One of the biggest reasons that so many businesses fail can be attributed to this: some business owners fail to plan. Murphy’s Law (Anything that can go wrong, will go wrong.) is just as applicable to business as it is to life, if not more so.
By failing to set business goals, entrepreneurs find themselves crushed underneath an avalanche of “bad luck” which they could have avoided had they taken time to plan.
Why business goals are essential to success
Here are five important reasons why it is important for business owners to set goals, and tips on how to make those goals work for your business.
Goals inform the specific steps a business should take in order to succeed.
Forbes contributor Bill Conerly makes a great point regarding the value of setting specific goals. As a sailboat racer his goal for each race was to “Finish in the top five.” When he showed that goal to his friend, a world champion sailor, who quickly declared that Conerly’s goal was terrible.
Instead, he should define “what action steps he would have to take to achieve his goal.” Like most athletes, action steps related to fitness, practice conditions, and healthy supplements are examples of “steps that can achieve a goal.” Instead of obsessing about a desired end state, whether it is taking your startup public or simply selling the best tea in town, entrepreneurs should double down on specific steps that will take you there. By first setting a clear goal, you are more likely to figure out which action steps to take next.
Goals improve employer/employee communication.
Nothing drives an employee madder than when their “out of touch” boss sets a ludicrous goal. However, at the same time, goals are a valuable tool to encourage communication, cooperation and productivity for viable and smart goals. By setting a reasonably tough goal, as the founder, you can also inspire healthy competition between team members, encouraging them to work smarter and and put their best foot forward.
Goals force founders to keep the right perspective.
That out of touch business owner I mentioned above – he sets impossible goals because he does not have any true perspective on what his business is capable of accomplishing. Entrepreneurs have to walk a fine line between pessimism and optimism.
The former can result in missed opportunities like Kodak’s digital misstep. The latter can cause over-expansion and scaling too fast, which is one of the top killers of many startups. By setting and managing goals you can ensure that you know the exact state of your business.
Goals help founders to see themselves clearly.
Goals are just as much about what a business owner is willing to achieve as they are about what the business is willing to accomplish. Some perfectly good founders may not be cut out for working night after night, which is what will happen if unrealistic goals are set. In contrast, when an entrepreneur understands their strengths and weaknesses, they can inform the goal process and adjust their role accordingly.
Goals sustain future growth and company autonomy.
Most entrepreneurs have sizable egos. There is nothing wrong with that, since every entrepreneur needs some level of ego to take a risky plunge into entrepreneurship. But many of the best world-class entrepreneurs are those who know how to manage to their own egos.
By creating company-wide goals, a business owner can ensure the company can survive without their daily presence. A sustainable business can only survive when the owner knows that he cannot micromanage everything. Over 80 percent of small businesses do not keep track of their business goals.
Business goals matter
They help ensure that a company understands the necessary steps needed to get to wherever they want to go. So, think carefully about what kind of business you want to build, and set goals accordingly. It is one of the most vital steps you can take to create a successful business.
This article has been edited and condensed.
Simon Crompton is an entrepreneur running several online businesses. Currently focusing on his marketing firm, Threecolors.blue, he is also a trained journalist sharing his knowledge via several internet blogs. In his spare time he’s an avid programmer and videographer. Connect with @PermanentStle on Twitter.
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