Many businesses describe their fiscal goals in terms of an increase in revenues, typically expressed as a percentage of growth.

Here is the interview I would like to conduct with a hypothetical business owner who has that goal.  

Me: So your goal for 2008 is to grow revenues 8%?

Business A: Yes

Me: So what if your costs grow by 15% during that same period?

Business A:  Well I wouldn't want that to happen.  So maybe my goal should be to grow revenues by  8% while keeping costs at the same percentage.

Me:  So let's say you increase revenues by 8%, hold costs steady but fail to collect on any of those additional sales.

Business A:  Um, well I guess I need to make sure that all of those new sales are collectible. 

Me:  Okay, so let's just say you grow revenues 8%, hold costs steady, and still manage to collect on the new receivables that you have generated.  All of your employees have just notified you that they plan to resign on the last day of your fiscal year.  What are your chances for success in the next fiscal year?

My point is, a revenue growth target is NOT a business goal.  Neither is any other single business metric.  Businesses are formed for an express purpose.  Annual targets should be in support of that purpose.  And why is growth always an objective? 

Of course businesses need to generate a decent return for the owner or investors.  But where is the business headed long term?  You need to know the goal before you even start to talk about supporting it with sales targets, budgets and compensation models.  

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