Although planning for the future can be unnerving, entrepreneurs should always be looking forward. Here's how to craft your 5 year plan.
“Where do you see yourself in five years?”
Nearly everyone answers that dreaded question at some point, and still it wields an unexplainable power to dredge up deep, existential fear. Having to look that far in the future is frightening, especially when you’re a small business owner.
According to the Small Business Administration, just half of all new businesses survive their first five years, so asking an entrepreneur to gaze that far into the future is almost akin to asking them to flip a coin to see if their business will make it.
Of course, as most realize, a business’s success is predicated on more than a fifty-fifty shot at survival, and a willingness to actually ask yourself where you want your business to be in five years is an important first step in lasting that long.
Answering that question effectively, though, requires a bit of thought and work.
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Looking Into the Future
Entrepreneurs are optimistic – nearly 91 percent of those surveyed by the Kauffman Foundation believed their business would grow over the following year. No one wants to admit there might be serious problems with their company, or that their business may be part of that 50 percent doomed to die within five years. But to effectively answer the five-year question, you have to balance optimism and reality.
Look around your market and find the businesses that are thriving and, if you can, signs of those who failed. What is their niche? How did they set themselves apart? What are you going to do differently?
You do not need any hard answers to these questions at this stage since you are looking five years into the future and, at this point, all anyone can do is infer and guess. But the relatively vague answers to those questions force you to think about where you want to be in five years, and that simple act is instrumental to setting goals and plotting your company’s course.
Defining Your Goals
A study conducted by Dr. Matthews of Dominican University found empirical proof that those who took the time to write down their goals were more likely to accomplish them than those who simply thought about what their goals may be. In fact, goal setting was even more effective than setting “action commitments” - commitments to complete a particular task, rather than a goal, by a certain time.
Understanding the distinction between goal and action is where a lot of entrepreneurs begin to falter. A goal is something you hope to achieve, like becoming profitable within your first year of business. An action is part of your overall plan to reach that goal; cold-calling at least fifty potential clients a month, for example.
Now, understand that hard milestones are how people turn lofty goals and ideas into an actionable plan, but you cannot rely on them alone. Doing so effectively limits what you want to achieve because it’s easy to mistake a minor success for a significant step towards your long-term goals.
Staying on Track
That same Dominican study found the most effective means to accomplish your goals is to combine written goals and actions with some form of regular accountability. You are, of course, accountable to yourself, but having a third-party to report to significantly enhances the likelihood you will meet your goals.
Accountability does not have to be frightening either – when I first started out, I talked to my husband about what I wanted to achieve, and occasionally he’d ask about those goals and help me re-orient my plan. I would have similar talks with my parents, neither of whom knew much about business, but were nonetheless still interested in what their daughter was doing so would ask about my progress. Friends, mentors, co-workers, accountants, family; all around you are people happy to walk through your goals with you and talk about them down the line. As long as you are open and honest about your business’s growth, having that little extra bit of accountability stokes your inner, entrepreneurial fire.
Honestly, no one knows where there will be in five years. The frightening question isn’t posed to make you panic and question your life choices. Rather, it’s to spur you to, at the very least, hazily sketch an image of what you want to achieve within a set time frame. The first five years of a business’s life are the most tumultuous, and it is hard to figure out just how healthy your company is when it feels like all you do is put out fires and solve a never-ending stream of problems.
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But, that rough five-year sketch helps you map out achievable goals punctuated with actionable milestones for which you are accountable. That way it is possible to step back, objectively measure how your business is doing, and figure out just how correct your answer to that dreaded five-year question was.