Planning comes in many different varieties and today we’re going to review the steps to develop your Annual Plan. A quote from Benjamin Franklin, “By failing to prepare, you are preparing to fail.”, characterizes why planning is so important.

Often, we loosely kick around ideas without going through the planning process and at the end of the year, wonder why we didn’t achieve any of our goals. Ask business owners if they have a plan for the year, they might point you to their budget. This is counter-intuitive to me. The plan should drive the budget not the budget drive the plan. Done properly, planning is a process that requires a mix of creativity and discipline resulting in focus and success.

Annual Plan Process

Let’s run through the Annual Planning process to help business owners and their teams improve their probability for success in 2022. It consists of the following steps:

Previous Year Review

Start by evaluating your performance for the previous year. It’s important to reflect on the following sample questions to understand not only how you performed but why and what drove your results.

• Did you achieve our goals?
• What did you accomplish?
• Were there disappointments?
• What lessons did you learn?
• Did you achieve your financial targets?

SWOT Analysis

The next step is to conduct an analysis of your strengths, weaknesses, opportunities and threats (SWOT Analysis).

A SWOT Analysis is a powerful tool to help you understand the internal and external factors that impact your business. The final step is the most important, identifying actions from the SWOT elements to improve your business. This can help identify potential goals for the next step in the Annual Planning process.

Setting Goals

The next step in the process is developing goals for the coming year. A goal is an idea of the future or desired result that you envision, plan and commit to achieving. “A goal without a plan is just a wish.” says Antoine de Saint-Exupéry.

Consider the following points to brainstorm ideas for goals:

• What are the 3 to 7 most important things that must get done to be successful.

• Are these aligned with your purpose, key focus, core values and long-term objectives?

• Evaluate your SWOT Analysis to identify potential opportunities.

• Ask yourself; If you achieve these goals, will it be a great year?

• Write your Goals in a SMART format.

Developing Strategies

After creating your goals, the next step is to develop strategies to achieve those goals. Strategies are simply the “how” and include specific actions, resources, dependencies, owners, due dates and metrics to track progress. This requires focused thinking to develop the level of detail necessary to be successful and we highly encourage you to engage other members of your team to add their input and develop ownership.

The following template can help you organize the elements for your Annual Plan.

Creating Your Budget

Now that you have identified our goals and strategies, the final step is creating your budget for the coming year. A budget is an estimation of revenue and expenses for the year broken down by month. Budgets are used to drive accountability and measure your performance towards achieving your financial goals.

Keep your budget model relatively simple and consider using the following template. It’s entirely up to you on the level of detail but consider the following elements:

• Build the Annual Revenue and Expense Budgets to Support your Goals and Strategies.

• Provide Key Assumptions, Clients, Headcount, Marketing, Overhead, etc.

• Don’t just straight-line the numbers over 12 months, estimate by seasonality or history.

• Make sure the Budget is aligned with the Annual Plan.

What’s Next

Now that you’ve created your Annual Plan, make sure you use it to manage your business and track your results. Review your Annual Plan Goals and Budget every month to track progress and, more importantly, identify potential issues and make the necessary adjustments. Planning is a fluid, dynamic process…just like your business. As Thomas Edison said, “Good fortune is what happens when opportunity meets with planning”.

Norten Consulting can help you with Annual Planning so you too can achieve good fortune.