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5 Tips for Financial Goal Setting!

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“What’s the point of setting financial goals?  I have no idea what will happen each day for sales.  Unexpected expenses crop up all the time, too.  If it’s just a ‘guess,’ then why bother?”

That’s what one of my clients just shared with me.  I appreciate his candor and his frustration.  However, if you want tomorrow to be better than today, it starts with intention and imagination.  So, set financial goals…no matter how awkward it is.  As you clarify your intention and take aligned action, you will make those dreams come to pass.  It’s OK if it takes a little longer and costs a little more than you hoped.

Here’s more help!  I put together 5 Tips for Financial Goal Setting.  Enjoy!

1. Take a look at the past, but don’t recreate it.  Review your Profit and Loss reports for the last two years.  Run the reports so that you can see the Sales and Expenses as a percentage of total income.  If you are delighted with past performance you can use the “model” for 2014.  However, if you want a better outcome, be willing to start fresh.  It’s called Zero-based Budgeting.  Start with a clean slate and list what you would want to incur for Expenses.  Hint!  Salaries and wages are the BIG Expenses.  Be generous with them.  Add all other Expenses…THEN create the Sales line to be big enough to cover all Expenses and leave your desired amount of profit.  Use a columnar pad and a calculator if you want to go “old school.”  You can use an Excel ™ spreadsheet.  Or, your accounting program probably has a Budgeting feature.  Check it out.  Set Goals for Sales, Expenses and Profits.  A weekly review of actual to Budget will help you see if you are moving in the right direction.

2. Use per Truck, or per Salesperson numbers for Sales Goals.  Instead of increasing Sales by a percentage for this year, increase Sales by assuming 1 or more additional Service Trucks of Salespeople.  So, instead of saying, “Let’s increase our top line by 10% over last year,” consider, “Let’s add one more Truck.  Each Truck is capable of bringing $300,000 in Sales to the top line.”  This is especially appropriate if you have a pretty good idea of what each Truck contributes to the whole.  Note you could opt for a percentage increase IF you are willing to increase your prices.  For instance, if you increase prices 10%, then you could expect to increase Sales this year by 10%.  And, you could do both.  Increase your Goals by adding a Truck or a Salesperson…AND raise your prices.

3. Consider Straight-line or Flexed Monthly Goals.  You can create a Budget for the year, then divide by 12 for a monthly Goal.  That’s a Straight-line Budget, and it is simple…which is good.  If you have never hit $1million in Sales, the month you hit $83,333.33 in Sales is the month you are tracking $1million.  A Straight-line Budget is an easy one to get the team involved in because their Goal doesn’t change from month to month.  A Flexed Budget is appropriate if there is a serious seasonal impact on your business.  If you are an HVAC contractor, you may want to weight your Budget to have On-Season months and Off-Season months.  Do steer clear of having different Goals for every month.  It’s weird when a “lose” this month is a “win” next month just because you have based your Budget on past financial data…and that’s how the past stacked up.  I vote for using Straight-line monthly Goals and figuring out ways to overcome seasonal hiccups.  And, you can always jump to another Budget if you have a big event – you acquire a company, or add another Truck.

4. Make the Sales Goal Big, but not TOO Big.  Whatever you decide for the total Sales Goal for this year, put it to the “gut” test.  If the dollar amount generates excitement and gets you all fired up, that’s a good indicator.  If the dollar amount is just too big, and makes your stomach hurt, dial it down a bit.  Aim for a “juicy” Goal…one that gets the juices flowing but doesn’t “collapse” you.  You can always have a few Budgets at the ready.   Explore different assumptions and company concepts on paper or in a spreadsheet.  As you grow, you can adopt a different Budget.

5. Lighten up about the Money!  Whether or not your achieve your financial Goals doesn’t impact your worth as a human being.  Not one jot.  Business is just a game.  Some days you win, and other days you get your butt handed to you.  Goals are important for clarifying your intention.  What do you want to have?  Think it, ink it…and take aligned action.  Sometimes, we put a Budget together and you – or a team member – starts to think of the Budget like the tablets that Moses brought down from the mountain.  You can change your Budget!  Weekly, monthly reviews of actual to Budgeted information help you see what you are dialing in on for dollars and percentages and other areas where you may be WAY off.  You can change your behavior.  For instance, if Labor as a % of Sales is much higher than Budgeted, you may consider training your Techs – on Sales, Operations and Technical skills.  Their increased performance and efficiency may bring that percentage down.  Or, you may raise prices on a few key tasks and see the effect on the numbers.  You may also decide that, given the overall performance of the company, your actual numbers and percentages are fine…and the Budget may need adjusting.  Try stuff.  Have some fun in the Game of Business!

Take a swing.  Set financial Goals.  And see what it makes of you to attempt to achieve them!  🙂

Love, peace, $$, freedom,

Ellen

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2017-01-23T21:12:34+00:00