⏱ 3 min reading
Financial goals. How beautiful and full of eager you will be to set them. Oh wait, you’re not excited? We can totally see why this would be the case, but setting some financial goals for your business is a very essential element of your business. With a financial goal, you can work towards achieving something at the end of a year for example, which will allow you to compare with last year and see the progress you made. Moreover, it can just be a way to motivate yourself to find new ways of making money.
There are 4 different kinds of financial goals that you can consider:
1. Blue Sky goals
This goal can be characterized as the sky is the limit. Essentially, it’s an extremely high and maybe even slightly unrealistic goal. But it helps you to think differently. And especially for start-ups, in the beginning, you are eager to see results fast and blue sky goals usually have many investors or are a way to try and make a lot of profit. When you keep pushing for more profit, the sky is so blue that it’s essentially limitless. But while it may sound very rosy, this isn’t always the case. These types of goals are quite unstable, and if it turns out the other end it can be devastating for your business.
2. Realistic goals
As you can probably guess from the name, these are more trustworthy than blue sky goals and therefore these are often the most common financial goals made by small businesses. Realistic goals are set with all your data from the past, so how you have previously performed. Based on this, you are able to set stable goals for the future by slightly increasing your goals.
3. Lowball goals
Quite the opposite of setting extraordinarily high goals, you can also have very low targets which could help avoid future money problems and make it way easier for you to actually reach your goal. But these types of goals are very safe, and don’t particularly push you outside of your comfort zone or force you to think differently. Therefore, they may eventually lead to stagnation because there is little to no new development and growth.
4. Stretched goals
Stretched goals lie somewhere between blue sky and realistic goals. They are similar to realistic goals, but they force you to take that little step extra. With the same data you can use for realistic goals, you need to think a little bit further about what you aspire for your business to become. The goals should not be as far off as the blue sky goals which make them more realizable. However, if you don’t meet your first milestone, this will probably mean it’ll be difficult to catch up. When you are only a little bit behind on your milestone, this could leave a bad mark with your investors so you should, therefore, consider whether or not this goal is for you.
Extras to think about for setting goals
Above all, you need to think about what it is exactly that you would like to achieve for your business and you need to think realistically what it could achieve. In addition, you need to have a good look at your industry. Ultimately, you need a goal that resonates with you personally since it’s your business. When setting your goals, you don’t only have to set long term goals, but you can also set short term goals that attribute to eventually reaching your bigger long term goal. Lastly, it’s not just about being profitable but making sure that you can manage your cash flow. Cash flow is all the amount of money that’s coming into your business versus all the amount of money that is going out of your business due to payments. If you have more money coming in than leaving, you are cash flow positive which should really be your ultimate financial goal.