Setting targets for a business right now feels like an impossible task.
It’s been said before this year that forecasts are pointless because they are so soon out of date. As a result, people assume they don’t achieve anything. Even more so this year, people feel that setting targets when the world changes so much from week to week is a fruitless exercise.
It will not come as a surprise that I disagree.
Why set targets now?
From experience, it seems that forecasts are prepared and targets are set for two main reasons:
- To prepare for differing scenarios of business performance
- To drive a change in behaviour
In 2020 especially, preparing for differing scenarios is key to survival. It enables you to react quickly to changing conditions.
Preparation for changes in business performance
Even before the pandemic, clients looked to a forecast to help them prepare for the what-ifs. It helped them to understand the impact – both good and bad – ahead of time.
The most common priorities have been:
- Planning growth and the related costs – Think recruitment, management investment time, marketing strategy or increased overheads
- Funding – Understanding what funding might be required to grow the business or alternatively needed to fund any reduction in income
- Capacity – Do you have the right level of staffing, how can you manage ebbs and flows
- Scenarios – What would 10% more or less income mean for your profits and cashflow
Once the targets are set, vulnerabilities can be identified and plans to deal with them accordingly.
The next step is to set the detailed objectives required to deliver the targets set.
Driving Behavioural change
Our clients are self-motivated and know what they want from their business. They don’t look to a forecast to drive a change in their own behaviour. However, in cascading those targets to employees, they see it as driving behavioural change throughout the business. This goes far wider than the simplest example where sales targets are linked to remuneration.
Sharing the objectives of the business with staff results in:
- Greater staff retention – Staff are bought into the aims of the business for the year ahead and motivated to help achieve them.
- Reduced pressure – Sharing the objectives of what you want to achieve and the actions to achieve it with staff doesn’t leave all the tasks at your door.
- Quicker results – Shared objectives are achieved more quickly and not bottle-necked with you as the business owner
- Innovative ideas – Openness encourages ideas and staff will contribute new ways of thinking all working to achieve your targets
- Staff objectives – The sometimes-onerous task of writing staff objectives happens organically with the forecast aims cascaded down into the detailed requirements which can be more easily allocated across the workforce
So, with all this uncertainty around – the reason to forecast is to help businesses cope. It enables businesses to plan for the worst and the best and understand the impacts now. Setting detailed targets for you and your staff follows on from the high-level forecast and will help you to achieve your aims.
Get your finances on track with Helen Fleet:
Helen Fleet of HF Financial Strategy works as a finance director and guides companies to delivering their financial and business objectives which can include cash flow planning, pricing reviews and ways to improve profitability.