How to Set Goals as a Small Business Owner
Having owned businesses for nearly two decades, I've learned that setting long-term goals and then working backward toward short-term goals is an effective strategy for growth.
Goal-setting can be an absolutely amazing driving force for a small business. Goals can jumpstart your performance and take you to a whole new level, or they can do exactly the opposite and set you back weeks, months, or even years at a time. This article's sole purpose is to describe why goals should be set in the first place, and how you can apply goal-setting effectively to your own small business—or even your life.
My Background
I've owned and been involved with running multiple businesses for the better part of two decades. I mention this not so that you are impressed, but instead so that you understand that I've made plenty of mistakes in attempting to set goals for each of these businesses over the years, and as a direct consequence, I've learned through trials by fire what works and what doesn't.
I've been in business long enough to observe the consequences of my goal-setting strategies over a long time frame. In this article, I provide a framework for how to set both long and short-term goals for your business by keeping your overall objectives in mind at all times.
Predictive Marshmallows: The Importance of Delaying Gratification
Decades ago, psychologists at Stanford university carried out one of the most famous experiments in human behavior ever. A marshmallow was placed in front of a young child who was told that they could have one marshmallow right now or wait and have two in a few minutes when the researcher came back.
Clearly, sitting in front of a treat for what seems like an eternity is a lot to ask of a child, and unsurprisingly, many of the kids caved and ate the initial marshmallow. Fortunately, researchers followed up with their subjects years later, and the results were impressive: The children who were able to wait until the researcher returned to collect their two-marshmallow payout had higher levels of success in life as measured by a variety of metrics ranging from SAT scores to BMI.
In fact, the ability to accept delayed gratification proved to be the single most effective way to measure how successful a person would be later in life as defined by very visible metrics. So, what gives?
Good Things Come to Those Who Delegate
It's clear that the underlying message is that waiting for a larger reward is a fundamental key to success in nearly any endeavor. This is the essence of investing: the ability to forego something that brings you a little bit of joy today in exchange for a great deal more joy at some future date.
As a business owner, you really need to think like an investor and spend as much time in the important-but-not urgent quadrant of Dwight D. Eisenhower's urgent/important matrix (Stephen Covey coined this phrase, but it's often also called the Eisenhower Matrix).
The matrix provides you with an extremely useful filter, where everything is either relatively urgent (or not), and everything is also either relatively important (or not). By having an urgent axis and an important axis, you can quickly understand where you should be spending most of your time. If a project is urgent and important, it needs to be done immediately, although you may be able to delegate it to someone else (ideally, you're delegating most of your urgent tasks so that you can focus more on the important ones).
By foregoing the instant reward from quickly accomplishing tasks, you can focus instead on things that will help your business the most in the long term, ensuring a better future. By having good systems in place and delegating when needed, you can spend far more time doing important things, especially those things that buy you more time. This virtuous snowball is self-reinforcing, and the more you can focus on the long term, the better off you'll be.
Beginning With the End in Mind
The maxim "begin with the end in mind" has been coined by the aforementioned Covey in his 7 Habits of Highly Effective People, which certainly qualifies as one of my picks for the best books of all time for small business owners. If you're able to think about where you want to be 10 years from now, you can have a set of far-off goals that can be your true north.
Thinking about where you want to be in 10 years can be intimidating, though. We humans aren't wired to think long-term. Instead, we think in the short term to survive in an environment where thinking for too long can get you killed. This evolutionary tendency manifests itself today in our distracted, short-term thinking. This means we often spin our wheels with our businesses and just barely eke by, scraping enough cash up to pay our bills and—if we're lucky—ourselves from time to time.
Because of the way we're hard-wired, we need to develop our long-term thinking muscles by practicing thinking about how things might be in a decade. Be patient here, and resist the desire to stop the exercise too soon if you're trying to visualize where your business could be in the distant future. Understand that your vision muscle will strengthen with use, and each time you wrestle with far-off goals, the task will become easier.
Making the Future You Want Happen
Thinking about where you want to be 10 years from now is a great starting point, but it certainly doesn't get you there. Instead, you need to extrapolate backward to today and create action items you can implement immediately. The method I've settled on is to consider the long-term time horizon (we're using a decade, but you can certainly think even further out than that, and I do recommend it when you're ready).
Where do you want your business to be in 10 years? How would you like to be spending your time on a daily basis as an owner, and what sorts of systems would you like to have in place for your customers?
Michael Gerber does the best job I've seen anywhere of helping you think through what sort of things would be in your business's best interest in his seminal The E-Myth Revisited. I think I've recommended Gerber's book to more business owners than all other books combined, for what it's worth.
When you're identifying these goals, it's important to keep in mind that you can get far less done in a week than you think you can, but you can get far, far more accomplished over a decade than you probably think you can. The trick is to consistently march in the right direction over time.
Extrapolating Backward From Your Long-Term Goals
Once you have an idea of what your business should look like in a decade, it's time to extrapolate backward to today. Given that you want to be a thousand miles down the road after 10 years, where do you need to be after five years? The answer to this question can be a good challenge with no precise answer.
Sometimes, you'd need to be 500 miles into your journey by the halfway mark, but sometimes, you're sort of building up your car's engine along the way, accelerating as your business grows. If the process that gets you to year five is compounding, you might only expect to be a quarter of the way there by the time half of the time has passed.
If it's linear, on the other hand, you'd want to be at least halfway there by year five (and maybe even further, factoring in a nice margin of safety). If you can estimate where you need to be by year five, it can be a little easier to think about where you want to be in a year, and if you have an idea of where you want to be in a year, you can slice that up into monthly goals that make sense. This is much, much easier than just asking yourself what you should work on this month in order to reach your 10-year goal.
Monthly goals can lead you to weekly goals, and weekly goals can lead you to daily goals. Using this process can help ensure that you're always marching in the right direction, and setting daily goals is a simple matter of extrapolating backward from your longer-term goals. This means that every single day, you're working on where your business needs to be 10 years down the line.
Momentum and Team Building
While marching along toward your vision, it's a good idea to build momentum with small wins as you go along. After all, you're only human, and even though your rational mind understands that you're making progress toward an amazing horizon, it's helpful to throw little bones to your subconscious.
I'm a huge fan of trying to get the toughest things out of the way first, but you might not always be motivated to get started with the least palatable project on today's plate. This is infinitely more true when you have business partners and employees who are going to be the ones who help you reach these objectives.
It's important to keep in mind that the people you work with might not always see where you want your company to be in the future quite as well as you can. In fact, it's very likely that you're the only person who can see this vision so clearly. It's important to articulate that vision carefully to your people, but even with great communication, it's important to achieve some really small wins first so that people gradually come to trust in your ability to get things done. With a great team, your ability to accomplish goals goes up exponentially.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2021 Andrew Smith
