|INFORMATION||Home Ag Ec Home Course Description Calendar AGEC Home|
Best if printed in landscape.
Business Planning --
Setting Personal and Business Goals*
It is difficult, if not impossible, to make a decision
The comparison has been made that planning a business is like planning a trip; individuals must know their destination to determine their route and their mode of travel or transportation. The previous steps addressed describing the current business, identifying individual skills and interests, and considering the future of the industry. This step reviews how business owners specify, prioritize, and reconcile their personal and business goals. Clearly defined goals are a critical element in developing a well-designed business strategy.
Business owners set goals for themselves and their business. By establishing goals, the owners specify where they want their business to go. The goals are the destination for "the trip," but more importantly, they become the criteria for making future decisions.
Challenge of Setting Goals
Defining goals may be challenging because some people have not previously specified their goals. Goal setting requires a person to think about the future. The process takes time, a precious commodity for everyone. The reward or payback for setting goals is not always immediately recognized. However, business owners often benefit from specifying their goals because they acquire a better understanding of what they are trying to accomplish with their business. They then rely on the goals in making decisions every time a question arises. When a decision must be made, owners ask themselves "which alternatives best facilitate reaching our goals."
Benefit of Setting Goals
Setting goals causes business owners to think about the future, and such forward thinking about opportunities and challenges benefits themselves and their business. Owners who have specified their personal and business goals find themselves better able to explain their objectives to others. Discussions and documents that indicate where the business is headed allow others, including lenders, investors, purchasers of output, input suppliers, and possibly regulators, to decide whether they want to be part of the future of the business. Having established goals demonstrates that the owner has thought about the future.
Benefit of Writing Goals
Written goals can help business owners be more precise in their thoughts about the future and where they want to end up. Written goals are more easily shared with others and demonstrate that the owner has given careful thought to the situation and the future. Finally, business owners can refer to written goals (rather than relying solely on their memory) to guide decision-making and the operation of the business.
Beginning to Identify Goals
One way owners can begin to specify goals is to answer questions about themselves and their business. Appendix suggests questions farmers can consider as they begin to identify goals. This is not a complete list because there likely are additional questions farmers will think about. Similarly, every question does not pertain to each situation. The questions are intended to stimulate thinking and conversations among owners and family members. Although answers to the questions are not goals, they should help individuals specify and prioritize their personal and business goals. Space is provided on the worksheet for you to write your personal and business goals.
Time for Accomplishing Goals
The period for accomplishing goals varies from situation to situation and from person to person. Therefore, goals should reflect different periods, such as short-term and long-term goals. Some farmers specify long-term goals, intermediate-term goals, and short-term goals. The following list provides examples of each type of goal.
Some owners consider their short-term business goals to be performance standards. Growth of the business, rate of return on assets, production goals, turnover of inventory, and general use of resources to reach maximum efficiency are some common performance standards. Performance benchmarks will be addressed in the step 9.
Perhaps the most critical goal for owners of a closely held business is to specify how much cash will be withdrawn annually from the business to meet living expenses. At this point, the owners also can consider how this amount may change in the future as the family grows or retirement approaches.
Characteristics of a Goal
A meaningful goal is
For example, a family may specify a goal to set aside, in addition to its regular savings plan, an extra $20,000 into a savings account over the next 3 years for home remodeling. The additional $6,700 each year can be challenging, yet it is measurable, has a time limit, states a purpose, and addresses an effort that is important to the family.
Interaction and Relationship Among Goals
Owners of closely held businesses coordinate their personal goals with their business goals. This is a result of the owner's heavy reliance on the business as a primary source of income for living expenses. Such coordination also is important when cash withdrawals for family living impacts the financial condition of the business.
Few businesses or families have enough resources to reach all their goals at one time; therefore, owners prioritize their goals. They specify which goals will be emphasized first, and which ones will be delayed. Business owners stress that communication among family members and co-owners of the business is vital in minimizing the conflicts that may arise when establishing, prioritizing, and reconciling personal goals of several individuals with their collective goals for the business.
Steps in Group Goal Setting
Several steps have been suggested for setting goals if the business involves more than one person.
The importance of effective communication is often mentioned as owners and their families describe their experiences in setting goals. These individuals also mention the extensive time commitment that may be necessary for a successful goal-setting process.
Owners indicate that during the process of discussing and setting goals, the conversation can be inadvertently side-tracked onto other topics. Families might rely on an unrelated person to serve as a facilitator during these discussions. Such an individual also can help the family maintain the focus of its conversation.
A question that arises is how do business owners reconcile their different goals. The individuals that ask this question have already set their own goals and shared them with their family and co-owners. It is at this point in the process that they realize there are differences that need to be resolved. One observation in answering this question is that the goals of family members and co-owners do not need to, and never will, be identical. It is not reasonable to strive to establish one set goals that fits everyone.
Yet goals cannot be so divergent that there is nothing in common. Instead, the group should strive to find commonalities among their goals and opportunities to work together to accomplish tasks that fulfill the goals of several individuals. For example, there may be an activity that fulfills a goal for several people even though they are different goals. The key to working out differences among goals appears to be communication and a willingness to cooperate.
Categories of Goals
Not all goals fit within the same categories. For example, one individual may focus on career interests whereas another person may emphasize personal financial goals, while others may address their business practices or estate planning. Goals likely will address personal career objectives, business objectives, and personal financial objectives. One suggestion is to initially categorize goals as
Business owners and their families will likely define additional categories of goals as they progress through the planning process.
Goals change over time because people change, their needs and desires change, and their situation changes. Owners are encouraged to guard against changing their goals just because the first one turns out to require more effort than initially expected. Similarly, owners are urged to be cautious about lowering their goals just because they are not immediately accomplished. However, it is recommended that goals be revised once it is clear that the current goals are so challenging that they are detracting from other important business or family interests.
The worksheets/tables offer space for you to record your short- and long-term personal and business goals. There also is space to indicate the time frame in which you hope to accomplish the goal and the priority of reaching that goal. As mentioned in a previous paragraph, cash withdrawals for family living needs may be one short-term business goal.
An issue to consider as a long-term personal goal would be retirement/estate planning. The worksheet provides space to summarize your current plans for retirement and the disposal of your estate. The second worksheet asks some questions that may help with setting long-term business goals. These goals will be critical in completing the remaining steps of the planning process.
ConclusionBusiness owners can explain to other owners what goals are, why they are needed, how they are used, why they need to be prioritized, and why the family and business partners need to discuss them. However, no one can tell another person what goals they should set for themselves, their families, or their business. Each individual is responsible for that decision. Having set goals provides the owner the criteria necessary to select among alternatives in the future.
* Prepared by David M. Saxowsky, Dr. Cole R. Gustafson, Dr. Laurence M. Crane, and Joe C. Samson, agricultural economists, Department of Agricultural Economics, North Dakota State University. August 1995.
Last Updated May 31, 2007
This material is intended for educational purposes only. It is not a substitute for competent professional advice. Seek appropriate advice for answers to your specific questions.
|NDSU Home Phone Book Campus Map NDSU Search College of Agriculture|