The outcomes we experience in our businesses are directly correlated to the decisions we make, and the actions we take, on a daily basis.
It’s accepted wisdom that setting goals in business is important. Yet I’ve seen a range of different approaches fail.
Let me give you some insight into what works best.
There are different types of goals. Who knew?
First of all, there’s your Big Hairy Audacious Goal (BHAG). The 10 or 15 years out version that needs to be a big stretch. By definition, this one needs to be about 20% believable.
Just to be clear, 20% believable is almost unbelievable. It’s barely believable. It’s almost inconceivable. That’s what I mean by 20% believable.
If you find that your BHAG is 90% believable you haven’t set a BHAG. I find a lot of business owners are intimidated by the BHAG. Here’s my theory on why that is and what to do about it.
Lots of financial planning firms I’m working with have just cracked £1m of annual revenue, and at times getting there has been pretty hard. However, at £1m of revenue I believe the next focus needs to be £3m and £5m of annual revenue; even though £2m might seem like the logical next step.
However, when I suggest this to business owners this is what happens:
When I say, let’s aim for £3m, they think to themselves, “If doing £1m of revenue hurts this much, doing £3m will hurt three times as much and I’ll die.” They don’t say this out loud, of course, but I know that’s what’s going through their mind.
If you find yourself thinking or feeling something similar, at whatever level of revenue you are doing now, let me explain another way to think about it.
If you’re doing £1m of revenue, setting a goal to do £2m doesn’t force you to change, and change is what’s necessary to make your life more enjoyable.
A business that turns over £3m or £5m looks a lot different to one that turns over £1m. If you start creating the building blocks you need to get to that level, it will make your future business really perform and be a joy to work in.
Building blocks you’ll need are:
• Making sure you have the right team on board
• Developing the skills of your existing team
• Streamlining your business processes
• Improving your client experience
• Developing your next generation of leaders
• Improving your own delegation and leadership skills
• Institutionalising your marketing and lead generation
• Improving adviser communication skills
The millisecond that you set a BHAG that is larger than what feels comfortable to you, all of your necessary next steps become obvious. You can then get started on addressing them. This is when your business gets exciting again.
Can I share something else with you that no one talks about? It doesn’t matter if you hit your BHAG or not in 10 to 15 years’ time. However, I still believe it’s important to have a BHAG that you are going after. It’s the thing that generates the excitement for you, your team and your business.
Also, when you first set this goal it should scare you witless about 50% and excite you no end about 50%. Scared and excited in equal measure is about right. If it’s too scary, you won’t start. If it’s too easy, you won’t be motivated to take on the challenge.
The Three-year goal
The second type of goal is your three-year goal. I much prefer three years to five years. Three years is like looking to the horizon. Five years feels like trying to look over the horizon, which is not really possible.
The three-year goal should not be a massive stretch. Please re-read this; it should not be a massive stretch.
A mistake which I believe that many business owners make is setting a big hairy three-year goal; a stretch goal for three years’ time. I don’t like it.
What I see happen in 98% of cases is that six months in, everyone in the firm realises it’s a silly unreachable target. It loses its pull as a goal for the next two and a half years. That’s not ideal.
My advice is to set a three-year goal that is about 90% believable. That is, you are almost certain you will hit this three-year target. That would make it a very small stretch.
As with all goals, you are allowed to smash it if things go really well for you. However, if you have any setbacks along the way, and let’s be honest that’s what usually happens, you can still be close enough to play catch up to this three year goal.
In the business planning process we use at FP Advance, we recommend not only setting a financial target for three years, but also describing your future business in as much detail as you can muster.
For example, you might say:
• We have moved to new offices that fit our new branding and positioning
• Our processes are slick and efficient
• Every team member is skilled in their role
• The team work brilliantly together
• Our marketing process runs like clockwork and generates a flow of on-target leads for all advisers
• Etc etc.
You could go on and on with these descriptors for your business. The more of them you have the better. I’d suggest you aim for 10-15 ideas for what the business will look like in three years’ time.
When I review the business plan with clients in my consulting work, it’s the descriptors I’m most interested in measuring progress against; not so much the financial target.
Because if these descriptors are being put in place, the results will also come along in due course. The descriptors are the inputs, and it’s the inputs you need to focus on to achieve your outputs or end goals.
The one-year goal
The third type of goal is your one-year goal. In this instance, I believe the financial target should be 100% achievable. I don’t mean setting a stupidly low target, I mean a genuine forecast number that, although moving you ahead, is achievable for your business.
Some people think this is a bit lame or unambitious. I disagree.
By setting a one-year financial goal that you can hit, you can trust your forecasts. Many smaller firms, having heard about BHAGs, apply the concept to their one-year goals. After 10 years of never ever hitting one of these targets, what do you think the internal dialogue is around next year’s target?
That’s right: no one believes it to be real.
By setting 100% achievable goals for one year, you start to build confidence and trust in the leadership team. That’s crucial in terms of your credibility as a leader.
The same goes for other non-financial goals that you set for the year. They have to be things that you commit to and can achieve in 12 months.
As with all of these shorter-term goals you’re allowed to smash them out of the park. Your goals are not limits.
By getting your various goals set correctly, you can really improve the enthusiasm within your business and get everyone on board with the direction of travel. This can be a powerful tool for improving your performance.
You can also give yourself the time to hit the really big goals. Nothing great ever got achieved in two minutes. Big goals take an extended commitment to doing the work required and learning along the way.
If you follow this goal-setting approach, you’ll be perfectly placed to achieve something amazing before your career is done.
Let me know how you go.
About Brett Davidson
Brett is the Founder of FP Advance, the boutique consulting firm that helps financial planning professionals to advise better and live better. He is recognised as one of the leading consultants to financial advisers in the UK.
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