How to Set Goals for Your Business That Work
Setting goals and achieving them are two entirely different things – but they don’t have to be.
The standard operating procedure for most small businesses is to create a goal at the beginning of the year (hit $1mm in revenue, hire 5 new staff, launch a new product), kind of work at it, but drop it by March when more pressing issues push it aside.
If you’ve been in that mode for a while – it’s ok. We’ve all been there (if you know an entrepreneur that says they haven’t, they’re lying).
The truth is simple. It isn’t new or innovative, but you need your goals to be clear with well-laid out steps to get here.
If you’re looking to grow your business and trying to figure out the next steps, check out Traction. The EOS system they’ve developed works for a lot of people and is definitely worth your time.
One of the ideas they address that is absolutely correct is that you need to set SMART (specific, measurable, attainable, realistic, and timely) goals.
Whenever a new business starts, odds are they are going to mess up their pricing. Whether they are so high that they never get a sale, or too low and so they never get a sale because they’re so cheap, most everyone gets this wrong in the beginning.
Let’s say you’re a solopreneur in a service business. The common place to start is to look at what it costs to keep the doors open and add a 10% margin. Say it costs $250,000 to run their business for a year. That comes out to $120 per hour (8 hours a day, 5 days a week, 52 weeks a year). Add 10% and the company’s hourly rate is $132 an hour – if it’s a 5-hour job, that should run $660.
In a way it makes sense behind the scenes, but that doesn’t mean it makes sense to your client. If the work you are doing for them is going to make them $150,000 this year (or save them that much money), they are going to see the price of $660 too cheap and thus unable to create that much value – the price needs to be in line with the benefit they’re getting or they will pass (even if you can do the work for that rate).
Now let’s say you’re a solopreneur who is at capacity. While you’re going through your hiring process you get a new prospect. You can’t do the work without hiring, so now your price is going up significantly. Your old rate doesn’t work anymore.
The same process is true if you are running a product-based business. Odds are you are accounting for shipping costs, receiving & stocking inventory etc in your prices. But if your warehouse is full and you need to expand, that next unit is going to destroy your margins. Thus your pricing needs to reflect that major shift in your fixed costs to keep the lights on.
The reality is you will get more sales if people like the value proposition of your product or service –it’s why Timex and Rolex are both able to sell what is basically the same product at completely different prices.
