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Setting financial goals is key for SMEs aiming to navigate challenges such as fluctuating market conditions, an ongoing cost of living crisis, and the urgent shift towards sustainability.
With many of the UK’s 5.6 million SMEs looking ahead nervously, having clear, achievable targets can give you greater confidence in your direction.
Below, read four key steps to creating tailored financial goals for sustainable resilience and growth.
Assess your current financial position
Understanding your current financial health is vital before setting any new goals. This might involve reviewing various data sources such as your balance sheet, income statement, and cash flow statements to gauge your business’s overall financial stability.
You may also reflect on your revenue streams, spending patterns, and profit margins to identify areas of strength and weakness. This step lays the foundation for well-informed goals, making sure your objectives are grounded in reality and tailored to your specific needs.
Understand market trends and economic forecasts
Keeping abreast of market trends and forecasts is crucial for setting realistic financial goals. The UK’s economic landscape is influenced by several macroeconomic factors, including inflation rates, consumer spending habits, and sector-specific trends.
For example, PwC predicts that the UK economy will see inflation return closer to normal in 2024 after challenging rises in the wake of the COVID-19 pandemic. But there will always be many unknowns, so you’ll need to tailor your financial strategies to be resilient under various conditions.
Set SMART financial goals
Vague aims are often of little use in business. But SMART goals – specific, measurable, achievable, relevant, and time-bound – can help you achieve clarity and accountability.
Beyond profitability, you might want to set goals around revenue growth, cost reduction, cash flow, or raising capital for investment. Reflecting on your business’s specific circumstances and the broader economic outlook in steps one and two will help keep your goals realistic.
Create an actionable roadmap
Finally, devising a clear action plan is essential for turning your financial goals into reality. This involves breaking down each goal into actionable steps, assigning responsibilities, and setting deadlines.
For instance, if you have a goal to increase revenue by 20% in the next year, you might consider strategies such as market expansion, product diversification, or efficiency improvements. Or for cost reduction, you may review your processes, for example by switching suppliers for courier services if you operate in ecommerce.
Monitoring progress and adjusting your plan in response to changing circumstances will help keep you on track towards your financial objectives.
In summary, setting financial goals is a multifaceted process that needs a deep understanding of your current financial standing, the external economic environment, and the strategic application of the SMART framework. By taking a structured approach as outlined, you’ll be better set to navigate the current economic landscape with confidence.