Question

Prepare two written financial goals for a business and show how the goals meet all of the characteristics of effective goals.

Answer 1

Two written financial goals for a business are:

1. Improve profit margins in a sustainable manner by rationalizing costs by better managing the expenses.
2. Increase top-line (i.e. revenues) in a systematic manner through both value focus (higher realization per unit) and volume focus (increased quantity of sales).

Both these financial goals for a business bear the characteristics of being an effective goal. The first goal is the goal to improve profit margins through cost rationalization. This is an effective goal as it is realistic, measurable and controllable. The goal is realistic because a company always has the ability to reduce its costs and better manage its costs. The goal is measurable as a business can establish a time frame and a foreseeable outcome for this goal. Lastly the goal is controllable as managers of a business can take charge and personal responsibility for this goal.

The second goal is the goal of increasing revenues and this too bears the characteristics of being an effective goal. The goal to increase revenue is believable and possible, is measurable and is flexible. The goal to increase revenues is certainly possible if the amount is set within reasonable and achievable limits. The goal is measurable as it can be quantified in terms of quantum of increase and time frame required. Thirdly the goal is flexible as it can be changed and modified due to changes in economic conditions, changes in competitive environment etc.