How do you set financial goals and give yourself the very best chance of achieving them? Understanding how to do this properly and then manage your tasks and activities accordingly can be a struggle.
Setting financial goals in our business can feel like a daunting task. Most people resist it because they don’t know how much to expect they’d earn and they also don’t want to end up disappointed. This approach however leads us into trouble because everyday we are spending money and running up cost, thus we need to make sure we are replacing that money by earning it back.
For most small businesses wondering about setting financial goals, I recommend having two targets. One is the ‘Must Earn’ figure that covers the overheads of the business and living, and the other is ‘Goal Figure’.
Every day we need to be focusing on activities that bring in the money that we need to meet our ‘Must Earn’ goal, otherwise we are eating away at our savings or building up debt.
In the early days of your business it really doesn’t matter where you earn the money to pay for your ‘Must Earn’ goal, just as long as you do. You must put enough time aside each week into guaranteeing that that money is coming in.
When you take this approach you’ll find yourself asking better questions of yourself, and always focusing your business on profit making activities. Many entrepreneurs can suffer from ‘Creativitus’ – an addition to always making things and never selling. It is important in your business that you have a mixture of activities and focus on selling, at least to meet your ‘Must Earn’ figure.
A lot of entrepreneurs experience resistance when it comes to setting their ‘Goal Figure’. This is usually because they have experienced failure with this in the past and don’t want to disappoint themselves. However, without this goal being in place, we fail to ask the right questions of ourselves and structure the business in a way that will lead it to make good income.
Here is how to handle it. When you set your goal figure for the year, you’ll need to divide it by 12 to find the monthly figure. However, this isn’t your goal for the next 12 months, but rather a baseline that you’re aiming for from here onwards in your business. As you grow in your business you can raise this figure.
Your goal is to aim to earn this figure in your business, however, if your business is new or you are currently some way off this figure with your current contracts and activities, you’ll need to make those monthly goal to be lower and more achievable in the first three months. Then over the months this figure should go up in increments and add up to your Goal Figure for that 12 month period.
By doing this you will find you’ve given yourself a ‘grace’ period in your early days with a realistic income target, you’ll be asking better questions of yourself and thus producing better results that lead you to be able to hit these higher income goals and feel amazing when you have achieved them.
What is better, at the tail end of the year you’ll be earning the higher income target and managing your business accordingly. There is no need for you to reduce your activities or your income target, thus in your second year you’ll be able to earn this high figure every month, making your second year even more profitable.
On this to note however: if your income goes up as well as your spending, they’ll be no profit. Aim to keep your spending the same no matter what your earnings.