generate a surplus once fixed and variable costs have been covered. Let's look at the math.

Say our fixed costs are $1000. Our variable costs are $50 per customer. We sell our service for $100. This means that in year 1, we need to provide services to 20 customers in order to break even:

Income: 20 x 100 = 2000; Fixed costs: 1000; Variable costs: 20 x 50 = 1000

If our fixed and variable costs remain the same in year 2, then from customer 21 onwards, we are generating $50 of profit per transaction.

So a SMART objective could be: In year 1 we will service 20 customers with one transaction each, charging $100 per time. This gives us a specific objective, which can be measured, hopefully is achievable and is certainly relevant and time-related.

Other financial objectives could relate to the numbers of new customers, new product development or measures for keeping costs under control.

Non-Financial Objectives

Of course, business is not just about finances, although they are a key factor. Remember why we wanted to work for ourselves. Maybe we wanted more time to spend with the family; or to be able to put time aside for other things. If these are important factors, then they should also be the subject of objectives. For example 'to take one afternoon each month for swimming with the kids' or 'to clear three hours every week to work on that novel'. Whatever our reasons for running a small business (and everyone's reasons are different), setting SMART objectives, writing them down and measuring ourselves against them periodically will give us a better chance of fulfilling our ambitions.

Learn more about this author, Elizabeth Ducie.
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