Businesses need goals to give direction and growth.
A business without goals is like walking on a busy street blindfolded and wearing earmuffs, busily stumbling around, not achieving anything and in danger of ceasing to exist.
Business owners need to understand what a goal is.
A goal is simply an objective that you are trying to achieve, usually an improvement from the current situation.
Examples of general business goals could be:
- Reduce costs
- Increase revenue
- Increase customer satisfaction
- Open a new office
Goals themselves have no metrics associated with them.
To measure how well a business is moving towards a goal, you will need to set some Key Performance Indicators (KPI’s).
KPI’s are something specific with a target value or benchmark that you can measure over time.
I find that many business owners don’t properly understand the difference between goals, KPI’s (Key Performance Indicators) and targets wrongly using the terms interchangeably.
Here is a quick summary of the three terms with an example.
Goal:
A goal is an objective that you are trying to improve, e.g. increase revenue
A goal will remain the same until achieved.
KPI:
A KPI (Key Performance Indicator) is the measure that you will use to understand whether you are on track to meet your goal, e.g. an increase in sales.
KPI’s will remain the same until deemed not useful.
Target:
A target is a value or benchmark that you are aiming to achieve for your KPI, e.g. a 15% increase in overall sales in Q1.
The target value of a KPI may change over time to set a new benchmark for review.
Owners will need to regularly review KPI’s and targets against real data from the business to determine if the company is moving towards its goals.
Tell me what business goals, KPI’s and targets you have set for your business in the comments below.
