The Six Foundations of a Business
By ActionCOACH Mark McNulty
When we get our clients together for our quarterly planning sessions, one of the challenges is coming up with goals for their businesses other then the obvious ones – for sales and profit. In reality, there are a total of 6 (actually 7) foundational areas of your business that you should be establishing annual goals for, and then creating detailed quarterly plans for achieving the goals. The six areas of the business are: Sales, Marketing, Finance, Operations, Products, and Team. The seventh area that I mentioned is you, the owner, and your personal development. Let’s look at the types of goals you might set in each of these areas.
Sales is the area that most people typically have an easy time setting goals, or at least being aware that they should. The types of goals I typically look for in the sales area are Sales Dollars, Sales Volume (number of sales), and Gross Margins (can also be in finance). Typical sales performance indicators like Conversion Rate and Average Dollar Sale are also important to either establish as specific goals or at the very least to measure and track.
Marketing goals are next in line to develop, and are often confused and intermixed with Sales goals, yet they are really very different. The most common marketing goals are the Number of Leads created , which is the primary purpose of marketing, and the Cost of Leads (remember that marketing is simply buying leads). Some other common marketing goals can be related to establishing new lead sources (for example referral partners, strategic alliances), or establishing new target markets or niches to introduce your products into.
Finance goals are also fairly straight forward, and need to reflect the type of business you have. Typical finance goals are Gross Margin/Profit, Net Profit, Free Cash Flow, A/R, A/P, and Inventory. You may also have debt reduction goals or new financing goals, depending on your needs. Some industries have key financial ratios to monitor and achieve – your CPA or Coach can help you determine the appropriate ones.
Operations is the area of your business where the bulk of the work of delivering your products and services is performed. Operations goals are most commonly related to efficiency and productivity. Some common goals in operations are billable hours, parts per hour, service callbacks, error rates/rework, waste/spillage, and labor hours. Infrastructure needs are also part of operations, in particular your IT department and their goals for uptime and backup systems and availability.
Products and Services are what you sell to your clients. Goals in this area of your business could include the development of new products and services, the improvement of existing products and the quality of the products and services in your customers hands.
The last of the 6 foundational areas of your business is your Team. Team goals can include changes in the size of your team, team morale and satisfaction, development of new skills, development of new leaders, your HR functions and processes, and changes in your organization of your team.
Once you have identified goals in each area, it is time to look inward, to determine how you need to grow to be a better leader for your new and improved organization. Do you need to learn to manage yourself better (often confused with time management)? Do you need new skills yourself, to be a better leader and manager? Your business can only grow as big as you and your leadership team, so make sure that you are continuing to better yourself so that your business’s growth can be sustainable and profitable.