The Business of Goal Setting: What SME owners need to know

When setting up a new business, as an SME owner you will have goals you want to achieve for your new venture. Whether these are short term or long term, new business owners can sometimes feel pressured to achieve their business goals within a certain period of time.

But should new business owners be applying so much pressure on achieving their initial business goals?

We surveyed 500 SME owners in June 2022 to discover their original business goals, whether these were achieved in line with when they had initially planned, and any challenges they felt they had faced along the way.

The results reveal that when it comes to setting up a business, things may not always go to plan - but then even the most successful businesses go through similar things.

45% of SME owners say they didn’t achieve their short-term goals within their initial time frame and budget

There can be many reasons why people leave their well-trodden career paths in order to begin their own businesses, though some are more common than others. We asked our SME owners what their main reasons were for starting up their own business - the three top reasons were;

Reasons for setting up own businessPercentage of respondents who agreed with this statement
To become own boss41%
For financial stability36%
For more flexibility36%

We asked SME owners what their initial short-term (one-three year) goals were when becoming a business owner. Interestingly, 39% of respondents said one of their goals was just to stay in business, but the most popular short term goal was to see the company make a profit (46%). Nearly 8% of respondents said they wanted to turnover £1 million in their first three years of business.

However, are these achievable short term goals? When asked if respondents had achieved their short term goals within their initial planned time frame and budget, only one third (30%) said yes and only a quarter (25%) said that they had achieved their initial goals and went on to add further goals within their initial time frame and budget.

Meanwhile, 45% of respondents admitted they did not achieve their short term goals within time frame and budget. Our study showed that one in six (17%) business owners reduced their short term goals in order to achieve them within their initial time frame/budget, and over 22% had to increase their budget in order to achieve their goals. Realising your business plan is going to take more time and budget than you initially planned for is not an uncommon occurrence for business owners. Seeing an immediate profit within the short term of a business can often be unrealistic when setting business goals.

It is important when starting your business to plan for slower progress in order to ensure your goals are as achievable as possible.

Danny Greeves, life coach and therapist said: “Setting achievable goals is fundamental to staying motivated and focused on achieving your business dreams. When we set a realistic goal and achieve it, our brain gives us a burst of the feel-good chemical dopamine. The celebration that comes with that feel-good chemical state becomes associated with goal achievement, and so we develop an internal drive to continue to pursue progressively bigger and more challenging goals.

“On the other hand, when we set an unrealistic goal the opposite happens. We begin to accumulate evidence that we cannot do what we set out to do, this increases self-doubt and leads to the self-image shrinking. The smaller our self-image, the less faith and trust we have in ourselves and the lower our ambitions become.”

We asked those who had not achieved their short term goals within their planned time frame how much longer it took them to reach these goals:

Extra time needed by SME owners to complete initial short term goalsPercentage of respondents who agreed with this statement
Up to 6 months0%
7 - 12 months44%
13 - 18 months26%
19 months - 2 years13%
3 - 5 years11%
More than 5 years0%
N/A7%

It is easy, and understandable, to aim high when pulling together a business plan - however, it can also be important to remind ourselves that even the most successful companies in the world today did not see a profit in their first few years of business and many had to adjust. Examples of this include companies such as Amazon which was set up in 1994 but did not see a profit until 2003, after nine years in business.

In it for the long run: Around 64% of business owners have to expand their initial time frames to achieve their long-term business goals

Setting initial long term goals for your business is important in order to be able to create and achieve the overall vision. When you create your long term business goals, you can then set your short term goals in order to get where you eventually want to be.

We asked our survey respondents the time frame in which they wanted to achieve their long term goals for their businesses; 39% wanted to achieve their long-term goals in under four years, whilst 72% wanted to achieve their long-term goals in under six years.

However, we can also see from our results that 64% of SME owners needed to give themselves at least 12-18 months longer than initially planned to achieve their long-term goals. Once again, they are not alone in this with many successful entrepreneurs taking years to get where they are today - many changing their direction in the process.

75% of SME owners said that their business had changed path from their initial business plan

BODY IMAGE 1 | SME GOALS

In our survey 75% of respondents said that their business had changed path or goals in some way from what they had initially planned when starting up their business - 17% even admitted to having had a full change in direction.

