Do you ever feel like financial goal setting is a bunch of fluff? I used to feel that way. I would set a goal and a date to do it by then totally FORGET that I made the goal in the first place. Somewhere down the line, I’d find some crumpled up piece of paper with my goal on it and go, “Oh yeah, I had a goal once.”
Financial goal setting is an art where you take in the future, the present, and the past to create a goal that is both relevant to your life and achievable. It isn’t enough to just want something, setting financial goals also require that you reflect and vision to identify what you REALLY want and how to get there.
Here’s my process for setting financial goals that will change your business and your life:
Step 1: Envision what you want
All goal setting starts with this one question- what do you want?
When you envision what you want, get specific. Saying you want more time for your family doesn’t paint a strong picture. Describe how you want to spend time with your family.
Do you want to pick your kids up earlier from school? Make dinner every night? Go on long family road trips? Take one full day off to be with your kids during the summer?
The more detailed you can get when describing what you want, the easier it is to create a financial goal that fulfills what you really need.
Do this: Spend some time describing what you really want. Get detailed. Remember in elementary school when you learned about the 5 Ws- now is the time to use them. Write about the who, what, where, when, and why.
Step 2: Review your data
You need to know where you are in order to figure out where you want to go and your current financial data has a lot to tell you about where you’re at right now.
What can you learn from your financial data?
Your best selling product or service
Your busiest and slowest times of the year
Your spending pain points (i.e. where you overspend)
What’s driving the profitability of your business up or down
Yup, you can really learn all that from just a few reports! In the beginning, looking at your reports will feel like reading a foreign language. Keep with it! The more you look at those numbers the more sense they will make and soon you will be a report reading master.
Do this: Run a basic Profit & Loss report for your business this year. Look at your total numbers. What surprises you? What seems out of the ordinary? What do you have more questions about? Write your observations down.
Now, run the same report for every month of the year. Look at these reports using your list of questions as a lens. Notice where big shifts occur. Try to answer your questions using just your reports.
Step 3: Play with the numbers
At this point, you should have a very clear sense of your business finances. Now is the fun part of playing with numbers. This is actually my favorite part of financial goal setting because it shows you what’s possible.
When playing, don’t get caught up in the how just yet. This is the time to take what you know from Step 2 and tweak and amplify your numbers so you have a sense of what’s possible with your finances.
This step will also teach you how your business finances work together.
If you go from selling 10 planners a month to 500, chances are you will need support to get all those planners packaged and shipped, which is an extra expense. You also will need to pay for the manufacturing of all those planners which will impact your net income.
Think about all the moving parts of your business.
Do this: Come up with 2-3 scenarios that would move you towards what you envisioned in step 1. I like to start with my right now numbers (which you have from Step 2) and tweak from there.
Playing doesn’t mean increasing your income and saying, “Then I’ll make more money.” Playing means coming up with specifics of how you earn more money.
How much of one product or service do you need to sell? What rate do you need to sell these products or services at? What costs do you need to streamline? Consider these questions in your scenarios.
Step 4: Set a specific goal (with actual numbers!)
Using your scenarios as a guide, set your goal. Your goal doesn’t need to be one of the exact scenarios, it may be something in between. The point of the playing exercise is to stretch your thinking around what’s possible for your business and getting a grasp on the actual numbers to make it happen.
When you set your financial goal, use specific numbers. Numbers can be dollar amounts, percentages, units sold, and dates. If your goal doesn’t have numbers in it, you aren’t done.
What makes a good goal? Something that sits in the sweet spot of realistic and a stretch. You don’t want to pick a goal that is so easy that it won’t have an impact on your life but you also don’t want to pick a goal that is outside of what your business can handle.
Goal setting is a delicate balance of pushing yourself towards the outer limit of what you are capable of without going so far that you are stressed and overwhelmed.
Do this: Set your goal and make sure it has two sets of numbers. One that relates to the goal itself and another that is the date you will accomplish the goal by.
Next, ask yourself, “What would make this goal 20% harder?” Adjust your goal to make it 20% harder.
Then, ask yourself, “What would make this goal 20% harder?”. Make a second goal that is 20% harder than the first and consider this your stretch goal.
Step 5: Break the goal into smaller parts
This part of goal setting is where you take a number and date that may seem impossible to reach and break it up into the how. If you just say you want to sell $20,000 more in products next year- you will likely get overwhelmed and lost along the way.
Break out $20,000 into smaller, more manageable milestones.
How much of each product will you sell every month? Every quarter? Do you need to set up an online shop to boost your sales? Run several promotions a year? Launch a new product that is higher priced?
What are all the actions you need to take to reach your goal? What are the tasks within those actions?
Give yourself plenty of time for this step- this is where your financial goals start to drive the activities of your business.
Do this: Using your specific numbers from the last step, and the date you want your goal accomplished by, work backward and break your goal up into smaller pieces. What do you need to DO to reach your goal?
There may be some initial steps you need to take and there may be some action steps along the way. Write down every action step you need to take to reach your goal and set deadlines.
Put your deadlines on your calendar and add at least 3-4 milestones that you can use as a benchmark.
Step 6: Understand why it’s important
An often overlooked part of the financial goal setting process is understanding why this goal is important to YOUR life. How does your life change when you reach your goal? It isn’t enough to use vague language like, “I’ll be happier” or “I will have more freedom”. Dive deep into this one.
What’s possible when you are happier? Who do you get to be at your happiest self? What core values are being honored when you’re free? How does your business prosper when you’re aligned with those values?
Why do we do this? To be blunt, because if a goal isn’t important to you, you won’t take the steps you need to accomplish it. Remember how in the last section we broke the goal down into smaller parts?
There’s probably something on that task list that you really don’t want to do. And you’re going to find a million other things to do instead of that one thing. Understanding the big WHY behind the goal will help you do that crappy thing you want to put off.
Do this: You know when kids go through that annoying phases where all they do is ask, “Why, why why?”. Well, it’s time to channel your inner annoying kid and start asking why.
Look at your financial goal and ask yourself, “Why is this important.” After you answer that question, ask yourself, “Why is that important?” Then, ask yourself, “Why is that important,” at least 3 more times.
Don’t stop digging after 1-2 questions. Go as deep as you can push yourself to go (that’s why 5 is a good number) and get to the BIG WHY of why you are setting this goal.
Step 7: Design accountability
The last step in the goal-setting process is to find ways to hold yourself accountable to your action steps, milestones, and final goal.
You already started the internal accountability process in Step 5, when you set deadlines and added them to your calendar. For most people, deadlines are a huge motivator to get things done because you have something tangible to work with.
However, deadlines can be hard to stick to if you don’t have someone to share them with, which means external accountability is key to reaching your goals.
I know, sharing your big wild dreams (and stretch goals) with someone can be scary, but what’s scarier than sharing the life you want to live? Never giving yourself the chance to live it.
Do this: Make a list of 5 people you can ask to hold you accountable to your goals. Then answer these questions:
How often do you want to check in?
How do you want to check in?
What do need if you fall behind on your deadlines and milestones?
How do you want to be celebrated when you reach your goals?
Reach out to one person on the list and ask them to be your accountability buddy and, using your answers, explain what this means and the time commitment. Give people all the details so they can commit to holding you accountable with a full understanding of what that means.
Also, make sure you let people know they can say no! You want an accountability partner who is fully willing to embrace their role rather than someone who feels obligated.
There is one tiny last step of the financial goal setting process: Celebrate yourself! If you’ve gotten through all seven steps in this post, then it’s def time to do something nice for yourself!