How to set SMART goals for your business

SMART Goals - what keeps me going is goals.

What keeps me going is goals“, said Muhammad Ali, one of the most successful heavyweight boxers in history, named by Sports Illustrated magazine as the “Sportsman of the Century”. Not every business owner will have the honor of becoming the Muhammad Ali of Entrepreneurs, but having proper goals can save many new ventures from being quickly knocked down by the surrounding market.

I believe that starting a new business is much like placing a bet in a casino. Even though everyone knows that the chances of succeeding are low people nevertheless decide to play. The prospect of eventual win is so tempting that it actually makes up for the risks that players encounter along the way.

But does it mean that starting a business is no more than playing a lottery in which some people win, but the majority loses? Not necessarily. Even in the world where the market often does “play dice” we have the tools which can increase the likelihood of surviving a series of punches from Adam Smith’s invisible hand.

Tools

Some of these tools are innovative business plans. Long gone are the days where business plans were boring, static documents filled with hand-carved numbers detached from reality. Innovative business plans are as dynamic as the ventures which they describe. We have already written about these types of modern plans in one of our previous articles.

There are entrepreneurs which are stuck in the old good days where having a stable but solid business was good enough — these are the ones that are often swallowed up by newer, more flexible competitors. Other business owners understand that in the modern market their ventures, even the smaller and more traditional ones must move quickly. But, the pressure from the surrounding market environment often pushes them into chaotic decisions which do them more harm than good. So, how do you strike a balance between “management diarrhea” and stagnation?

We need a systematic approach to plan, execute and validate business concepts — a specific manual laying out how to run a business more efficiently. Unfortunately, there are no manuals which work for each and every business, and can be downloaded from Amazon straight to our Kindle readers; but, luckily, we have the ability to compose such a manual on our own, using a simple 34-year-old tool. This tool is the S.M.A.R.T. goals.

S.M.A.R.T. goals

Wikipedia states that “S.M.A.R.T. (Goals) is a mnemonic acronym giving criteria to guide in the setting of objectives”. For me, this is a nice way to run a business in a predictable manner.

Having goals is like transforming an ultra marathon into a big relay race in which the effort can be divided up between a number of shorter, quicker sections. The main difference is that while a marathon has one set route, a goal-driven relay race can change the route along the way.

Because objectives are smaller and more precise than big strategies, they allow entrepreneurs to focus more and put the effort on the activities that are truly important in a particular point at time. Of course, it is fine to dream about succeeding, it is fine to possess the “secret” of thinking positively, it is fine to visualize yourself having a nice drink in a fancy bungalow by the beach. This is all fine, but the specific short- and long-term objectives are the engines which actually turn the wheels of your business. Moreover, if properly aligned with the strategy, they can keep the bigger picture visible all the time.

SMART goals for your business
SMART goals for your business

S.M.A.R.T. puts a framework on the definition and execution process for goals. This type of framework is particularly needed because wrongly defined goals can hurt the company’s performance. They can create an illusion that the venture is moving forward, when in reality it is going in circles or standing still. Vague goals can be misinterpreted, adjusted far too often and ultimately, what is most dangerous, ignored. Smart goals, on the other hand, are specific, measurable, achievable, relevant and time-bound.

Specific.

Paradoxically, being specific can be understood in many different ways. For some people, a statement “we want to start selling our goods in China” can be specific enough, but others will demand more concrete data and numbers — in which cities, which and how many goods they want to sell.

When someone asks me how to distinguish between a specific goal and a nonspecific one, I ask them to change the perspective and use the term “anti-ambiguity”. Do you, as someone who crafted a goal, along with all the other parties involved in its creation understand the goal in exactly the same way? Will you understand it tomorrow in the same manner? If so, the objective probably is specific enough. If no, the goal needs to be more specific.

Measurable.

Some people imagine that developing a business is like building a house. I prefer to look at it from a different perspective — a business is more like driving a car from point A to point B using a crappy GPS device. In this metaphor, the specificity of a objective defines a destination but the measures assigned to a goal are equally important. They define whether we are heading in the right direction, how fast we are going and approximately when we will get to the destination.

