Examples Of Financial Goals For A Business Fully Explained
Today we are going to dive into 10 business financial goals that every company should have. To maximize business profits. And position for profitable growth into the future.
Having worked as a corporate finance professional for nearly 30 years. I have planned, set, and achieved more business financial goals than I care to remember.
But this isn’t about me. It’s about you and your business. So let’s focus on the best company financial goals that your business should have.
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
10 Examples Of Financial Goals For A Business
Here is my top 10 list of financial goals for a business. Consider it your summary of what we will cover a little later on.
- Clearly define your value proposition
- Increase sales volumes for more revenue
- Optimize product and service pricing
- Decrease expenses
- Implement productivity improvements
- Improve profit margins
- Forecast cash flows
- Develop a cash plan
- Make investments for the future
- Develop a business plan
Next, let’s lay in a little background information. So we are all on the same page about today’s topic. So you become a student of financial goal setting for your business.
Specifically, I want to address these 3 questions:
- What is a business financial goal?
- Why do businesses set financial goals?
- How do you set the financial goals of a business?
Then we will cover each of the 10 best financial goals examples for a business in greater detail.
What Is A Business Financial Goal?
First of all, a goal is the desired outcome that a person envisions, plans, and commits to achieve for their business.
Furthermore, a business financial goal is a result that you want to accomplish in an area of your company’s finances.
Finally, good business financial goals are company-specific. Because every business is different.
Why Do Businesses Set Financial Goals?
Business goals are a critical element to improve the odds for success with your company’s finances.
First of all, setting the financial goals of a company will prompt you to establish new behaviors within the organization.
Furthermore, business financial goals guide everyone’s focus. And help keep the company from straying into financial problems.
Not sure what you should work on this week? Then just refer to your company’s financial goals. And let them guide you.
Finally, business financial goals allow companies to take big plans and ideas that seem overwhelming. And pursue those plans one goal at a time.
And this isn’t to downplay the importance of non-financial performance measures. Because every business needs them too. They just aren’t the focus of this article.
How Do You Set Business Financial Goals?
I suggest the SMART system for setting business financial goals. In this case, each of your goals should have the following 5 attributes.
- Specific
- Measurable
- Achievable
- Realistic
- Time-bound
Allow me to explain what it means to set SMART goals…
Business Financial Goals Are Specific
The first step in making SMART business financial goals is to make them specific. So, define exactly what is to be accomplished.
The more details about the goal that you can document, the better. Because you will become more clear on exactly what you want to achieve.
Business Financial Goals Are Measurable
Make the financial goals for your business measurable. To do so, answer this: what information are you going to use to measure your progress in route to the goal.
Fortunately, most financial goals for a business tend to be easy to measure. They can be defined in dollars and cents.
Business Financial Goals Are Achievable
We want to stretch ourselves and our businesses. But, there is no need to set business goals if they can’t be achieved.
By being specific, you will come to understand whether the goal is achievable.
Business Financial Goals Are Realistic
A realistic goal has 2 attributes. First of all, the goal should make sense for your current business situation. Furthermore, make sure you have the resources to achieve the goal.
Business Financial Goals Are Time-Bound
You must set a date to achieve your financial business goals. First of all, having a deadline will increase your sense of urgency. Furthermore, a time constraint will increase your odds of success.
Many business financial goals are short-term in nature. In contrast, others may take many years to achieve.
Okay. So we know what business financial goals are. We know why they are important. And we know how to set them.
Next up, exactly what you have been waiting for…
Examples Of Financial Business Goals Explained In Detail…
So, let’s cover each of the 10 financial business goals examples next…
1. Clearly Define Your Value Proposition
You must clearly define your value proposition for your target customers. This may not seem like a financial goal for a business. But, it is.
Your value proposition is the foundation from which your other financial goals are set. Knowing exactly what you are setting out to deliver means avoiding financial mistakes in the future.
So, make sure you are crystal clear on your target customers. And exactly what you are going to deliver for them.
