Many business owners expect more than their business can deliver. It is important to set achievable and realistic growth targets.
Growth Targets Should Be Well Defined
Business owners generally start their business with a goal of earning a profit. Some business owners will believe they have an original idea that should revolutionize the market, and that idea should be worth millions of dollars, in their opinion. Other business owners will have lower expectations, and may be seeking only financial security for their family.
Of course, there are a large number of variations between these two extremes, but most new business owners establish some financial goals when they start their business.
Successful businesses will usually have detailed business plans that include sales projections, a budget that includes estimates of expenses, and targets for profits in the short-term, as well as the long-run. In many cases, the business plans will use several different sets of assumptions in order to help the owner prepare for both the worst-case and best-case scenarios.
Understand the Potential Return on Investment
Profits will usually be dependent upon the amount of capital that is invested in the business. Very few businesses will be able to generate millions of dollars in profits from a very small investment. Success like that is not impossible, but is rare enough that the stories are often chronicled in local news stories and business magazines. Other success stories, like the billions made by Facebook founders, required millions of dollars in investment, and years of time dedicated to the effort.
Investment analysts use the concept of return on equity (ROE) to determine whether or not a company is financially successful. The ROE of many industries is available on a number of websites. You can use this information to develop profit targets for your small business, once you develop realistic estimates of the amount of investment that will be needed.