We all know that having goals is the key to success in life. It’s the same in business. Financial goals plus focus equal results.
With a new year about to begin, now is the perfect time to identify one to three financial goals (targets) and get serious about making them happen.
Why only one to three goals?
In my experience, limiting the number of financial improvement goals you are focused on in any given month is the secret to success. By limiting your goals, you force yourself to think deeply about what really matters to you. It motivates you to think about what component of your current financial results needs the most attention right now. You ask yourself questions like:
- What numbers am I most excited about improving?
- What area of the business, if I were successful in moving the needle, would put the most money to the bottom line?
- Is my business as profitable as it should be? If not, what area is lagging and needs my attention to drive improvement?
- Is the business creating the level of excess cash that it should so that distributions to the owners are consistent and growing?
Thinking through these important questions will help you hone in on the parts of the business that need your attention.
Breaking through the whirlwind
Another benefit of limiting your financial goals is that it is a fantastic way to break through the “whirlwind” of decisions and challenges that you have to deal with every day. Here is a quote from a great book, The 4 Disciplines of Execution, that highlights this reality:
The real enemy of execution is your day job! We call it the whirlwind. It’s the massive amount of energy that’s necessary just to keep your operation going on a day-to-day basis; and, ironically, it’s also the thing that makes it so hard to execute anything new.
I encourage you to think deeply about the truth of that quote. The reason so many people fail to achieve their goals is they ignore this reality.
The fact is, you wear lots of hats in the business, and you deal with hundreds of day-to-day decisions, issues, and problems every single day. That’s why you need to keep your monthly or quarterly financial improvement goals to a small number. You only have so much energy to devote to new initiatives or bigger picture financial improvement goals.
The scoreboard is important
After you have picked your one to three financial goals and created your plan for how to make the results happen, it’s time to put a process in place to monitor results compared to the goal/target. The secret sauce here is frequent visibility into progress (or lack of progress) so you can “course-correct” quickly.
I strongly recommend you have daily or weekly updates on your financial goals and results rather than waiting until the end of the month. That means you need a process for putting the numbers in front of you that is faster than waiting on your monthly financial statements.
My favorite way to accomplish daily/weekly monitoring of financial results against target is with a simple dashboard. I have discovered over the years that combining numbers with a visual representation of those numbers creates insight and action in a uniquely powerful way. It creates insight in a way no other tool can do.
Dashboards made simple (and powerful)
In my next article, I will begin a series that will show you how to use dashboards to drive profitability and cash flow. I’ll include specific examples of financial goals and targets with actual data and interactive dashboards.
I’ll walk you through the tips and tricks I have learned about how to visually present data so it conveys instant insight and creates those “aha” moments that make monitoring results vs. targets productive… and even makes the process fun.