According to our survey, 32% of business owners said they had expanded into other areas over time, increasing to 40% for those businesses turning over £1 million. Of those who had a full change in direction, 67% have an annual turnover of £500,000+ and 18% have an annual turnover of over £1 million, showing that making changes to your initial business plan is not a bad thing and could actually help the business in the long term.

Changing goals can include anything from changing the general direction of the business, to expanding into other areas and even looking for extra investment you hadn't initially planned in order to grow. Over a quarter (26%) of respondents said they ended up obtaining investment in order to help their business grow. This statistic rises to 88% for business owners with companies turning over £500,000+, showing that asking for help is a positive strategy to help your business in order to grow.

Female SME owners are more likely to start up their own business for flexibility reasons than their male counterparts

BODY IMAGE 2 | SME GOALS

Our survey results found that there are some key differences between male and female entrepreneurs. When asked what SME owners' main reason was for setting up their business, 36% of respondents said more flexibility - however the split between male and female SME owners who gave this reason was quite noticeable. 43% of women selected this as one of their main reasons for setting up their own business, whilst only 30% of men chose this option.

This is in line with recent reports that have shown women leaving work places due to lack of flexibility. Many women have reportedly changed jobs and careers due to feeling as though their previous work places did not allow for them to navigate a good work-life balance.

Another question that saw a considerable gender split in answers was the short term goals for SME owners. Over a quarter (26%) of respondents said they wanted to make more money than they were making full time, however, this was more important to women SME owners with nearly 31% stating that this was one of their main short term goals, whilst it was a priority to only 22% of male SME owners.

We spoke to registered Occupational Psychologist, Suzanne Guest, who noted that “people set up businesses for a variety of reasons, money is a driving factor for many people but also work life balance and flexibility are other driving forces.

“Research shows that women still provide the majority of the care in the home, this could be childcare or caring for elderly relatives, women also do more than 50% of the housework. Therefore it makes sense that women may choose self-employment as a way of being more flexible, enabling them to do the tasks such as a school run or looking after elderly relatives.”

Nearly one in five business owners say they had to reduce time spent with loved ones in order to achieve their business goals

We asked our survey respondents what, if any, challenges or sacrifices they have had to make in order to achieve their business goals. The most common answers were reduced time spent with family and partners (19%) and missed holidays (17%). This shows that, despite many setting up their own business for more flexibility (26%), the ideal might not be the reality - especially when starting out and trying to get a business off the ground.

Many business owners even said that starting up their business has affected them physically and mentally:

Mental and physical challenges faced when starting own businessPercentage of respondents who agreed with this statement
Loss of sleep16%
Non-existent work-life balance15%
Feeling more stressed15%
Mental health and wellbeing affected14%
Physical health and wellbeing affected11%
Loss of private health insurance benefit4%

Danny Greeves tells us “Running a business is a challenging process. It has the capacity for great returns, but it also comes with specific challenges which can negatively impact our mental health. This then goes on to affect several different areas of life such as sleep, stress resilience, and physical wellbeing.

“As a consequence of this, it is even more important for small business owners to proactively look after their mental health. This can involve simple strategies such as meditation, exercise and good nutrition. But it can also include getting external help in the form of coaches and mentors.”

In order to support business owners with their mental health, we partner with online therapy platform Spill to offer free therapy sessions to SME owners who need the support.

Starting up a business can feel like a daunting experience. If you’re a business owner who may be looking for inspiration to start your own business or make a big change in a current business you own, then these are six original business plans from some of the most successful businesses in the world. You can see how their business goals have changed over time, and that pivoting from your initial goals isn’t always a bad thing.

Six renowned businesses SME owners can learn from

1 Tesla

Tesla was founded in 2003 but did not turn a profit until 18 years later in 2020. The company had to turn to investment funding within its first year (in 2004) and did not actually start production of their first product until 2008, showing how long it can take for companies to get a product out onto the market.

Our survey results showed that nearly 14% of business owners wanted to get their new product or service onto the market within their first three years of starting up. However, Tesla’s example should reassure business owners that sometimes it can take time to get a product right and ready for the market.

Tesla has since expanded its long-term goals from being able to provide sustainable transport to the mid-priced market to providing further sustainable energy for homes and businesses - as well as sending the public to the moon - using electric energy of course.

2 Uber

Uber was founded in 2009 with the aim of bringing fast and efficient transportation to big cities through a mobile app that would mean people did not need to carry cash around. The original plan was for Uber to be an upmarket experience for luxury clientele.