Business goal measures can take different forms. When running an online store it can be a statistic which defines how many customers bought a specific product, in other services it can be the average number of weekly customers or daily trading volume. There is a simple test which determines if the measures are correctly defined. If I look at this measure in a week, in a month, in the next quarter, will I be able to decide whether the goal has been accomplished or not? If the answer is no, or “it depends on”, it means that we must look for other measures.

Achievable.

A business goal can neither be outside our current capabilities nor be too easily accomplished. I have heard about companies which dreamed big, but then quietly shut down because they weren’t able to meet their expectations in a limited period of time. Other businesses struggle to survive on the edge of profitability because at some point they didn’t utilize their potential.

An achievable goal has to meet one criteria — it should be ambitious enough. If you want a number I can say that if you set your current capacity to 100%, then define a goal which aims for achieving 120%. It is a safe choice — it is not too much, it is not too little, but naturally the correct number depends only on you and your business environment.

Relevant.

I have always felt a bit sad because there is no acronym as good as S.M.A.R.T. which starts with the letter R. Why? Because I truly believe that being relevant is the most important factor of each goal and, therefore, should be validated first. Sadly, lots of people do start writing down S.M.A.R.T. properties according to order of the letters in the acronym and finally get to the letter “R”, just to find out that the goal is not really an important one and should be discarded completely .

how to manage your time Eisenhower Matrix
Eisenhower Matrix

It is not a coincidence that the famous Eisenhower Matrix focuses on things that are urgent and important, or long-term and important. When an objective is not important enough, it doesn’t matter whether it is specific or measurable or achievable — it just should not be pursued. This seems obvious, but it is often overlooked. Asking the question “why I need to achieve this objective” can basically save you a lot of time. As we wrote in the previous article, we tend to enjoy being occupied so we often make decisions which are easy but irrelevant. This also doesn’t mean that we should choose only difficult goals because there isn’t an actual relationship between relevance and difficulty. What we need instead, is to ask ourselves a question: is this goal worth pursuing? If yes — proceed; if no — quit.

Time-bound.

Passing a Relay Baton A long-term goal which has no checkpoints along the way can easily transform itself into a long, drawn-out example of wishful thinking. A short-term goal without a specific deadline can be easily overtaken by the day-to-day crises so common to most businesses. If we go back to the metaphor of a relay, setting a date for the goal is like setting up a place where runners can pass the baton to one in front of them. In a regular race, missing an opportunity to pass the baton means disqualification from the competition. In a business, it’s like having the same runner running the entire distance without having a sip of water. The runner gets more and more tired, and eventually stops or falls down.

Businesses do the same, they keep running, continually having the same goals but not making any pauses. Setting a deadline or a checkpoint for a goal is an opportunity to take such a break and actually learn from past experience. It is an asset which is particularly important in a business environment which changes rapidly and often.

Of course, there is no one-size-fits-all solution for setting a due date — some goals are long-term and some are urgent, but each entrepreneur must remember that even long-lasting exhausting goals should have regular checkpoints in which business owners can check whether they are still heading in a right direction.

A guide to using S.M.A.R.T. goals.

One may ask: how does this relate to my business? I have a plan, I am experienced and know what I am doing — I have all my goals in my head. Setting aside issues transparency of, how can you assume that your brain is not playing games with you? The human brain is very efficient; it doesn’t need every bit of information and it is very good at filling in the blanks. Sadly, these gaps are often risks and issues which can actually prevent your business from growing. Having crystal clear goals that are written down can mitigate this risk.

But, there is more than that. Using the S.M.A.R.T. guide can transform vague objectives into a dynamic action plan, which will eventually define the long-term strategy of the company. As I wrote before — it is like having an editable manual for running a business. Setting new objectives is like writing down bullet points, describing the steps that are needed to continuously improve the company.

How can you start?

Think generally about your next business goal — it is probably quite relevant. If so, write it down. Then, think about how you would measure its progress; what kind of factors you would measure and which levels would be satisfactory for you. Based on these metrics think about the achievability of the goal — is it too hard, is too easy or is it just right? Write down the a specific description so that it will be understandable to you and others. If it is still vague, adjust it. Set a time-frame — is it urgent, or long-term? What should the due date be or should it have some progress checkpoints?

Do the same with a few other goals, do the “relevancy test”, and then prioritize them according to their importance. Put the goals in a visible place and start planning tasks that are aligned with them. Verify the progress, change priorities, pass the baton, avoid punches…

Plan. Do. Check. Act.

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