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Goals

It is difficult, if not impossible, to make a decision without goals. When a decision must be made, we should ask ourselves "which alternative best facilitates reaching our goals."

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The comparison has been made that planning a business is like planning a trip; individuals must know their destination to determine their route and their mode of travel or transportation. Clearly defined goals are a critical element in developing a well-designed business strategy.

Farmers and other business managers establish and prioritize personal and business goals to guide them in their decisions. A meaningful goal is specific, measurable, challenging but realistic and time specific and addresses key result areas. Co-owners of a business rely on careful thought and forthright communication to collectively establish and prioritize their business goals. Likewise, business owners reconcile their personal goals with their business goals. For many business persons, a primary goal for the business is to generate all or a portion of the income they need to meet their living expenses.

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Business owners set goals for themselves and their business. By establishing goals, the owners specify where they want their business to go. The goals are the destination for "the trip," but more importantly, they become the criteria for making future decisions.

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Challenge of Setting Goals

Defining goals may be challenging because some people have not previously specified their goals. Goal setting requires a person to think about the future. The process takes time, a precious commodity for everyone. The reward or payback for setting goals is not always immediately recognized. However, business owners often benefit from specifying their goals because they acquire a better understanding of what they are trying to accomplish with their business. They then rely on the goals in making decisions every time a question arises. When a decision must be made, owners ask themselves "which alternative best facilitates reaching our goals."

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Benefit of Setting Goals

Setting goals causes business owners to think about the future, and such forward thinking about opportunities and challenges benefits themselves and their business. Owners who have specified their personal and business goals find themselves better able to explain their objectives to others. Discussions and documents that indicate where the business is headed allow others, including lenders, investors, purchasers of output, input suppliers, and possibly regulators, to decide whether they want to be part of the future of the business. Having established goals demonstrates that the owner has thought about the future.

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Benefit of Writing Goals

Written goals can help business owners be more precise in their thoughts about the future and where they want to end up. Written goals are more easily shared with others and demonstrate that the owner has given careful thought to the situation and the future. Finally, business owners can refer to written goals (rather than relying solely on their memory) to guide decision-making and the operation of the business.

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Beginning to Identify Goals

One way owners can begin to specify goals is to answer questions about themselves and their business. Appendix suggests questions farmers can consider as they begin to identify goals. This is not a complete list because there likely are additional questions farmers will think about. Similarly, every question does not pertain to each situation. The questions are intended to stimulate thinking and conversations among owners and family members. Although answers to the questions are not goals, they should help individuals specify and prioritize their personal and business goals.

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Time for Accomplishing Goals

The period for accomplishing goals varies from situation to situation and from person to person. Therefore, goals should reflect different periods, such as short-term and long-term goals. Some business persons specify long-term goals, intermediate-term goals, and short-term goals. The following list provides examples of each type of goal.

1.   I will spend 10 days each year away from the business.

2.   I will increase the amount of business income available for family living or non-business investments by $2,000 each year for the next five years.

3.   The only debt I will have 15 years from now is what is needed to expand the business at that time.

Some owners consider their short-term business goals to be performance standards. Growth of the business, rate of return on assets, production goals, turnover of inventory, and general use of resources to reach maximum efficiency are some common performance standards. Performance benchmarks will be addressed in the step 9.

Perhaps the most critical goal for owners of a closely held business is to specify how much cash will be withdrawn annually from the business to meet living expenses. At this point, the owners also can consider how this amount may change in the future as the family grows or retirement approaches.

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Characteristics of a Goal

A meaningful goal is

  • specific,
  • measurable,
  • challenging but realistic,
  • time specific, and
  • addresses key result areas.

For example, a family may specify a goal to set aside, in addition to its regular savings plan, an extra $35,000 into a savings account over the next 3 years for home remodeling. The additional $11,700 each year can be challenging, yet it is measurable, has a time limit, states a purpose, and addresses an effort that is important to the family.

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Interaction and Relationship Among Goals

Owners of closely held businesses coordinate their personal goals with their business goals. This is a result of the owner's heavy reliance on the business as a primary source of income for living expenses. Such coordination also is important when cash withdrawals for family living impacts the financial condition of the business.

Few businesses or families have enough resources to reach all their goals at one time; therefore, owners prioritize their goals. They specify which goals will be emphasized first, and which ones will be delayed. Business owners stress that communication among family members and co-owners of the business is vital in minimizing the conflicts that may arise when establishing, prioritizing, and reconciling personal goals of several individuals with their collective goals for the business.

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Steps in Group Goal Setting

Several steps have been suggested for setting goals if the business involves more than one person.

  • First, all individuals should set and prioritize their goals.
  • Second, married couples should share their individual goals with one another to identify common goals and recognize differences. The couple then can set and prioritize their collective goals.
  • Third, the units within the family (unmarried individuals and married couples) should discuss their goals and work together to set and prioritize their collective goals.
    • Some business owners have suggested that not everyone needs to participate in this third round of setting goals as long as everyone's interests are adequately and accurately represented. This observation is made, recognizing that the discussion at this point may focus more on business goals than personal goals and that not everyone is intimately involved in the operating the business.
  • The next suggested step is to set and prioritize business goals with non-family business partners.
  • Finally, goals can be assessed against what others, such as landowners, lenders, or investors, expect from the business.

The importance of effective communication is often mentioned as owners and their families describe their experiences in setting goals. These individuals also mention the extensive time commitment that may be necessary for a successful goal-setting process.

Owners indicate that during the process of discussing and setting goals, the conversation can be inadvertently side-tracked onto other topics. Families might rely on an unrelated person to serve as a facilitator during these discussions. Such an individual also can help the family maintain the focus of its conversation.

A question that arises is how do business owners reconcile their different goals. The individuals that ask this question have already set their own goals and shared them with their family and co-owners. It is at this point in the process that they realize there are differences that need to be resolved. One observation in answering this question is that the goals of family members and co-owners do not need to, and never will, be identical. It is not reasonable to strive to establish one set of goals that fits everyone.

Yet goals cannot be so divergent that there is nothing in common. Instead, the group should strive to find commonalities among their goals and opportunities to work together to accomplish tasks that fulfill the goals of several individuals. For example, there may be an activity that fulfills a goal for several people even though they are different goals. The key to working out differences among goals appears to be communication and a willingness to cooperate.

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Categories of Goals

Not all goals fit within the same categories. For example, one individual may focus on career interests whereas another person may emphasize personal financial goals, while others may address their business practices or estate planning. Goals likely will address personal career objectives, business objectives, and personal financial objectives. One suggestion is to initially categorize goals as

  • short-term personal goals,
  • long-term personal goals,
  • short-term business goals, and
  • long-term business goals.

Business owners and their families will likely define additional categories of goals as they progress through the planning process.

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Revising Goals

Goals change over time because people change, their needs and desires change, and their situation changes. Owners are encouraged to guard against changing their goals just because the first one turns out to require more effort than initially expected. Similarly, owners are urged to be cautious about lowering their goals just because they are not immediately accomplished. However, it is recommended that goals be revised once it is clear that the current goals are so challenging that they are detracting from other important business or family interests.

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Conclusion

Business owners can define goals to other owners, why goals are needed, how they are used, why they need to be prioritized, and why the family and business partners need to discuss them. However, no one can tell another person what goals they should set for themselves, their families, or their business. Each individual is responsible for that decision. Having set goals provides the owner the criteria necessary to select among alternatives in the future.

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