With the Financial year end upon us, doing an annual business plan is one of the most important things a business owner must do, now! How else will you get to prioritize all the things you have to do, and how else would you get to know and focus on the critical and most important strategies that will move you faster to your end goal?
Our GrowthCLUB 90-day business planning sessions are aimed at assisting you in getting a clear focus and understanding of the urgency and importance of actions that need your attention now, this week, this month and this quarter.
I believe from working with more than 100 business owners over the last 5 years, that by getting clarity on your quarterly goals, you will ensure that both you and your team will know what is expected and what needs to be delivered! Accountability is key!
Yes, there is a lot to consider but taking a day out of the office will save you a lot of time in the future. Here are 8 key elements that should be covered in your Annual Business Plan that will help you with an efficient planning process.
8 Key elements of an Annual Business Planning Checklist
1. REVIEW YOUR MISSION AND VISION STATEMENTS.
Are they still applicable? Are they in sync? Are you still passionate about them? Do they need tweaking or have you course corrected or must they be overhauled? Be sure that they provide the overarching reasons WHY your business exists. A good read would be Simon Sinek's – "Start with Why"
It is important to be 100% aligned with your mission and vision before you start with the annual plan.
2. SET YOUR REVENUE GOAL.
What is your high-level income goal for the year and what growth can you expect? In setting this goal which again goes hand in hand with setting a Gross Profit goal, you should also consider the company's Strengths, Opportunities, Weaknesses and Threats (including trends in the market) – SWOTT Analysis.
Henry Ford said that "Whether you think you can or you think you can't you are right!" Stay firmly grounded and set SMART Goals, goals that build on what is already in place. You should consider for instance, how many people do you need to hire, what infrastructure investments need to be made, and how scalable are your support systems?
It's best to start visualizing the plan at a high level by creating different scenarios. One of the most important benefits of planning is the buy-in that is created by the constructive discussion between the members of the senior team.Here the "Conversation Scenario Planning Model for Strategic Planning" created by Clem Sunter is an example of the different elements of conversation.
3. REVIEW AND UPDATE YOUR PEOPLE PLAN.
First, review your current organizational chart, identifying current and future gaps and needs. Identify new positions needed to attain your growth goals and eliminate service delivery issues. It is also wise to review the roles and responsibilities for current positions. Use your Performance Evaluation Program as input into the people development plan
You need to develop a structure that you feel comfortable with that firstly you can afford and secondly that can deliver the end-goal.
4. SETTING YOUR FINANCIAL PLAN.
Put your plan into numbers and set a budget per month for the coming year. The goal is to put all the above information into numbers. You should use the Zero-Based budget principle, so you understand every aspect of the plan and don't just add 10% to last year's costs. The goal is to do ever more with ever less!
Plan your skills acquisition and how much skilled people are going to cost. Look at things from both a top down and bottom up standpoint. Ensure that your top-line goal is reasonable based on initial calculations and ensure you have an acceptable net profit or EBITDA.
Remember to budget for profit for you as the business owner to get 5 to 10% on turnover is a start.
5. DEVELOP YOUR SALES PLAN AND SALES TARGETS
Once you have established your plan and budget, there is one final check. Is the plan reasonable from a sales standpoint? Are goals and quotas reasonable based on the current team members and focus?
Using the history of conversion between the various steps in the sales process, what does your pipeline need to look like? Are there any positive or negative trends developing for the year? Remember the sales plan and numbers that must be achieved is normally the final piece in establishing how realistic the plan is.
6. CREATE MANAGEMENT AND TEAM BUY IN.
Once your executive team has bought into your plan for the coming year (I am assuming they have been a part of the steps above), make sure you share the plan with your key managers. Address their concerns and questions and tweak the plan further if required. This is however an information session and the overall budget direction won't change.
Now it's time to share with all employees.
This is a chance to create final buy-in and to get everyone excited about the next year and to ensure that everybody is moving in the right direction. Your business performance is dependent on all team members doing their job to the best of their ability. With good plan and the right team in place, you will have the best chance of reaching the goals, the team has set for the business.
7. CREATE A FEEDBACK LOOP - KEY PERFORMANCE INDICATORS (KPI's).
It's time to figure out what you're going to hold each department in your business accountable for. Developing KPIs start at the top, with the executive team and are then established for each department.
Remember that your department heads should also establish KPIs with those who report to them. Generally, there should be 3-5 KPIs per department or individual.
These KPIs should be SMART (Specific, Measurable, Attainable, Realistic and Timely). Remember your KPIs are the key things that when measured (leading and lagging indicators) will allow the business to succeed in the coming year.
8. CREATE A 90 DAY CASH FLOW FORECAST
Remember to forecast and monitor your cash flow closely during the few months around year end. Typically, there are some seasonal spikes and dips at this time for many companies. And often new expenses are incurred during the beginning of the year. Plan for and monitor this extra closely via a detailed 13-week cash flow forecast.
The above 8 Key Elements is only the beginning in assisting you to understand where your business needs attention.
The next step, is to take the action necessary to reach that goal that you want in your business.
Whether that goal is to make more profit, to grow the business, to hire a better team (not just employees), have the correct systems in place, or if it is to hand the business over to your son or daughter.
Without taking the time to plan, how do you know what actions to take and when?
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Start 2018 with the end goal in mind.