Figure out what services and products you want to deliver. Then set a goal to be great at doing it.
From here, we can start digging into the finances…
2. Increase Sales Volumes To Generate More Revenue
Your value proposition dictates what you intend to sell. Whatever, “it” is. Now, set a business financial goal to sell more of it.
First of all, if your products or services sell, then you have a viable business model. Furthermore, every business needs to make sales. And that’s what sales professionals are good at.
A former colleague of mine and sales executive I used to work with had an interesting saying. His name was Peter. And Peter used to say,
“Nothing starts in a business until a sale is made.”
Now I differ with Peter on this to a degree. Because there are a lot of activities that businesses engage in before they start selling a product or service. But, there is wisdom to Peter’s thought.
Because every business has fixed costs. Those costs you incur no matter how much you sell.
And by selling more, you leverage those costs across a greater revenue base. Allowing more profit to flow to the bottom line. And ultimately, into your pocket.
3. Optimize Product And Service Pricing
I could write an entire article on business pricing strategy. But, that is a post for another day.
Suffice it to say that you should think about and optimize your pricing. But, this means different things to different businesses.
Are your products and services commodities? Then price at the same level as your competition.
Price a commodity item too high. And your competition will take all of your business. Because your offerings are not differentiated.
In contrast, do you sell premium products and services? Unique and valuable as compared to the competition? Then set your prices to what the market will bear.
Regardless of the situation, set your prices as high as you can. Because higher prices flow right to the bottom line in the form of greater profits.
4. Decrease Expenses
Pull together all of your expenses for the last month, quarter, and year. Then go through them with a fine-tooth comb.
Identify expenses that are not necessary. To deliver on your customer value proposition from goal #1. Then eliminate those expenses.
Strive to be a low-cost leader. In whatever business you choose to operate.
That’s why defining your value proposition is so important. Because expenses that directly support it are important. They should not be eliminated.
That would be like “cutting off your nose to spite your face” as the old expression goes. So, be like a surgeon when looking for cost reductions.
Take out, fix, and repair only the expenses that are not necessary. Because they are like a disease. That builds over time. And threatens the financial health of your business.
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You can learn more about Rakuten here. Next up, in our examples of business financial goals: productivity.
5. Implement Productivity Improvements
Set goals to execute your business processes either better, faster, or both. This is another way of reducing expenses.
Better means doing more with fewer resources. Faster means getting the most out of the resources that are already in place.
Years back, I worked with a business process consultant. His name was Rhett. He talked about getting better every day.
Rhett had a saying that has stuck with me. He used to say “we need to operate better today than we did yesterday. And be better tomorrow than we are today.”
Another expression I think about came from a CEO I worked for. His name was Bill. He talked about being faster and more efficient each day.
Bill always told us to continually ask ourselves “am I working on the right things and am I doing those things the right way”.
These expressions might seem catchy. But they are real.
They are at the essence of improving the productivity within a business. And are the foundation for employee goal setting.
As you think about ways to get better and faster. Consider smart business outsourcing of certain tasks to save time and money.
6. Increase Profit Margins
A company’s profit margin is the money left from a dollar of revenue. In other words, the money remaining after selling a dollar of whatever it is you sell.
Some businesses have high-profit margins. For example, 90 cents of profit margin remains from a dollar of sales.
In contrast, other businesses have low-profit margins. And may only have a nickel after making a 1 dollar sale.
It doesn’t matter what type of business you have. Set a goal to make your profit margins as high as possible.
By doing what we have already discussed:
- Increasing sales revenue
- Optimizing pricing
- Reducing non-valued-added expenses
- Increasing productivity
Finally, don’t forget about locating your operations in a business-friendly state. For the growth, expense, and tax benefits they can foster.
Put all of these elements together. Then, your profit margins will naturally rise. To their highest potential level.
7. Forecast Cash Flows
Have you ever heard the expression “cash is king”? Well, it is. At least when it comes to business financial goals.
Set a company financial goal to create a cash flow forecast. And keep it updated on a routine basis.
