Non financial objectives - not involving financial matters.
Case Study
Jayne and David worked for a business that designed websites for the internet. David worked in sales and Jayne designed the sites. But after a few years, they decided they had had enough. They wanted to set up their own website design business. There was a number of reasons why they wanted to become entrepreneurs, running their own business.
Financial Objectives
Jayne and David wanted to earn more financially. They earned two salaries working for their present employer. But no matter how hard they worked, the amount they could earn was limited. So what were their financial objectives when they set up their own business?
Survival. Jayne and David were realistic about their new business. They knew that many businesses fail within the first few years. So, to start with, they just wanted to survive. It would take time to build up a base of customers. There would be heavy expenses at the start because they would need to buy computers. They would have to rent premises and buy office equipment. If they could get through this difficult time, they could then achieve the long term financial objectives.
Profit and Income. Jayne and David knew that in the first year or two, they would have to take a cut in income. But in the long term, they wanted to earn more than their present salaries. So they were motivated by the thought of higher incomes. Their business would pay them a wage. But on top of that, they would also get the profit made by the business.
- Job Creation
- Earning more than his previous job
- As a result of a dare
- Being in control of his hours of work
- Using profits to fund a pension
- To keep his family happy
- To increase income
- To get greater work satisfaction
- To accumulate wealth
- To maximize profit
Wealth. Jayne and David were also looking
forward to their retirement. Their business, if it was successful, could be
sold. The price they got for the business would be the value of the wealth they
had built up in the business. A successful business would not only mean that
they earned more but also that they would become wealthier. That wealth could
be used to fund their retirement.
Financial security. Owning
a business carries risks. Jayne and David felt that owning their own business
would give them greater financial security in the long term. Financial security
therefore was a long term personal objective for them.
Non-Financial Objectives
Money was one reason why Jayne and David wanted to set up their own business. But they had other, non-financial objectives too.
Personal satisfaction. Jayne and David looked forward to running their own successful business. They would feel proud and get a great sense of achievement. Building a business would be exciting. They would both get personal satisfaction.
Challenge. Jayne and David both enjoyed a challenge. Creating a successful business from scratch would be their ultimate challenge. Many entrepreneurs like David and Jayne find the challenge of running a business very satisfying.
Independence and control. Entrepreneurs like Jayne and David often enjoy the independence thr comes with owning a business.
• They can be their own boss.
• They don't have to ask anybody else's permission to take time off work.
• They have more flexibility to organize their lives compared to working for someone else.
This gives them more control over how they live their lives.
Helping others. Jayne designed posters for charities. Sometimes she would stop and have a chat when she delivered them. She admired how some people were more motivated to work to help others than to earn extra money. A friend of hers had actually helped set up a sports charity working with disadvantaged children on a local estate. Gemma spend most of her spare time unpaid with these children, coaching them in sports.
Multiple Choice Questions
- John Smith has recently set up in business on his own as a plumber. Which two of the following would be his financial objectives?
- Which one of the following would be a non-financial objective for individuals to start a business? Select one answer.
This is really good Elisha! Can you add at the bottom 2 multiple choice questions that you think could turn up in the exam on this subject? Well done!
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