What is a business objective? Definition and meaning
A business objective is a result that a company aims to achieve. It also includes the strategies that people will use to get there. A business objective usually includes a time frame and lists the resources available.
The adjective – to be objective – means not to let personal feelings or prejudice affect you when considering something. For example:
“We need to be objective when confronting this problem – this is not a time for personal bias.”
The opposite is to be subjective.
Business objective vs. goal
A company’s goals and objectives are not the same. The goal includes a broad primary outcome. A business objective, on the other hand, is a measurable step people take to achieve that goal. Goals are general while objectives are specific.
A company’s business objectives provide a picture of how it plans to achieve its goal. It also states how long it will take, and what resources are available. A business goal is vague in comparison.
When we plan our business’ future, we generate a list of potential achievements. We call these the goals. The actual steps we plan to take get to those achievements are the objectives.
You will often hear these two terms in business situations: “Our goals and objectives are…” or “Our aims and objectives are…” In a business context, ‘aims and goals’ might have the same meaning.
People commonly use the terms ‘goals’ and ‘objectives’ interchangeably. However, they are not the same. Business objectives and goals have important differentiating attributes which we use at different stages of the planning process.
Objectives are specific – not goals
A business objective is more specific and easier to measure than a goal. All our basic tools that underlie our planning and strategic activities are our objectives.
Our objectives serve as the basis for creating policy and gauging performance.
In business, your goals are where you aim to be one day. Your objectives, on the other hand, describe how you plan to get there.
For example, making a profit is a business objective. Reducing the workforce, expanding abroad, or minimizing expenses are also business objectives. Expenses are what the business spends. Keeping track of your expenses and outgoings can be a real chore. Some business bank accounts, like Monzo, make that easier with features automatic tax pots for setting aside costs for VAT, etc.
Goals are statements a business makes regarding its future. They represent the aspirations its leaders have.
The CEO of a company may say: “We seek to become the largest maker of bicycles in the world.” This is a goal because the person does not explain how the company will achieve this.
The exact steps a company plans to take to reach its goals or aims are its business objectives. When expressing the objectives, the CEO might say:
“We will increase our sales of bicycles by 2.5% each quarter of this year. We will open new branches and factories in Germany and France during the next twelve months.”
Business objectives – small companies
Defining objectives and goals assumes great significance when selecting a great idea for a small business. Nowadays, we have scores of small business ideas that require an only online presence. While planning a fully online venture, defining objectives and goals is imperative since they decide the future trajectory of the business.
The main objectives of a small or very young business might be:
Profit maximization means making as much profit as possible. In fact, everybody has this business objective.
Survival is a short-term business objective. When you have a start-up company, staying alive is uppermost in your mind.
Survival is also a priority for small or young companies when there is an economic crisis. In fact, it is also a priority for many large corporations. An economic crisis is a situation in which the economy takes a sudden and severe downturn.
Profit satisficing means making enough profit to keep the owners happy. It is a common strategy in small businesses in which the owners do not work in the company.
Satisficing means being happy with ‘good enough’ rather than striving for the best possible option.
Imagine you don’t work at your company. You have managers working for you. What should you do if you want them to do more than just make you happy? You should offer them a stake in the business.
With sales growth, a company gets larger. Most people want their company to grow. In fact, some believe that growth is the only route to survival.
Furthermore, the bigger a company, the more it can benefit from economies of scale.
When a business objective clashes
Sometimes, one business objective can clash with another. For example, growth and profit may clash. When a company achieves greater sales in the short term, perhaps by slashing prices, it reduces short-term profit.
Long-term objectives can affect the short-term prospects of a business. If it invests heavily in plant, equipment, or new products, its cash flow in the short-term will suffer.
Many business people complain that the stock market forces short-term business behaviors. Stock market investors focus too much on short-term profits, they say. Companies subsequently suffer especially their long-term growth.