The objective of a business

Business Objectives

Objectives give the business a clearly defined target. Plans can then be made to achieve these targets. This can motivate the employees. It also enables the business to measure the progress towards to its stated aims.

The most effective business objectives meet the following criteria:

S – Specific – objectives are aimed at what the business does, e.g. a hotel might have an objective of filling 60% of its beds a night during October, an objective specific to that business.

M - Measurable – the business can put a value to the objective, e.g. €10,000 in sales in the next half year of trading.

A - Agreed by all those concerned in trying to achieve the objective.

R - Realistic – the objective should be challenging, but it should also be able to be achieved by the resources available.

T- Time specific – they have a time limit of when the objective should be achieved, e.g. by the end of the year.



The main objectives that a business might have are:

Survival – a short term objective, probably for small business just starting out, or when a new firm enters the market or at a time of crisis.

Profit maximisation – try to make the most profit possible – most like to be the aim of the owners and shareholders.

Profit satisficing – try to make enough profit to keep the owners comfortable – probably the aim of smaller businesses whose owners do not want to work longer hours.

Sales growth – where the business tries to make as many sales as possible. This may be because the managers believe that the survival of the business depends on being large. Large businesses can also benefit from economies of scale.

A business may find that some of their objectives conflict with one and other:

Growth versus profit: for example, achieving higher sales in the short term (e.g. by cutting prices) will reduce short-term profit.

Short-term versus long-term: for example, a business may decide to accept lower cash flows in the short-term whilst it invests heavily in new products or plant and equipment.

Large investors in the Stock Exchange are often accused of looking too much at short-term objectives and company performance rather than investing in a business for the long-term