In order to be an adviser that works with advice sensitive clients you need to ensure you have an advice based practice - this is covered in the next blog - How to ensure you have an 'Advice based practice'

Mark Laing - Business Coach

How a SWOT Analysis can kick-start your small business

Many small business owners view a SWOT Analysis as only being useful when they conduct their annual review of the business. They don't realise its potential to kick-start their business and to take advantage of their strengths and opportunities, particularly in difficult times such as the current financial crisis.

The natural tendency of a business owner is to take action. In challenging times owners tend to want to work harder 'to make things happen' and to feel in control. Often this can result in activity for the sake of activity. What is needed is activity that is directed towards the achievement of goals, working on strengths, grasping opportunities, and working smarter.

A  SWOT Analysis is a tool that allows a business owner to review their business in a structured way and to identify the parts of the business where they need to take action. The first step is to decide on the objectives that are going to be achieved by the business over the next 12 months and for the next 3 years. This then forms the basis of the SWOT Analysis as you review each of the four criteria in the SWOT against your current situation and the objectives to be achieved.

When looking at your Strengths you are reviewing each area of your business in terms of whether it is a strength that will allow you to achieve your 12 month and 3 year objectives. The weaknesses of your business need to be identified - what is going to hold you back? What action can you take to minimise the impact of your weaknesses?

What opportunities are there to grow the business - new products, new markets or new forms of distribution? The threats to your business need to be identified and where possible eliminated. Many businesses are now paying the price of carrying too much debt into a downward economic cycle. What actions are you taking to 'recession' proof your business. Now is the time to start taking action.

Once you have completed your SWOT Analysis you don't need to write a lengthy business plan. Decide on the actions that you need to take - compile a list and with your staff decide on priorities and set deadlines. Many owners feel out of control when the economy starts to turn against their business - a SWOT Analysis is a useful tool to kick-start your business.

I have developed a FORMIDABLE SWOT Analysis guide for small business that you can get right now at my website www.swotanalysis.com.au for just AU$6.95. 

Mark Laing - Business Coach

Welcome to FORMIDABLE Business

This Blog is dedicated to providing small business owners with access to a wide range of practical tools to assist them in achieving outstanding results for their business.

Regards

Mark Laing (Founder)