Annual Planning for Small Business

As you gear up for a new year in your small business, it’s a great time to reflect on the current year, evaluate what’s working, determine what’s not, and think about where you’re headed.

A great first step to annual planning is to start building out your budget. As you work through your budget, you’ll be thinking about your financial goals for the business. This will help you determine your growth plans, hiring needs, and any large spending. As you continue to work through your annual plan, you’ll revisit your budget and make updates based on the goals you set for the business and what you’ll need to achieve them.

After getting your initial draft budget started, take some time to review your 5Ws. Why do you exist? Who do you serve? What’s the way you serve? What do you stand for? Where are you headed. Every year it’s a good idea to spend some time intentionally thinking about your business – who you are and where you’re headed.

Once you’ve affirmed who you are as a business, start thinking about your number 1 focus for the year ahead. If you’ve been struggling with profitability, maybe your margin is your number one focus. If your staff turnover has gotten out of hand, maybe you need to focus on retention. Do you need to streamline your key processes & systems? Do you need to implement a new CRM? By evaluating and setting one key focus area for the year, you know your priority. This doesn’t mean you won’t have other goals and it doesn’t mean that all your goals will relate to your focus. What it does mean is that you’ll have a true north for the year. You’ll know where to come back to when new opportunities arise or distractions present themselves.

Once you’ve determined your number 1 focus for the year, think about your goals. If you determined your focus was staff retention, you might set a goal to implement a quarterly employee survey. Maybe you need to review and re-write your team member scorecards. Do you need to implement a formalized performance review process? Start with the goals that will impact your number one focus. Then, think about other key areas in your business. Do you have a key hire you need to make? Do you have a key contract you want to land?

When you’re setting your goals for the year, don’t overdo it. Be realistic. If you have 10 really big goals for the year, it might be hard to devote enough attention to each of them. You may end up working really hard and feel like you accomplish nothing because you’re focused on too many things. Five to six goals per year is a good guide when you’re setting your annual plan.

After you’ve set your number one focus and you’ve set your annual goals, go back to your budget. Based on the goals you set, do you need to make adjustments? If you set a goal to implement an employee survey, do you have the tools you need to do this? If not, do you need to budget for something to do this? If one of your goals was to launch a new product, does your budgeted revenue reflect that? And, more importantly, do your expenses? Launching something new often comes with increased expenses in the short-term. Make sure you include adequate amounts in your budget.

Review your plan, goal by goal, and ensure your budget reflects those goals.

After revisiting your budget, you can finish your annual plan. Your annual plan should include:

• Annual Revenue budgeted
• Annual Profit budgeted
• Your #1 Focus
• Your Annual Goals, including when they will be completed and who is responsible

Share your plan with your team. Get their feedback. Make adjustments. Then present the plan. After it’s finalized, your annual plan should be broken down into quarterly plans. Set a plan for first quarter. Review your annual goals and determine what needs to be done in Q1 so that you can achieve the goals you’ve set. You will set each quarter’s plan a quarter at a time. Don’t try to set every quarter’s plan at the beginning of the year. This allows for flexibility and re-prioritization based on what’s happening in the business.

Your quarterly plan should include:

• Quarterly Revenue budgeted
• Quarterly Profit budgeted
• Quarterly Focus
• Your Quarterly Goals, including when they will be completed and who is responsible

Remember, annual planning is a great time to revisit your 5Ws. It’s also a great time to review or build out your organizational chart if you don’t have it. Your budget is a key part of your annual plan. And, it’s a great time to review your processes, systems, and tools to make sure your business is operating at peak efficiency and optimization.

Here are some free resources that can help you with your annual planning:

5Ws Framework
Blog: How a Budget Can Grow Your Business

If you’d like some additional help as you work through your annual planning, we have two programs coming up:

Budget Builder Week
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