Setting financial goals is important as many small-business owners start a company based on the fact that they have expertise with a particular product or service, not because they are general business experts. Focusing your efforts on creating a great product is key to your success, but you’re in business to make money, and the way you handle the financial side of your business is as important to your success as the quality of what you sell. Take the time to set realistic financial goals and monitor them to ensure that your business meets its potential.
How to set Financial goals for small Business.
1. Increased Revenue
One of the most obvious financial goals for any business is increased revenue. Revenue differs from sales in that sales refers to units, while revenue refers to amounts. For example, you can increase your revenues without increasing your sales by raising your prices. Forecast your revenues and set goals every year using a variety of tools, including past performance, marketplace analysis, industry research, and feedback from your staff. Don’t set a generic goal of increased sales — work to set specific revenue goals, and review and adjust them each quarter, as necessary.
2. Decreased Costs
Many small-business owners fail because they don’t control their costs. The difference between profit and loss is often not sales volume, but cost control. Review your expenses to learn if you can cut your utility costs, reduce waste, negotiate better contracts, decrease interest payments, and find other efficiencies you haven’t considered. Simply bidding out contracted services, such as insurance, information technology, accounting or marketing, can help you identify ways to trim your budget each year.
3. Improved Margins
Another way to improve your profits without increasing sales or revenues is to set a goal for improving your profit margins. You can do this by reducing your cost of production and overhead expenses and by raising your prices. Test market different price increases in different locations or on specific products before your roll out an overall price hike. If you don’t lose significant sales after you test a price hike, you can more confidently raise your prices.
4. Debt Service Management
Calculate the amount of interest you are paying each year and set a goal of reducing your debt if you feel the amount of interest you pay is too high compared to the benefit you are getting from your debt. Reducing your debt can help you improve your credit score, and get more credit and lower interest rates. If you have a balance on a credit card, pay it down faster, look for a new credit that offers a low-interest or interest-free balance transfer, or simply call the credit card company and ask if they will reduce your rate. Meet with your banker and other lender to determine if you can get more favorable terms, which might require transferring your business loan from one bank to another.
5. Cash Flow Planning
Knowing how much you will need to pay your expenses is an important part of financial planning, and a master budget helps prevent surprises. Many small business owners make the mistake of not tracking when they will owe money, leading to temporary shortages and cash flow problems. Create a cash flow budget that lets you see the exact amount of money you might take in and owe each month, in addition to creating a budget that shows your monthly averages. Cash flow planning helps you avoid a lack of cash that could stall or shut down your business when you can’t pay your bills, even temporarily.
These are some of Financial Goals you can consider when starting a new business also seeks experts advice as some businesses need more information’s.