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Creating Your Business Goals

In addition to evaluating your strengths and weaknesses, it's important to define your business goals. For some people, the goal is the freedom to do what they want when they want, without anyone telling them otherwise. For others, the goal is financial security.

Setting goals is an integral part of choosing the business that's right for you. After all, if your business doesn't meet your personal goals, you probably won't be happy waking up each morning and trying to make the business a success. Sooner or later you'll stop putting forth the effort needed to make the concept work. When setting goals, aim for the following four qualities:

1. Specificity: You have a better chance achieving a goal if it is specific. For example, "Raising capital" isn't a specific goal but "raising $10,000 by July 1st" is on target.

2. Optimism: Be positive when you set your goals. "Being able to pay the bills" is not exactly an inspirational goal. "Achieving financial security" phrases your goal in a more positive manner, thus firing up your energy to attain it.

3. Ego gratification: Face it, many people go into business to satisfy their egos. Owning a business can be very ego-gratifying, especially if you are in a business that is considered glamorous or exciting. You need to decide how important ego gratification is to you and what business best fills that need.

4.Realism: If you set a goal to earn $100,000 a month when you have never earned that much in a year, that goal is unrealistic. Begin with small steps, such as increasing your monthly income by 25 percent. Once your first goal is met, you can reach for larger ones.
Short and long term: Short-term goals are attainable in a period of weeks to a year. Long term goals can be for five, 10 or even 20 years; they should be substantially greater than short-term goals but should still be realistic.

There are several factors to consider when setting goals:

* Income: Many entrepreneurs go into business to achieve financial security. Consider how much money you want to make during your first year of operation and each year thereafter, up to five years.

* Lifestyle: This includes areas such as travel, hours of work, investment of personal assets and geographic location. Are you willing to travel extensively or to move? How many hours are you willing to work? Which assets are you willing to risk?

* Type of work: When setting goals for type of work, you need to determine whether you like working outdoors, in an office, with computers, on the phone, with lots of people, with children and so on.

Carefully Planning Your New Business Risks

A great business strategy is always to put two thirds of your energy into reducing expenses and one third into increasing income. The reasoning is that if you do what you can be sure of, you will get a real return on your investment of time and effort. For every dollar that you do not spend, you have a real dollar in your pocket. But the dollars you spend on marketing, promotions, or increasing productivity may or may not increase your income.

Your success at generating income is an unknown in the present. You see the results of your effort as you go along. Because creating income can't be hurried up or known for sure in advance, the potential for loss and disappointment is very great. On the other hand, you can decide not to spend, or to reduce spending, in the present. And when you do, you will see the results immediately.

As far as time spent on something can be wasted, you can lose 100 percent of your investment in attempting to generate income, since it might not work. Don't risk your whole business. Put the risk into only one third of your time and effort. Even after a business has been going for several years, the same strategy applies: When more net income is needed, put two thirds of your effort into reducing costs, because you can be confident of the results. Put the rest of your effort into improving your management and marketing systems.

Most people follow these same practices in their personal lives. They put the bulk of their discretionary income into secure forms of financial investment, especially if their equity in a home is counted. They reserve a much smaller amount for high-return, high-risk investments, thus choosing the known risk over the unknown for the major amount of their effort.

Putting this rule into practice is often easier said than done. Many people who ask for advice on a new business view money and time spent on getting new customers as certain to bring results. "My friend in direct mail assures me that a ten-thousand-piece mailing for $8,000 will get me four hundred new customers worth $35,000 in revenue. How can I pass that up?" This is the typical mindset of an inexperienced entrepreneur.

It is hard for people to see cost cutting as superior to marketing because they get swept up in the enthusiasm generated by the hoped-for future. You can't control your customers' behavior, but you have direct control over your own actions, so anything you do to cut costs is low risk and certain to pay off.