It is that time of year again — the leaves are changing colour, the air is getting cooler, and, for many people, the end of the financial year is approaching. For businesses, the end of the financial year (EOFY) is an important time to reflect on the past 12 months and plan for the year ahead.
Annual planning helps businesses set goals, track progress, and ensure they are on track to achieve their objectives. It also allows businesses to allocate resources effectively and identify potential risks or opportunities.
In this article, we will explore the importance of annual planning and how it can benefit your business.
What Is An Annual Plan?
A company’s annual plan sets goals and expectations for the year ahead. It is a collection of objectives and milestones that a firm will use to steer its operations. The plan assists employees and investors in making the best decisions moving forward and helps them visualise their destination and how to get there.
The annual plan is used to align all parts of the organisation’s visions and strategies, bridging your strategic pillars and strategic projects:
Strategic Pillars: The key focus areas or business drivers that will create the most value for the company.
Strategic Projects: The initiatives or activities that will help achieve the objectives of the company’s strategy.
Why Is Annual Planning Important
One of the main benefits of annual planning is that it allows businesses to set clear goals and objectives. This helps ensure that everyone in the organisation is working towards the same objectives. So why use it?
1. Be proactive, not reactive
Too often, businesses do not have a plan, and they just react to what is happening around them. As a result, they are firefighting instead of taking a step back to assess the situation and develop a strategy.
A well-developed annual plan can prevent this from happening. It will help you anticipate potential problems and put contingency plans in place to minimise the negative impact on your business.
2. Track progress
A good annual plan will help you track progress and ensure that you are making the necessary changes to achieve your objectives. Without a plan, it can be challenging to determine if you are making any headway and what adjustments need to be made.
The annual plan will provide you with the necessary information to monitor your progress and ensure that your business is on the right track.
3. Focus on the essentials
Annual plans help to focus employees on what is important. If no plan exists, it can be difficult for employees to know what they should be working on. The annual plan will outline the key objectives and strategies that need to be achieved, and this will help employees focus their efforts on the most critical tasks.
4. Forecast effectively
Annual plans are a valuable tool for budgeting and forecasting. By having a plan in place, you will better understand what resources you need and when you need them. This will help you budget more accurately and forecast future revenue and expenses.
5. Make informed decisions
Annual plans provide a framework for decision-making. To make sound decisions, you need to have a clear understanding of your business’s objectives and the strategies you will use to achieve them. The annual plan will provide this information and help you make informed decisions that will benefit your business.
6. Promote accountability
A well-documented annual plan will hold individuals and leaders accountable for their actions. It will identify what is expected of them and provide a means to measure their performance. This will help ensure everyone is working towards the same goals and objectives.
7. Plan for the long term
The annual plan can be a starting point for developing a longer-term strategic plan. It will provide you with an overview of your business and the areas that need improvement.
By conducting annual plans regularly, you will be able to build on specific strategies that need to be implemented to achieve your objectives in the long run.
8. Improve communication
A good annual plan will outline the key areas of communication and how the information will be shared between departments and individuals. This will help ensure that everyone is on the same page and that communication flows effectively.
9. Manage change
Change is constant, and businesses need to be able to adapt quickly to changes in the market. A well-documented annual plan will help you manage these changes and make the necessary adjustments to ensure your business is successful.
How to Create an Annual Plan
Now that you understand the importance of annual planning, you may be wondering how you can create a plan for your business. We use a tool called Strategy on a Page that you can get a FREE copy of.
The Strategy on a Page is a high-level plan that shows your key strategies and how they will be implemented. It is a living document that should be reviewed and updated on a regular basis. It includes:
- Company Mission/Vision
- Guiding Policies
- Strategic Projects
- Measures of Success
Key Components Of Your Strategy
1. What’s your future state?
This is where you articulate your desired future state, including what you want your company to look like, what markets you want to be in, and the types of products or services you will offer. This serves as your guidepost to help you stay on track.
2. What’s your current position?
Using SWOT analysis (strengths, weaknesses, opportunities, and threats), you will want to understand your current position, including the internal and external factors that impact your business. This will help you determine where you need to focus your efforts. A SWOT analysis can be used for both your business and product or service offerings.
3. How will you bridge the gap?
Once you understand your current position and future state, you will want to develop strategies to bridge the gap between them. These could include entering new markets to developing new products or services. Provide a timeline (12 months) for each strategy and indicate how it will be funded.
4. Measures of success
What criteria will you use to determine whether or not your strategies are successful? Set target values for each and track progress and performance against these measures at an organisational level.
5. Team alignment
Ensure that everyone on your team is aligned with your strategy by creating an organisational chart and a list of key players. Form your strategy so that the team dependencies are clear among everyone. This will help you ensure that everyone is rowing in the same direction.
6. How will your teams contribute to achieving the plan?
OKR (Objectives and Key Results) can help you track and measure progress towards your goals. This will help you ensure that everyone, at the individual and team levels, contributes to the business’s overall success.
Putting together an annual plan can seem daunting, but using the Strategy on a Page can be done in a manageable and achievable way.
Final Thoughts: Annual Plan
The importance of annual planning cannot be overstated. A well-developed annual plan will provide the clarity and direction you need to achieve your business objectives. It will help you anticipate potential problems, track progress, focus employees on what is important, and promote accountability.
Need more help setting up your annual plans? Schedule a free coaching session with us today.
