“Accounting is a useful tool to help your company meet its financial goals” is a theme you may have picked up by now reading the Nerd. This month, I want to touch on a framework for establishing goals. Somewhere in sunny Southern California, while studying to be a a master Nerd, I learned about SMART goals. Let me share and present it to a Busgirl, or guy.
Below is a list of goals your transportation company may have:
- Make more money
- Increase sales
- Control expenses
- Increase profitability
- Improve cash flow
- Increase line run revenues by 20% for 2019 (over 2018)
- Increase revenue per mile by 5% by June 2020 as compared to calendar year 2018
- Increase revenue per day to $1,200 for the calendar year 2019
- Increase line run ridership by 15% for summer 2019 (over summer 2018)
- Keep administrative expenses at or below 6% of net sales for 2019
- Increase profitability to 15% of net sales by April 2020
- Increase sedan utilization to 50% during 2019
- Maintain fuel expenses at $100,000 for the year
Specific – Make sure your goals are specific. Define what it is the company would like to achieve. Goal number 1 is very vague. What does this mean? Is the goal to increase cash? Increase the dollar amount of net income? One would have to guess or ask additional questions to really know. Goal number 2 is more specific than goal number 1, but numbers 6 through 13 are much more specific.
Measurable – Make sure your goal has an appropriate metric that can be measured. Sometimes goals are measured in dollars. Some may best be measured as a percentage of sales. Still others, as in examples 9 and 12, are measured by non-financial metrics such as utilization and yield. Creating a productive staff is vague, but decreasing absenteeism by X% over last year is a metric that can be measured.
Attainable – Are you setting goals that are reachable? If the goal is set too high and there is no way to reach it, it is not reasonable to set it as a goal. Goal number 13 may be an unattainable goal. Fuel is a large variable cost that rarely remains stagnant as a company’s revenues eb and flow. Therefore, measure the cost of fuel as a percentage of net sales instead of a dollar amount. During a period of increasing fuel prices, raising your rates may be the action required to attain a consistent fuel cost percentage. Our goal becomes “keeping our fuel cost at a X% of net sales by increasing our rates X% over the next six months.” Understand that here we are looking at rates and not volume. You may increase rates and decrease your utilization, all in keeping with the same bottom line. The point is that an attainable goal can involve multiple action items and results.
Relevant – Is the goal you are setting relevant to your overall business plan? A goal can be set for office supply expense, but that does that really have a significant effect on the company? Make sure the goal is worthwhile. Do not waste time on goals that have little to no affect on your finances, company culture, or personal well-being.
Time Bound – Set a specific time that the goal is to be completed in. A goal without a time frame in which to complete it leaves a company floundering as to the planning steps necessary to get there and hard to determine when you had reached or failed to reach your goal.
Include your team and have them buy into the goal. Allow you supervisors a chance to create goals with you. If you pass the responsibility on to a supervisor, be sure the goal is clear and well understood, and that you provide support. How do they benefit from achieving the goal? Can you incentivize them? How does your line staff benefit? Many times they are the ones that will determine the success of your goal.
Finally, seek encouragement from your non-competing industry peers; friends wish you to succeed and the synergy can be tremendous! In any event, there is always room for improvement and SMART goals are just that, smart.
Let us at BUSBooks review your financial picture and help you set your own SMART goals. Together we can move you further down the road!
Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator
BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.