Friday, November 29, 2013

SOP Friday: Financial Goals - More than Revenue Targets

We've talked about The Basics of Financial Goals and Making Realistic Revenue Projections. Now let's look beyond the money. This isn't quite a "mission statement" discussion, but it's not too far off of that either.

I like to remind small business owners: Your business exists to serve your personal goals. Yes you want to make money. Yes you want to help clients. But what's the big picture?

One of the terms you might hear in management training is stakeholder. This is different from a stockholder. A stock holder owns a piece of the company. A stake holder has a stake in the company. Stakeholders include the owners, the managers, the employees, the clients, and even the vendors.

Now that doesn't mean you need to intentionally create a business for the benefit of all those folks. But you should take stock of who they are. Let me tell you a story about a client who is a great stakeholder in our company.

Just a few days ago Mike and I were talking about this client and trying to decide whether to charge them for an on site visit that consisted of turning on a switch. I put my labor as standard on site labor. That means billable. Then I told Mike he has to decide whether or not to charge an hour for that.

Mike said "No. First, it's [Company]. Second, it's Janet. Third, they always do everything we say. In fact, they bought a new server before the three year warranty was expired on the last server.

On two different occasions we almost dropped this client because they were below our 10-user threshold. They literally begged us not to drop them. They honestly see our support as a key element in their success.

That's a stakeholder!

Now, what has all that to do with setting your financial goals? It's simple: Making money is also about being happy, making your clients happy, making your employees happy, and keeping your vendors happy. So when you sit down to project targets for the next year, three years, and five years, you should take all that into account.

There is a true cost - a monetary cost - to having loyal clients and loyal employees. It might mean keeping smaller clients, paying employee benefits, or even throwing a party once in awhile. Sometimes you need to budget for "unnecessary" expenses that make your company a better place to work and a better company to do business with.

And it's not selfish to consider your personal goals as well. What do you want to do with your life? Do you want to travel more? Buy some rental property? Start a non-profit organization? Put your kids through college?

Also consider the long-term goals of the business itself. What's the "end game" strategy? I was talking to a good friend a few days ago about a very esoteric part of my business and trying to decide on pricing strategies. In true entrepreneurial style he asked me what effect this decision would have on selling my business (Small Biz Thoughts). We had never talked about me selling this business, but he assumed that that's one possible end game. And he wisely suggested that I make decisions based on the long-term goals of the company.

Let's be honest: Most clients are really just customers. Most employees are not in it for the long haul. Most vendors don't really care much at all about your business. But some clients are true stakeholders. Some employees are true stakeholders. And even some vendors might be stakeholders.

All of this ties into the discussion of the kind of company you want to be. We work hard to have employees and client who are fun to work with. I love it when employees say "I love my job." And I'm proud to say I've heard that many, many times in my life.

It takes intention to create a business that serves your goals - personal and professional. First you need to acknowledge these goals. Then you need to keep them top of mind as you plan out your budget for the next year. Some of these things cost money. But in the long run they create the company you want.

Nothing happens by itself.


Comments welcome.

- - - - -



About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at SmallBizThoughts.com.

- - - - -

Next week's topic: Shredding

:-)
Join our Indiegogo campaign

Get the new 4-book series at the best price you'll ever see

Standard Operating Procedures
for Technology Consultants




Help make this 4-book set a reality and earn great perks for yourself.


See all the details - and some videos - at that site.

Thank you for your support!

No comments:

Post a Comment

Feedback Welcome

Please note, however, that spam will be deleted, as will abusive posts.

Disagreements welcome!