Business Goals Create Profit

The beginning of the year is an excellent time to reflect on past business successes and challenges and start making plans for the future.

By examining the trends, fluctuations and issues previously faced, business owners can better prepare for the year ahead. Two important exercises that business owners can complete to increase profits and productivity are to set business goals and develop a cash flow projection. 

Goal setting is an important exercise for entrepreneurs as it forces them to clearly define what they want to achieve in the coming year. Setting realistic, measurable, and achievable goals and then striving to attain them helps to keep entrepreneurs focused and increases the odds of succeeding. Goals can be broken down into manageable tasks or objectives and communicated to staff so that and everyone can be involved in accomplishing the goals. As well, this exercise will provide the entrepreneur with the tools necessary to evaluate the performance of the business during the year ahead.

Once a business owner has established their goals, attention can then be focused on the second exercise completed by successful entrepreneurs – the development of an annual cash flow projection. The cash flow projection predicts when the money associated with sales will be received and when the money paying the expenses will be paid out, while taking seasonal fluctuations into account. The statement provides the business owner with an estimate of how much money will be required to finance the day-to-day operations and shows potential investors/lenders that the business will have sufficient cash to meet its commitments on a regular basis. The projection typically details monthly sales and expenses with the entire year outlined on one page. The cash flow projection will be more realistic if the goal setting exercise and its resulting actions/tasks have been incorporated into the projection. Once completed, the cash flow can be reviewed for accuracy, and then used to benchmark the business owner’s success over the course of the coming year.

Goal setting helps entrepreneurs translate ideas into actions and subsequently, into profit. The cash flow forecast provides an estimated budget for business owners to follow and strive towards over the course of the coming year. By completing these two important exercises, small business owners increase their chances of success.

Mark Jamieson is the Co-ordinator of the Orangeville & Area Small Business Enterprise Centre. He can be reached at [email protected], 519-941-0440 Ext. 2270 or via cell phone at 519-942-6334.