Goals are good, right? Well, not if you’re setting the wrong ones, since chasing after short-term targets can mean you’re completely missing opportunities to grow your business. Read on to make sure you’re on the right path to success…

 

It’s usual to impose targets on your business activities for various reasons – not only can they help you to focus your efforts and maintain motivation, but they can also help you to measure success and know whether you are on track. However, selecting the wrong ones can lead to short-term strategies that simply aim to meet the goal, and the bigger picture (of a truly successful business) can get rather lost as a result.

For example, turnover is often considered a measure of success. This means that companies often make certain decisions in the chase for higher turnover – but in fact even businesses turning over millions of pounds can still be relatively unprofitable, so this is one target that’s not overly helpful. If this sounds like you, why not try refocusing your attention to margins and profitability? Simply chasing turnover can distract from the real issue: making money.

Re-aligning your objectives might seem counter-intuitive at times – for example, you might need to be more selective in the clients you take on – but as long as your decisions support the company’s long-term goals, they will be the right ones to make. Remember the 80/20 rule – 80% of your income is likely to come from 20% of your customer base. Not all your clients are worth having, even in recessionary times when you feel each new sale is a bonus. Remember, turnover is vanity, profit is sanity!

Another example of where short termism can be disastrous is when business management decisions are based on historic profit and loss information only. Whilst this is useful for recording what has happened, this approach does not necessarily help to change the future, which is really what running a business is all about. We always try to get our clients to identify their key profit drivers; the three or four key activities which really do make them money and move their businesses forward. This exercise allows business owners to then focus on these activities, which takes them closer to their strategic objectives.

Business is often fraught with distractions as well as routines to deal with, and it is too easy to take the short-term solution again of just dealing with that day’s activities, often out of habit. As a business owner, going home at night and feeling you have worked hard does not mean you have done a good day’s work: that is an employee mentality!

We invariably find that our most successful clients are not necessarily the busiest or most hard working. We find that they are not over-obsessed with detail and do not get dragged into short-term panic issues, which frankly are always there anyway. They focus on the key profit drivers within their businesses and set up systems andprocesses, which are delegated to make sure they are optimized every day. This then frees up their time to focus on the next deal and to manage strategy and longer term issues.

As business owners we all work very hard in our respective industries and professions, and sometimes this hard-working approach can actually be a barrier to success. Creatures of habit, we get used to doing the same tasks day in and day out, and often do not stop to wonder whether we are actually doing the right thing. Perhaps in many cases up to 90% of what a business owner does is for the short term, and only 10% is part of a longer term strategy. Every day before starting work, you should ask yourself ‘what am I going to achieve today?’ – and not ‘what am I going to do today?’.

At CBHC we look closely at the successful clients that we act for and really try and understand what makes them tick. Research has proven that business owners live and think 95% in the future and only 5% in the past. For most other accountants, their thinking and approach is actually the other way around.

We like to think that we live in the same time zones as our clients and we have set up our Business Advisory department which allows us to focus on the future for our clients – we can help make your business more profitable and successful going forward. We do of course have very strong departments which allow us to very accurately record the past, because without historic information, how can we predict the future? We see the accountant’s role changing dramatically as time goes on, and at CBHC we aim to be at the forefront of these changes – helping businesses everywhere to establish clear goals and strategies and then more importantly, helping them to get there!

To find out more about how we can help you, please talk to our Business Advisory team.