Founders and managers often get stuck on the order: do you set goals and then write a plan, or write the plan and then derive goals? The honest answer is that they shape each other. But there is a sensible sequence that avoids going round in circles.
The recommended sequence
1. Vision and purpose (the big "why"). What are you trying to build, and for whom? This sets direction.
2. High-level goals. Two to five ambitious outcomes for the next one to three years. "Reach £1m revenue", "Become the leading provider in our region", "Launch in two new markets."
3. The business plan. How you will achieve those goals: market analysis, offer, operations, team, marketing and finances. Writing the plan tests whether the goals are realistic.
4. Refined goals. The plan almost always changes the goals. You may discover you need more funding, more time or a different focus.
5. Detailed targets and action plans. Annual SMART goals, KPIs and team goals that put the plan into action.
So: broad goals come first, the plan tests them, and detailed goals come after.
Did you know? Research by Francis Greene and Christian Hopp, reported in Harvard Business Review in 2017, found that entrepreneurs who wrote formal business plans were 16% more likely to achieve a viable business than otherwise similar entrepreneurs who did not.
Why not start with the plan?
Without goals, a business plan becomes a description instead of a strategy. It lists what you do, not what you are trying to achieve. Goals give the plan its purpose and the yardstick for every decision in it.
Why not stop at goals?
Goals without a plan are wishes. The planning process forces you to face the numbers, the competition and the resources you actually have. It is where unrealistic goals get exposed before they cost you money.
For established businesses
In an existing company, the cycle is continuous: last year's results inform this year's goals, which shape this year's plan, which produces targets for teams. See how many business goals a company should have.
For individuals
The same sequence works for your career: a sense of direction, a few big goals, a plan to get there and then specific annual goals. See short-term vs long-term goals.
The bottom line
Set broad goals first, test them with a business plan, refine them, then set detailed targets. The goals and the plan improve each other. For what goes into the plan itself, see the main sections of a business plan. Our Business Planning and Goal Setting course takes you through this whole sequence, and our Certificate of Entrepreneurship covers planning for new ventures.