Small Business Profitability Goal

If you operate a small business, profitability goal setting is something you definitely need to factor into your planning. When you first decide to set up a business, becoming an entrepreneur is an exciting prospect. It is easy to want to jump the gun and get started right way, but if you take time to make a detailed plan first, your business is much more likely to succeed over the long term.

Plan to profit over the long term.

Setting Goals in General

Setting goals for your business is a more involved process than simply deciding you want to be the CEO of "Me, Inc." Not only do you need to figure out what you want to accomplish, but you need to consider what steps you need to take to make it happen.

Start at the Result and Work Backward

A strategy to help you accomplish this is to think about what level of income you want or need your business to generate in the first year. This may be a relatively modest amount, since you will be in start up mode and likely need to invest in equipment, rent or buy space, hire staff, etc.

Then project how you want your business to grow during the next few years after your initial launch. Without a goal to work toward, what you are doing is wishing - and that won't help you succeed. Once you have a figure worked out, the next step is to think about exactly how you are going to achieve your goal.

Small Business Profitability Goal Setting

When you work up your small business profitability goal plan, you may want to factor in the following:

• Sales Levels

Once you know how much you need to make, you can figure out how many units you need to sell. In situations that sell a service, determine how many hours must be billed each month, quarter, or over the entire year to generate the level of income you have set for yourself.

• Marketing Plan

Your business will not grow if you don't make an effort to attract new customers or clients. Developing a marketing plan and working that plan should be a constant activity. What strategies will you be using? Will you be promoting your business online as well as using more traditional methods of advertising?

Your plans for promoting your business may include taking out ads in the local newspaper, joining a business owners' association, distributing flyers, or trading links with other web site owners.

• Special Offers for Repeat Customers

To build a successful small business, you want to develop a client base that includes a number of repeat customers. These are the bread-and-butter of your business, so it's important to cultivate these relationships carefully and nurture them along the way. Figure out what you can do to make these people feel special and keep them coming back to you for their needs. You might want to offer a coupon or a discount if they refer new customers to you.

Don't dismiss the power of offering a free gift or a bonus to your loyal customers. This is another strategy to help achieve your small business profitability goal.

• Control Your Costs

Knowing what to charge and trying to attract new customers while preserving your existing client base should only be part of your focus as a small business owner. Unless you are able to anticipate and control costs, you won't know how much profit you are making. Make a list of all the expenses incurred in running the business, including fixed expenses that you are responsible for every month and variable expenses.

You won't be able to do much about your fixed expenses (rent, heat, hydro, water) but you may be able to find some wiggle room in the area of variable expenses. Explore the idea of getting a discount from a supplier if you buy in bulk or consider outsourcing to independent contractors instead of hiring employees for your business.

If you follow these steps, you will have a detailed small business profitability plan in place that you can use to get your venture off to a good start.

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