Budget your cash inflows and outflows. To do so, forecast the cash coming in from the payments from customers. And the cash going out to cover all of your business expenses.
Because it’s critical to know how much cash is coming and going. And when.
Also, your cash flows forecast becomes part of your business financial plan. Just one of many benefits of preparing a cash forecast.
8. Develop A Plan For Cash
And now that you know your company’s cash flow. Make a financial plan to use any excess cash wisely.
Typically, there are 6 options for the use of your company’s excess cash:
- Accumulate it for liquidity
- Reinvest it in the business
- Acquire other businesses
- Payoff debt
- Buy out minority owners (if any)
- Pay dividends to owners
On the other hand, you may be forecasting that your business will run a cash deficit. This is normal for early-stage growth companies. And, startup companies setting financial goals early in their life cycle.
If your company needs cash, you will need to seek out lenders or investors. Then, having a solid set of financial goals and a business plan becomes very important.
Your plan will help you convince outsiders to provide your business the cash it needs to grow. More on business planning in a moment.
9. Make Investments For The Future
Regardless of whether your business is generating cash. Or, you need to go outside the company and borrow money.
It is important to set smart business financial goals for investing money in your company.
Because investments become part of your business financial strategies. And a component of your business plan. More on that topic in a bit. But first…
You must determine what the best investments are today. That will make your business more money in the future. So, these financial goals tend to be long-term by nature.
As the saying goes, it takes money to make money. Just be smart about your business investments.
Be sure to require an acceptable return. Also known as return on investment (ROI).
One last topic in today’s financial goals examples for business. Then, I will wrap it up.
10. Develop A Business Plan
By now you should have a very clear idea about your business’s value proposition. A cash flow forecast. And a quality set of business financial goals that you are setting off to achieve.
If this is the case, then you are well on your way to having a business plan. And as I said earlier, a business plan is critical if you need to go to outsiders. For money to finance your business.
When you want your business to make money as soon as possible, planning can seem tedious. However, successful business owners will tell you, a plan was often the key to their success. And critical to avoid serious financial problems. that many businesses encounter.
Because business planning pushes you to think carefully about how you’re going to bring your venture to life. And build it into a financially successful business enterprise.
Typical components of a business plan include:
- An executive summary
- Company description
- Itemization of products and services
- Market analysis & opportunity
- Competitor analysis
- Company management & organization structure
- Marketing strategy
- Sales plan
- Operational plan
- Financial projections
- Financial funding needs
Your business plan is the long-term strategic view. That you will present to outsiders.
Then your business financial goals should be tightly linked to your business plan. And ultimately, support your long-term personal financial plan.
But remember, as part of your goal setting and planning processes. Be sure to keep your personal finances separate from your business.
I use Personal Capital to pull all of my personal expenses and investments together in one place. Best of all Personal Capital is free to sign up and use.
You can learn more about Personal Capital here. Okay. That concludes our review of 10 financial goals for a business.
Let’s wrap up with a summary of what we have covered.
Summary: The Importance Of Business Financial Goals
First of all, a business financial goal is a result that you want to accomplish in an area of your company’s finances.
Furthermore, business goals are a critical element to improve the odds for success at your company. And guide your day-to-today focus.
Finally, I suggest the SMART system for setting business financial goals. In this case, each of your financial goals should have critical attributes. They are:
- Specific
- Measurable
- Achievable
- Realistic
- Time-bound
And here is a summary of the 10 business financial goals examples we reviewed today.
- Clearly define your value proposition
- Increase sales volumes for more revenue
- Optimize product and service pricing
- Decrease expenses
- Implement productivity improvements
- Improve profit margins
- Forecast cash flows
- Develop a plan for cash
- Make investments for the future
- Develop a business plan
More Reading To Further Your Finances
My Favorite Finance Tools To Save & Manage Money
I mentioned several of my favorite finance tools throughout this article. And I have summarized them here for your convenience.
| Save money on online purchases with Rakuten |
| Separate your personal & business finances with Personal Capital |
Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.