Before you form business objectives, the first thing you have to do is: “define your business”!
Defining your business
A business definition basically tells you ‘what kind of business’ you are in. It is a one-line summarization of your entire business. It helps you clearly communicate what your business is about to others.
A business definition is generally based upon 3 points:
- Who? : Who is your customer? To know this look at your customer description from “Understanding your business! (Situation Analysis)”
- What? : What customer needs will be satisfied by your business. Remember needs are not only physical needs. There are also other needs like the need for achievement, need for status etc.
- How? : What solution does your business offer to satisfy the needs of the customer.
For e.g. if it were a business making snacks the answers to the questions would be:
- Who? People who want to “munch” something
- What? Need to quickly quench their hunger in an enjoyable way.
- How? By providing good tasting between meals food products.
A “sample business definition” using the answers to the above questions would be:
"We will manufacture good and tasty sweet snacks to enable individuals to quickly satisfy their hunger."
After you have your business definition ready, the next step is to formulate your business objectives.
What are business objectives?
Business objectives are specific statements that give projections about growth or development to companies. For example, a business objective could be, “We must triple the sales of our product by next year.”
Why are business objectives needed?
Business objectives are important to give direction to a business. If you are running a business without any business objectives, you shall not be able to grow successfully in any direction. Having business objectives, gives you a much better understanding of where you stand, how to improve and what changes in your current method of working will be required to reach your objectives. Not having business objectives leads to an un-coordinated business that has a very low probability of being successful.
When setting business objectives, one must make sure that they are:
- Quantitative: The business objectives should be expressed in terms of numbers. It should not be expressed vaguely like, “Our sales should go up!”
- Time-frame specific: Time frames should be specified in the business objectives. This helps you to understand where you stand with respect to the completion of the current objective.
- Flexible: It is very important that your business objectives are adaptable to change. If the situation in which the business is working changes, the business objectives should change to reflect these changes.
- Understandable: The business objectives should be made in an understandable way. This helps in communicating your objectives to your investors, employees, partners etc. Without this communication of business objectives, it becomes very difficult to reach them.
- Realistic: It is important that the business objectives are realistic, or you may end up disappointing your investors and your self.
Examples of business objectives:
“Sell 1000 units o product A and 500 of product B by December 31, 2007”
OR
“Maintain a minimum of 5% market share in the soft drinks segment in Pune City during the whole of 2006”