7 Strategies for Setting Small Business Financial Goals

When the calendar turns to a new year, you have a unique opportunity to refocus and chart a course for financial success. It’s a time for fresh starts — and that means setting clear financial goals to guide your business through the next 12 months. Whether you're aiming to increase profitability, streamline expenses or build stronger finances, setting actionable and measurable financial goals is essential for sustaining growth and achieving long-term success.

We’ll walk through the key steps to help you set, track and achieve meaningful financial goals in the new year. With the right strategy in place, you can gain a clearer understanding of your business's financial health to help you make informed decisions and build a stronger foundation for future success.

1. Learn From Successes and Challenges

Start by reviewing your business's financial performance, noting areas where you excelled and others that need improvement. Ask yourself:

• Did your revenue meet expectations?
• Were your expenses in line with your budget?
• Did you experience cash flow issues at any point during the year?
• How did your profit margins compare to industry averages?

Reflecting on past successes helps identify strategies that worked well, enabling you to replicate and build on them in the future. At the same time, analyzing past challenges, such as cash flow issues or unexpected expenses, helps you pinpoint areas for improvement for smoother operations in the future.

2. Set Specific, Measurable Financial Goals

Next, think about where you want your business to go. Setting clear and specific goals is crucial for maintaining focus and tracking progress. Make sure your goals are SMART — Specific, Measurable, Achievable, Relevant and Time-bound. These goals help ensure that your resources are used efficiently and align with your long-term business vision. SMART goals help keep you focused and accountable, reducing the risk of getting overwhelmed or distracted by day-to-day challenges while driving measurable results. Here are some examples of financial goals for a small business:

• Increase Revenue: Set a target for how much you want to grow your business’s top line. For example, you might aim to increase revenue by 15% year over year or diversify your income stream by introducing a new product or service.
• Improve Profitability: Focus on boosting your profit margins by either increasing sales or reducing costs. You could set a goal to lower your cost of goods sold or streamline your operational expenses.
• Build Cash Reserves: Sufficient cash reserves can provide a safety net during lean months or unexpected downturns. Set a target to save a certain percentage of your monthly revenue or build up a specific cash reserve amount.
• Pay Down Debt: If your business has outstanding loans or credit lines, setting a goal to pay down debt can improve your financial position. Establish a clear target for reducing your liabilities, such as paying off 20% of your outstanding debt over the next year.
• Improve Financial Reporting and Forecasting: Financial goals aren’t just about numbers. You can set objectives to improve how you track and measure your financial health. For instance, aim to implement monthly cash flow forecasts or adopt accounting software to gain better insights into your financial performance.

3. Create a Realistic Budget

A well-crafted budget provides a clear framework for how your income will be spent and ensures that your business can stay on track to meet its financial goals. Start by estimating your projected revenue for the year, which is based on historical data, seasonal trends and any planned expansions or changes. For example, if you're planning to launch a new product or enter a new market, you’ll want to factor in potential sales from these initiatives.

Once your revenue is mapped out, focus on categorizing your expenses. Fixed costs, such as rent, insurance and salaried employees, tend to remain constant throughout the year. These are relatively easy to project since they don’t fluctuate much. Variable costs, on the other hand, such as raw materials or commissions and marketing, can change based on the volume of your business. By tracking your historical spending in these areas, you can better anticipate future expenses.

A good budget and financial plan will also account for any seasonal changes in costs, like higher utility bills during summer or increased staffing needs during peak sales periods. Make sure to set aside funds for unexpected expenses and emergencies. Also reserve money for taxes, savings and reinvestment into your business. Regularly reviewing and adjusting your budget will help ensure that it remains realistic and aligns with your business goals as you progress through the year.

4. Regularly Track Your Progress

Tracking progress is like checking your map during a road trip — you need to make sure you're heading in the right direction. When you keep an eye on things like sales, expenses and profits, you can see if you're on track to meet your financial plan. If something’s off, you can catch it early and make changes. It also helps you stay focused on what really matters, like boosting sales or cutting unnecessary costs.

In today’s digital age, there’s no reason to manage finances manually. You can benefit from accounting software and financial management tools, such as QuickBooks, which can help streamline invoicing, expense tracking and financial reporting. Automating routine tasks like cash flow forecasting can save you time and reduce the risk of errors. 

5. Adjust and Adapt Goals as Needed

The business landscape is constantly changing. Market trends and economic conditions or unexpected events can impact your financial goals. For example, if there's a downturn in your industry or you face a sudden increase in expenses, you may need to adjust your targets or reallocate resources.

Be flexible and willing to adapt your goals as circumstances change. If necessary, revise your goals to reflect new realities — just make sure you’re still striving for growth and financial stability, even if your strategy shifts along the way.

6. Invest in Your Business for Long-Term Growth

While short-term financial goals like increasing revenue or reducing costs are important, don’t forget to make long-term investments that will pay off in the future. Whether it’s expanding your team or improving your marketing strategies, these long-term financial goals can lead to better customer experiences and more opportunities for revenue.

Investing in your business allows you to stay competitive in a fast-changing marketplace. For example, investing in employee development or new product lines can help you respond to market demands and stay ahead of the competition.

7. Seek Professional Advice

Managing finances and setting goals can sometimes feel complex, but there are professionals to help you. Financial advisors, accountants and business consultants bring specialized knowledge that helps you navigate complex areas like tax planning, cash flow management and investment strategies. They can identify opportunities for tax savings, help with structuring your financial goals more effectively, and even advise on legal or regulatory changes that may impact your business.

Our Northwest Bank commercial banking team is always here to help you prioritize goals, make sure you're not overextending and provide strategies to manage risks. Whether you're deciding how to allocate resources or evaluating whether your goals are realistic, we can help you gain the confidence to make sound financial decisions that support long-term success.