The original pitch deck shows Uber’s goals were to start in San Francisco and “soon after” start service in Manhattan. Uber expanded internationally in 2013/14.

Uber is a good example to show new business owners that setting more achievable goals can be beneficial when starting up a business. It is easier and more encouraging to expand a business plan once initial goals have been achieved than to go back and down scale goals - which can leave business owners feeling demotivated.

3 AirBnb

AirBnB was set up by industrial designers, Brian Chesky and Joe Gebbia, in 2008. The company's vision was to create an online community and marketplace for people to book places to stay via other users offering their homes.

AirBnB realised early into setting up the business that they could not survive without funding. The company had to turn to funding in order to sustain the business early on and gained investment in 2009. Our survey results showed that only 11% of SME owners had ‘to gain investment’ in their short-term business goals. However, this example shows the importance of asking for help not just in long-term goals but in short term business goals when required.

4 Facebook

The original pitch deck shows that Facebook (then thefacebook.com) was set up for Havard students, alumni and staff to be able to connect with each other online. It included basic information and was not set up to make a profit.

Though the initial plan when founded in 2004 was for Facebook to be available for students to connect with one another, within three years of starting the business (2006) Facebook became open to the public, changing its goals from connecting students to connecting people globally.

This was not an initial goal that the founders of Facebook had in mind when starting out. They could have kept Facebook a social site for students, however, in expanding their goal to connect more people they have become one of the most successful companies in the world.

Despite Facebook’s success, the company only became profitable in 2009, five years after officially launching and three years after becoming open to the general public. Since this point, Facebook has expanded into numerous other areas, including setting up its own online marketplace and becoming a prime spot for other companies to place media ads - expanding further and adding additional goals when they have achieved previous ones has allowed Facebook to get where they are today.

5 Starbucks

Starbucks started out in 1971 in Seattle, Washington as a coffee house that would serve fresh coffee and products. Starbucks remained solely based in Seattle for its first 16 years before expanding to other areas in the US in 1987. It was not until 1996 that Starbucks opened its first shop outside of the US.

For companies like Starbucks, becoming a household name did not happen overnight. Starbucks is a good example of showing that not all small businesses need to start out with huge global plans. According to our survey, one of 31% SME owners' main goals when setting up their business was to provide for their family or follow a passion project (23%) - companies like Starbucks show that starting small is a great place to start.

6 Marks and Spencer

Whilst Marks and Spencer Food thrives in the UK, the company did not see the same success in other countries, such as Canada, and has reduced its number of clothing stores around the country. The company has in recent years re-focused their goals, concentrating on their online presence, partnership with Ocado delivery and the part of the business they have seen the most success with - their food shops.

This shows new business owners that even larger companies that have seen huge success in one market have seen a fluctuation in success trialling new areas of business. The example of M&S (which was voted the UK’s favourite supermarket in 2022) also shows that goals are always changeable and that SME owners can choose to change direction if they see a goal not achieving what they had hoped it would for the business.

Key takeaways

  • Around two thirds (64%) of business owners had to expand their initial time frames to achieve their long-term business goals. Though it is important to set business goals, it is also important to make them realistic and achievable.
  • Three-quarters (75%) of SME owners said that their business had changed path from their initial business plan. Many businesses go through a change in direction, taking unexpected paths - this should be seen as a positive and new SME owners should be aware that this is common and not a sign of failure.
  • Despite over a third (36%) of SME owners starting their business for more flexibility, 15% admit they have struggled with work-life balance - reaching out for help and support is important in order to be able to maintain your business long-term.
  • Even some of the most well-known businesses in the world took time, and changed paths, in order to achieve the success they see today.

Methodology

We surveyed 500 (18+ small business owners (less than 100 employees and under £2 million annual turnover) of public limited companies (PLCs) to find out; why they set up their business, initial and long term goals and the challenges of being a small business owner.

Conducted by Censuswide June 2022

Sources

https://medium.com/ https://www.nytimes.com/ https://evannex.com/blogs/news/ https://www.theatlantic.com/ https://www.slideteam.net/ https://web.archive.org/web/20100826234315/ https://www.anthonygregg.com/insights/

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Charlotte is a Senior PR & Communications specialist at iwoca. She's been sharing news and insights about the finance industry for over three years.

Article updated on: 13 July 2022

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