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Strategic Objectives → Goals → KPIs

planning Nov 16, 2023

Today we wrap up our Annual Budget & Planning series.

We break down how once you decide on your strategic objectives you should create:

  1. Goals
  2. KPIs
  3. an Operational Plan

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Over the last 2 months, we’ve broken down the annual budget and planning process step by step.

Today we’re going to bring it all together and talk goals and KPIs.

But first, let’s recap a bit of the prior weeks so you can see how it flows.

  1. Brainstorm strategic objective ideas. Narrow the list to 3-5 to do financial analysis on.
  2. Create a draft of both your operating and capital budgets.
  3. Build your revenue forecast, incorporating potential strategic objectives. Incorporate baseline, worst case, and best case scenarios.
  4. Refine both budgets and the revenue forecast until comfortable.
  5. Strategize and agree on your strategic objectives.
  6. Once finalized, create a 3 statement model (Income Statement, Balance Sheet, and Statement of Cash Flows). We’ll address this at another time.
  7. Identify goals that align with the strategic objectives.
  8. Develop a KPI dashboard that will track progress towards goals.
  9. Create milestones and an operational plan to achieve the goals and strategic objectives.

We’ve addressed 1-4, which means we have a lot of heavy lifting to do in this last week.

Let’s dive in.

Strategize and agree on your strategic objectives

Each business will have their own way to go about this process. Because of that, I don’t want to hit this section with a heavy hand.

Instead, consider the 3 high level questions I teased last time.

Which holds highest priority now that we know the numbers?

Numbers change things. When brainstorming and narrowing your objectives, you made some estimates on cost and profitability.

Now that you’ve really refined this estimate, it’s time to re-evaluate your rankings.

Don’t put too much weight on this and in turn rank them based on financial outcome. The reality is, all projections are guesses. But if your favorite doesn’t pencil, it may be time to move it down the list.

Do they stand to be “profitable” on their own?

Profitability in an objective is key. Sometimes the numbers just don’t work.

That doesn’t mean they’ll never work, but they won’t work today.

If the numbers don’t work today, it’s time to scrap it.

The exception here is:

  1. Does it give you a huge, long-term and enduring strategic advantage?
  2. Did you consider a long-enough time horizon?

Be honest in how important the objective truly is to the future of the business. It’s easy to overstate the importance and chase the wrong things.

Is it realistic to complete them all?

The reality is, every strategic objective/idea isn’t possible to achieve. Sometimes your business isn’t capable of achieving it and other times it’s a limit of the people on your team.

Most staff members can only focus on achieving one strategic objective at a time.

If they can work on more (and achieve them), it’s likely the objectives are too small.

In this discussion, we want to determine who would legitimately own it.

If a specific person is best for multiple objectives, ask:

  1. Which are they better suited for?
  2. Is there another teammate that is 90-95% as capable?

Let these answers guide you as you narrow down your options.

Going through these 3 questions should help you start to narrow and select your final objectives.

Again, I don’t want to create hard and fast rules, but some guidelines:

  1. Make sure they’re hard, but realistic.
  2. Each person should generally have only one objective.
  3. Consider how objectives will compete for resources (team or equipment).

Identify your goals

Your strategic objective will be a high level direction, or statement, of where you want to be in 3-5 years. The timeline is not super important, as long as the horizon is more than one year.

Your goal is the target you set for the next 12 months to help you get to that strategic objective. These will be more concrete and measurable and should begin the process of breaking them down into actionable steps.

An example looks like this:

Strategic Objective: Diversify your service offering by introducing new service A.

Goal: Achieve $X in revenue on service A in the next 12 months.

With goals, I love using the SMART goal framework:

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Time-bound

I wrote about the SMART goal framework a while back, which you can check out here.

Establish a goal for the next 12 months for each objective you’ve identified.

Develop a KPI dashboard

Now that you have a goal, you need to know you’re going to track achievement of that goal.

For each goal, we want (at minimum) two metrics:

  1. Leading measures
  2. Lagging measures

Leading measures predict the outcome of lagging measures.

Using our example above of offering a new service, leading measures could be:

  1. Sales calls made
  2. Customer inquires made
  3. Sales pipeline number or dollars
  4. Ad campaign engagements (clicks, likes, shares, etc)

Lagging measures would look like:

  1. Revenue per month
  2. Customer retention rate
  3. Churn rate for service

Leading measures should be tracked frequently (such as daily or weekly) and lagging indicators will be tracked less frequently (weekly or monthly).

We want to make sure our leading measures are doing a good job of predicting our lagging measure and goal results. If it’s not, switch it out.

We also want to use the MVD (minimum viable dose) idea when choosing how many to track. If you only need to track sales calls and revenue, do it.

But sometimes other factors, like retention or churn, drastically impact your ability to meet the goal. Don’t be afraid to track multiple when needed.

If you want to read more about how to pick the right KPIs, check out this article I wrote earlier this year.

Create milestones and an operational plan

Now that you’ve established goals and KPIs, it’s time to turn this into an actionable plan.

Don’t map the whole strategic objective because that’s a waste of time.

Instead create a step-by-step plan on how you’re going to get to the goal at the end of year one.

Yes, the plan will change. But a one year plan is more real than a 3-5 year step-by-step.

  1. Set broad intentions far out (3-5 years)
  2. Back into the one year result you need to achieve it
  3. Create a step-by-step plan to achieve your one-year goal

Once you have your steps, assign them to an individual and set a deadline.

Next, identify the natural milestones in the process. Highlight these and make a point to pause at these milestones and reflect on:

  1. How it’s going
  2. What needs to change
  3. How we’re going to reach the goal

This is key to keeping the momentum moving forward but then also being intentional about asking the questions “are we still doing the right thing?”

Running the process

This annual planning process is insane.

I understand that. But a good annual plan isn’t easy.

If it were easy, everyone would do it and it wouldn’t be a competitive advantage.

When it comes to running this process, be intentional about the people you include in the process and spreading out the work.

Give assignments to different groups of people and have them bring back deliverables.

Then, assign one person to combine all the data.

After you’ve compiled all the information you need for budgets and forecasts, narrow the circle considerably.

Let people provide opinions on the process until this point, then only allow those top level leaders in the room as you finalize it.

This means you allow input and include people, but don’t lose the process to competing interests.

Once you finalize the plan, present the plan to the larger, original group and seek feedback.

Refine it based on the feedback before presenting the final plan to the whole company.

Sure you might have a different idea or flavor in your business. That’s fine! But I’ve found when you include too many or too few in the process as a whole you end up with no plan or a really bad one.

Thank you all for walking through this journey with me.


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