Setting objectives

In most businesses, the owners decide on the objectives for the business.

SMART objectives are Specific, Measurable, Agreed, Realistic and Timed

When a business first starts trading it has few loyal customers and no reputation. The most likely objective for a start-up business is simply survival. As the business grows and begins to win market share, the aim may shift towards expansion and/or increasing profits.

Some owners have a vague idea about their objectives. The best types of objective are SMART, which stands for:

  • Specific: clearly state what is to be achieved, eg increased profits.
  • Measurable: the desired outcome is a number value that can be measured, eg increase profits by 10%.
  • Agreed: all staff are involved in discussing and agreeing an aim.
  • Realistic: the target is possible given the market conditions and the staff and financial resources available.
  • Timed: the target will be met within a given period of time, eg 12 months.

An example of a SMART objective is 'to increase profits by 10% within the next 12 months'. SMART objectives allow the performance of a business to be assessed.

While owners have a major say in deciding the aims of a business, other interest groups called stakeholders are usually considered. Stakeholders are any group of people interested in the activities of the business - they could be managers, staff or customers. When owners sacrifice some profit to pay staff an annual bonus, this is an example of stakeholder consideration.