How important is it for a business owner to have clear personal goals and truly know why they own a business (your owner’s intent)?
We believe it’s critical to your success and experiencing true satisfaction with owning the business. So much so that we kickoff every new relationship by discussing the business owner’s personal goals and their intent for the business before we talk for one second about the business, strategy, profit, etc.
An entrepreneur needs a clear understanding of what they’re trying to accomplish by owning their business. This allows them to create clear guidance all the way through the business to ensure the owner gets their ‘why they own’ fulfilled.
Let’s discuss why knowing your goal for owning a business is the foundation to building a more profitable and fulfilling business. This is a stacking process in which every decision you make affects every additional decision after it.
***If you want the short version, jump to the illustration at the bottom***
First, know your personal goals…
…because your business should support these, not the other way around.
If you want to save $1M in the next 5 years, your business needs to produce $200K/year (after taxes) in additional cash flow to you on top of your regular earnings you receive from it. If it doesn’t (or cannot), your business is at odds with your personal goals and this guaranteed to rear its ugly head down the road.
Know why you are in this business.
The real why, not surface level and not what you think others want to hear. This requires some digging. If you need some convincing why this matters or help with the digging, there’s a book I highly recommend called “The No B.S. Small Business Book” by Casey Graham. To quote Casey, this will become a filter for everything else you do in your business.
There’s no shame in wanting to make $1M in profit. There’s no shame in wanting to work 20 hours a week so you can be highly involved with family or giving your time to others.
It’s important your honest about the real reason or everything past this point is based on everything but the truth. There is no wrong answer, unless it’s not the real answer.
Develop a Purpose and Mission for your business (which supports the above).
This is where you begin to align your business with your why (or your goal & intent as an owner). You need to give people something to work towards other than helping your business be more successful in exchange for a paycheck – that doesn’t work the same way it used to.
At this point you have nailed down key foundational issues and you should consider them as such. Consider these 3 legs to your business stool. If any are missing or weak, the stool will weaken or fall.
Create profit and cash flow goals.
This is pretty straightforward. Create profit and cash flow goals which support your current Mission and fulfil your owner’s intent.
You’ll need these to set further direction in your business, which is the next point.
Build a roadmap to achieve profit and cash flow goals (using drivers).
With profit and cash flow goals set, begin building the road map to achieve them.
You want to set targets for the revenue, profit and cash flow drivers. This helps develop a plan to execute so you’re not left wondering how you will grow profit from $X to $Y. It takes the guesswork out of reaching your goals.
Use the driver targets to create a 2nd layer of targets.
Once revenue, profit and cash flow driver targets are set, you can take these a step further and define targets for additional metrics which are leading indicators of success for the drivers.
One idea is to develop weekly metrics you can track more frequently. We believe most businesses should have a basic set of weekly metrics which are leading indicators of the drivers. For a basic example, if you need 520 leads, you need 10 leads per week.
You can use the revenue drivers to extrapolate additional key metrics to manage toward.
Finally, goals need ownership.
Once the above is determined you can assign accountability to the team to execute against the goals you’ve created.
If you missed our article on how to become the CEO your business needs you to be, check it out here. We talk about this topic in the 2nd half.
Because we like pictures…
To illustrate this, below is a summary of how this works.
The order in which it’s presented from the bottom-up is not an accident.
As said earlier, knowing your personal goals is at the very foundation of building your business.
If your goals for the business are the concrete foundation for a house, your personal goals are the solid ground beneath it. Even that solid concrete foundation can crumble if built upon unsteady dirt.
Our challenge to you…
If you don’t have a clear owner’s intent or you aren’t sure, dedicate some time (like now, or tomorrow) and work on this. We frequently find a lack of focus or clarity in the business to be a result of the owner not knowing what they truly want from the business. Get honest with yourself, starting finding clarity and work towards fulfilling what you are after.
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