Tracking Business Goals, A Roadmap to Success for Small Businesses

Running a small business can feel like navigating a maze, but with clear goals and consistent tracking, you can turn that maze into a well-paved road to success. Whether you're a sole trader, self-employed, or manage a small team, understanding where you're headed and how well you're progressing is essential. This guide will walk you through how to set, track, and achieve your business goals, with advice for both business owners and their bookkeeping partners.

Why Goal Tracking Matters

Setting goals is the first step, but tracking them is where you see real results. Without tracking, it’s like sailing without a map—you might move, but you won’t know if you’re going in the right direction. Regular tracking helps you:

Stay Focused

Clear goals keep you and your team focused on what truly matters.

Measure Progress

Tracking allows you to see your progress, which keeps you motivated.

Make Adjustments

If something isn’t working, tracking helps you spot it early, allowing you to make necessary changes.

Achieve Financial Freedom

By managing your finances effectively, you are setting yourself up for a better future.

Setting Effective Business Goals

Before you can track your goals, you need to set them effectively. Here are a few methodologies to consider

SMART Goals

A very common framework for goal setting, SMART goals are Specific, Measurable, Achievable, Relevant, and Time-bound. For example, instead of "increase sales," a SMART goal would be "increase monthly sales by 10% in the next six months".

Objectives and Key Results (OKRs)

This method involves setting a few major objectives (or Goals) and then defining several key results (measures) under each objective. For example, an objective might be "improve cash flow," with key results like "reduce average debtor days by 10 days" and "increase cash reserves by £5,000".

Lean methodology 

The lean methodology is about ruthlessly focusing only on what is necessary, which is particularly helpful when time and resources are limited.

Key Areas to Track

Regardless of the method, focus your goals on these key areas of business:

Profit

How much money you're making after expenses. Track gross profit margin, net profit margin, and direct costs to optimise your business.

Cash

Manage the money coming in and going out to ensure smooth day-to-day operations. Monitor average debtor days, average creditor days, and short-term cash forecasts.

Growth

Monitor your income and key metrics that can fuel your business' financial freedom. You might focus on the number of invoices issued, the average value of invoices, and overall income.

Customer Base

Understand where customers come from and why they stay, or leave.

Operational Efficiency

Streamline the business and eliminate unnecessary tasks.

Goal Tracking in Action - Generic Business Example

Here’s how these methodologies might be applied in a generic business:

• KPI Example: A small retail business may track KPIs such as monthly revenue, customer acquisition cost, and average transaction value. They may review the data each month to see whether they are on track to meet their annual revenue goal, and to identify trends that might require further attention.
• Regular Financial Review Example: A freelance marketing consultant might schedule monthly meetings with their bookkeeper to review key metrics such as gross profit margin, average debtor days and income, and use the information to make any adjustments necessary.
• Goal Difference Example: A bakery may have a goal to reduce their direct costs to £5000. When they review their monthly figures they may notice that they have spent £6000. Instead of focusing on the fact that their costs are over £5000, they may choose to focus on what can be done to reduce their costs by £1000.
• Visual Dashboard Example: A small restaurant may use a visual dashboard that shows their current performance against goals for profit, cash and growth metrics. The dashboard may use colours to show whether they are meeting, exceeding or failing to meet their targets.
• Best Practice Measures Example: A hospitality business may use Cost of Goods Sold (COGS) as a key measure, as this is a leading measure for financial performance in the hospitality sector.
• Action Oriented Tracking: A business might set a goal to improve customer satisfaction. Rather than just tracking the overall customer satisfaction score, they might also track the number of customer service calls or emails, and use that information to understand whether they are taking the actions required to meet their overall goal.
• Consistent Update Example: A small business owner might check their key metrics using SME Clutch after each month’s accounts are completed. The data is automatically updated, and the dashboard immediately shows their progress against the set goals.
• Milestone Example: A business might set a goal to increase their annual revenue by 20%. To make it more manageable, they might create quarterly revenue milestones and then monthly targets that need to be achieved.

For Business Owners

As a business owner, it is your responsibility to set the vision for your company, and you need to define clear financial goals. Work with your bookkeeper or accountant to use accounting software to track your business’ progress. Make sure you understand the key metrics and how they contribute to your success.

Regularly Review

Check your metrics at least monthly. If the numbers aren't where you want them to be, take time to review and improve the process.

Set Realistic Goals

Make sure you set goals that are challenging but achievable. If your goals are too difficult you will become despondent, and if they are too easy you may not achieve your full potential.

Stay Accountable

Share your goals with a mentor, advisor, or partner. Having someone to discuss your progress and challenges with can make a huge difference.

For Bookkeepers

Bookkeepers play a crucial role in helping small businesses succeed. A good bookkeeper will keep the accounts accurate, and offer insights into a business' financial health. They can help clients with:

Data Management

Help clients to properly use their accounting software, and integrate other business tools. Use the software to generate and distribute regular reports.

Financial Insights

Analyse financial data and provide feedback on what is going well and what is not.

Accountability

Be a partner who keeps clients accountable for their goals.

The Path to Success

By setting clear goals, tracking your progress, and working collaboratively, both small business owners and their bookkeeping partners can achieve greater financial success. Tracking tools are essential, and when combined with best practice goal setting, you can be sure you are on the right track.

Profitable Path and SME Clutch are designed to support small business owners in their journey to financial freedom. 

The Profitable Path course provides financial education, teaching how to manage finances, set goals, and achieve security using the three key pillars of profit, cash, and growth. The course is designed to demystify finance and empower business owners to make informed decisions. 

SME Clutch is a tool that connects to accounting software, retrieving 13 months of data to help set and track financial goals. It simplifies monthly updates from your accounts and allows collaboration with bookkeepers and advisors, making it easier to stay on top of finances, track progress, and maintain accountability. 

By combining the financial knowledge gained from Profitable Path with the practical tools of SME Clutch, businesses can achieve financial clarity, optimize their finances, and ultimately grow their business.