What to Include in Your Annual Business Plan
Whether you’re starting a new business or have been running one for some time, an annual business plan is essential.
In fact, research suggests having a business plan doubles your chance of success.
An annual business plan is a document that outlines your business’ specific goals and success criteria for the year ahead. Unlike a strategic business plan, which articulates your longer-term and high-level goals, an annual business plan sets clear and measurable objectives for the next 12 months.
Think of it like this: your strategic business plan is the framework for your overall business success, and your annual plan is the specific roadmap for how you’ll make progress towards that over the next 12 months.
Creating an annual business plan can help you:
Agree and document the immediate goals that are most important and relevant to your business, employees and stakeholders.
Define exactly how you will achieve these goals in the year ahead.
Identify any areas for improvement and determine how you will address these.
Map out a plan for fulfilling your objectives and navigating any hurdles.
Potentially justify a financial investment from banks and investors.
Importantly, having a concise and accurate annual plan gives everyone in your business clarity and direction about what they need to do in order to contribute to the business’ success.
Yet despite all of these important reasons to have an annual business plan, 4 out of 5 SMEs don’t have one, and only 1 in 3 businesses regularly spend time on refining their strategy for growth.
Often, this is because business owners are so busy working in the business that they don’t make time to work on the business. Sometimes, it’s because the process of putting together an annual business plan can feel arduous and overwhelming; all too easily put in the ‘too hard’ basket. And in many instances, it’s simply a case of not understanding the vital importance – or where to start.
SO, WHAT SHOULD AN ANNUAL BUSINESS PLAN INCLUDE
While approaches and requirements differ based on your business, there are typically five key components of an annual plan:
Year in review
Market Context
Revenue growth plan and expenditure analysis
Top 10 must-dos
Team roles and responsibilities
year in review
As its name suggests, an annual business plan is something that should be done every 12 months. Every annual business plan should start with a review of the previous year, and offer an indication of exactly how you performed against the goals you had set (if any). It should outline what worked well, what didn’t, what opportunities you optimised, and those you missed.
To enable this, it’s important to be very clear and specific in your goals from the outset. Ensure they’re definite and easy to measure. For instance, rather than documenting that you want to “grow your team”, be sure to specify by how many people, in which areas, and in which roles.
This process of ongoing measurement against your goals enables your business to very easily determine where you’re succeeding – or not performing as well as you would like. This means you can make the changes you need in order to improve.
2. market context
As we’ve seen in the last 18 months, resilience and flexibility are extremely important in enabling businesses to adapt to broader changes in the market – many of which may be entirely unforeseeable.
A key part of this is documenting and understanding your business’ current market context at the start of every financial year:
Where does your business sit in relation to competitors?
What changes have affected your market in the last 12 months, and what lies ahead? How will your business respond?
Though much of this detail is usually documented in a broader strategic business plan, it’s always helpful to have a tight summary as part of your annual business plan – especially when it comes to identifying immediate opportunities and challenges in the market. It’s also helpful to narrow down your market context to the specific time period you’re looking at.
3. top 10 must-dos
This is the real ‘meat’ of your annual business plan: a tight and accurate summary of the top ten things that your business must do in order to achieve its goals and objectives for the year ahead.
In determining these ‘top ten must do’ items, it can help to delve into the following executional pillars of excellence, and ask the following types of questions:
Marketing – what specific activities do we need to do in order to reach our target audience this year? Via which channels and using what techniques? What worked well last year? What could we do better?
New business – how exactly will we reach new audiences, or sell more to existing audiences? What portion of our revenue will come via new business?
Operations – are there any changes we need to make to our everyday systems and processes? Are we missing opportunities to improve?
Product or service – what does our product or service look like in the current market? Is it still relevant and differentiated? Does it require any changes?
Customer relationships – how will we better nurture our customers this year, and provide an optimal customer experience?
Strategic partners – who do we need to partner with in order to deliver an optimal product or service this year? Are our existing partnerships working? Do we need to re-assess any of them?
Talent – are there any changes we need to make to our people or culture? Where are the gaps? How do we up-skill?
Ultimate financials – what will financial success look like over the next 12 months? What do we hope to achieve? By when, and through which of the five proven areas of growth?
Once each of these eight areas should be workshopped and discussed by all relevant stakeholders. It’s beneficial to then identify the ten action items that you need to focus on and prioritise. Ensure that each is clearly articulated and defined, and that everyone in the business is aware of their roles and responsibilities in helping achieve them.
4. revenue and expenditure
Detailing your current and predicted income and expenses, or revenue and expenditure, is another all-important component of an annual business plan.
Having very specific financial goals, with a clear indication of how you are going to drive revenue – and through which of the five proven areas of growth – provides you with a clear target upon which to measure your success.
The financial section of an annual business plan will depend on the size, nature and ownership of your business, but it should typically include some key components. These include forecasted sales for the upcoming year, and a budget for predicted expenditure. This should be accompanied by a cash flow projection and an income projection, as well as a statement of shareholder equity, where relevant. It can also be beneficial to have a breakeven analysis. Additionally, you need to set up the detail of how you are going to track your progress.
5. team roles and responsibilities
Once you have clearly articulated your top 10 must dos, income and expenditure, and market context, you then need to summarise the roles and responsibilities of your team.
Who will be responsible for which action item?
Will improvements to your products and services be driven by sales or by your research and development team?
Who will be responsible for forging new strategic partnerships? What cross-over exists between teams and departments?
How can you ensure everyone is collaborating for success?
bringing stakeholders together and getting started
For an annual business plan to get traction and deliver results, it’s essential that it’s produced collaboratively. By taking all of your business’ employees and stakeholders on your annual plan journey, you can ensure that everyone’s preferences and objectives are given equal footing. When you have employee and stakeholder buy-in from the start, your annual plan is far more likely to guide you in getting the results you want.
At the same time, you don’t want the process of compiling your plan to be unnecessarily complex or time consuming. It should be fast, fluid and efficient.
This is where the team at 24 Hour Business Plan can come in. We’ve stripped the process of preparing your annual plan down to the powerful essentials. We work closely with you to run four intensive workshops, relying on proven techniques, refined processes and machine-like efficiency.
Our team isn’t made up of typical business planning consultants. We are all senior-level business people with huge amounts of experience running high growth businesses as CEOs. We are all now investors, advisors, board members and mentors. This means we’re able to very quickly cut to the heart of matters and decipher what needs to be done.
As such, your team will walk out of the final session with access to a finished annual business plan, ready to guide you for the year ahead.
If you are interested in learning more about 24 Hour Business Plan and how we can help, please get in touch.
