Having a solid business plan is a crucial step when a company starts out, but many organizations fail to update their plan or develop a new one with each passing year. Lack of planning is one of the reasons 65 percent of businesses fail during their first 10 years, as reported by the U.S. Bureau of Labor Statistics.
Starting the year without a plan puts any business at risk of failure. A solid plan based on company goals, budgets, and metrics can serve as a roadmap, guiding leaders and team members on a shared journey. As Thomas Edison said, “Good fortune is what happens when opportunity meets with planning.”
Time spent creating an annual company plan is time well spent. Follow these tips to create a successful annual plan.
Take a Good Look Back
Annual planning should begin with an analysis of the previous 12 months. Examine targets and results and determine which goals fell short and which succeeded. Fundamental problems should be identified and analyzed to determine why they occurred and whether they could have been avoided.
Each team in the company should provide input to the annual review based on their activities during the previous year. Look for lessons to be learned and try to get an overview of its performance in terms of its mission statement or long-term goals. Don’t forget to measure how the previous year’s revenue compared to the competition. After reviewing and evaluating expectations and results, company leaders will be better equipped to form a plan that reflects a shared vision for the future.
Do a Strength, Weakness, Opportunity, Threat (SWOT) Analysis
This step adds some strategy to annual planning. Looking at a company’s strengths, weaknesses, opportunities, and threats add fact-based analysis to the planning processes. A SWOT analysis can focus on areas that need attention while revealing new opportunities, such as a new products or customer services, to be exploited. The talents of every team member can be identified and then put to best use in achieving future goals, so everyone should have a voice in this stage of planning.
Establish Key Performance Indicators (KPIs)
Once you understand what happened to your business in the previous year and have analyzed opportunities and threats, you should be prepared to start planning for the upcoming year. Identify specific targets that align with long-term goals for the next three to five years. If you don’t have those goals in place, it’s time to do some strategic planning that defines or affirms a long-term vision for the business and the steps that will make it a reality.
Once targets are identified, you can set some KPIs that can be used to measure performance towards targets over time. Each KPI should tie a performance measure to a business outcome. For example, if a company has the goal of increasing sales revenue, define a sales growth rate and schedule regular reviews to measure progress.
Don’t overlook the importance of North Star metrics when defining KPIs. These are the big revenue-generating goals that require contributions from the department to succeed. One or more North Star KPIs will set the theme for the annual plan; their success or failure will determine the plan’s outcome.
Document and Communicate the Plan
The final step in annual planning should be documenting the results. Summarize the one-year and three-year plans for the entire business, preferably in one or two pages. Ask the leaders of each team to do the same, basing their planned activities on the company goals. Once documentation is complete, get buy-in from the executive team and then share the documents company-wide. Each team member should understand company priorities and their role in the company’s success over the next year. Being open to questions about planning decisions and encouraging company-wide discussion will increase engagement in the upcoming year.
Publicizing the annual plan and frequently referring to it will help keep short-term goals in mind, increasing the chances of success. Team leaders should focus on KPI-related metrics and remind team members about the importance of their contribution. As the year progresses and circumstances change, don’t be afraid to adapt and make changes to the plan. Any annual plan should be flexible enough to adapt to dynamic changes in the business environment.
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