Financial Business Objectives
Prior to start a successful business, it is important for entrepreneur to set business objective, vision and mission. In simple words it is, what business will achieve in short term and long term. Business owners need to set different type of business objectives, one of them are financial business objectives which provide solid plan in the long term. There are different financial objectives of a business, some of them are
- Increase in Revenue
- Profit Margin
- Return on Investment
One of the most basic objective of business is to generate revenue and increase it gradually with the time. Mainly marketing and sales are responsible for the growth in revenue. Company set goals for increasing in revenue in the shape of percentile rather than a certain amount. For example few months back Mr. A started a business, now his objective is to increasing sales by 15 percent every year for the first five years.
The term project is different from the term revenue generation. Profit is that money which is left after excluding all the expenses (salaries and commission paid, administrative and operational expense etc.) from revenue. There are variety of way to utilize these profits for example reinvestment plans it means to reinvest all or part of profits in business, business expansion (opening new branches and franchises or aiming for new plants etc. dividend or profit sharing is another example of utilizing business profits.
Profit maximization is based on revenue and secondly on cost. Management must try to keep the cost low by applying different tools and technique “effective and efficient work environment” and take benefits from economies of scale.
There are times, when companies’ priorities are to focus on suitability and survival in the industry. Retrenching “reduce cost and spending” is totally a marketing strategy and based on financial objective. It attempts to keep the brand running and sustain both the revenue and profit from decreasing during the decline stage of product or brand.
Return on Investment
It is financial ration which is related to capital expenditures. There are two basic situations for Return on Investment ROI.
- First, ROI is based on return comes from real property and productive equipment investment. Here the entrepreneur want ensure to generate sufficient revenue from the buildings, equipment and machinery.
- Secondly, the other application of ROI are investment in shares, bond etc. Basic principles are the same but there is no physical but paper form of assets. Investor can get dividends, interest and capital gains.