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  • Writer's pictureStephen Heusinger

Short-term vs. Long-term: Aligning Company Goals for Success and Sustainability

There are two types of goals that will make up your overall business strategy; short-term and long-term. Businesses can fail for a variety of reasons, but one of the most common is due to a failure to solidify and align long-term and short-term goals. For example, a business may not have a clearly identifiable strategy and simply be focused on this quarter's profits, without understanding how achieving this quarters’ profit goals impact future business objectives and sustainability of the business.

A company's short-term goals will be very different depending on the long-term strategy. For example, the online giant Amazon did not make any profit for years, and still shows marginal profitability as it focuses on long term growth initiatives. Amazon gave growth and customer acquisition greater importance than immediate profits. They keep their prices very low, sometimes to the point of losing money, but these short-term tactics aligns with their long-term strategy; to be an industry leader and own a huge portion of the online sales market. Had Amazon favored profits over growth, they may not be the disruptive and industry redefining force of the digital age that they have become.

Following are some of the ways you can ensure your company's goals are clearly defined and that your short-term goals support your long-term objectives.

Always Be Thinking About the Exit Strategy

Too often start-ups as well as established firms don't have a clear exit strategy in place. There is an inherent tendency to focus on immediate gratification for objectives that may have little to no correlation to long term success. When companies do this, their default “exit” strategy often results in business failure. Failure is not an exit strategy. When and how you plan to exit will have a major bearing on short-term goals. A company with an exit strategy of eighteen months, such as a pre-IPO entity, will set very different short-term goals than a company with an exit strategy of ten years, such as a family owned business. These two companies will have to make very different choices when it comes to staffing, product development, capital allocation, among many other strategic decisions.

Set Long-Term Goals Before Setting Short-Term Tactics

Short-term planning should align with long-term goals; not the other way around. When you have a clear plan for your organization, you can create short-term tactics that uphold that longer-term vision. Remember that the best goals follow the S.M.A.R.T acronym. They are Specific, Measurable, Attainable, Relevant, and Timely. This means that your long-term goal should be something concrete and easily identifiable. Vague goals such as “Grow the business” will not lead you to success, nor do they enable alignment within the organization. A better goal would be, “Increase profits by 25% within two years’ time.” This goal is specific. It can easily be measured to see whether you've achieved it, and it has a time frame attached to it. Organizational, departmental, and individual goals can all then be aligned with their respective contribution to increasing profits by 25%.

Break Long-Term Goals into Short-Term Tactics

One way to ensure that your short-term goals align with your long-term goals is to create them by breaking your long-term goals down into smaller defined tactics and timeframe for achievement. To go back to the example above, if your goal is to increase profits by 25% within two years’ time, then you could break this down by quarter. You could set a goal of a profit increase of 4% each fiscal quarter, or you could divide that 25% another way if you know that some quarters see greater revenue than others. For a seasonal business, you may aim for a 10% increase during Q3 or Q4 and have lower quotas for quarters when you don't see as much demand. Remember that a two-year goal would only be considered long-term, if your exit is planned for two or three years in the future. If you have a twenty-year exit strategy, then a two-year goal would fall under the short-term. The measurement period may vary from one organization to the next; however, the primary importance is that it is consistently understood throughout the organization.

Remember that Success is not just about Profit: It is also about Sustainability

I started my first business in the “.com” era, a time marked by a huge boom and subsequent bust of many online businesses, and the resulting loss in billions of investment dollars. During this time, I remember seeing a seemingly never-ending stream of success stories in the press. The problem with these “successful” businesses is that they were focused largely on fundamentally flawed business assumptions that had no clear path for profitability. They didn't have a sharp vision for the future and they weren't making strategic decisions with longevity in mind. For these reasons, these “success” stories, became stories of failure. Failure was their only exit strategy, and when they ran out of funds, they were forced to shut down.

When to Start Planning?

If you haven’t already done so, the best time to start thinking about your long-term and short-term goals, and making sure these goals align with one another, is now! Especially for start-ups, if you've already been in business for some time and your focus has been merely on short term ‘survival’, you can start making smart and future-focused decisions today. Start by thinking about your exit strategy. How long do you want to operate this business? How will you know when it is time to sell the business? Do you ever plan to go public (IPO) or will your business remain privately-owned?

These are just a few of the questions that you'll want to consider, as you formulate your long-term business strategy. Your goals may change as the business grows or as the industry changes, but it is vital to have that plan in place and ensure that the goals are clearly communicated throughout the organization. When you take the time to think about the future, it is much more likely that your company will have a future!

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