Last week, we discussed performance reviews as the first element of year-end activities for entrepreneurs to do, and said it was a “look back.” Today we are going to cover the annual business plan. This is about the second component, “Foresight”.
First and foremost, every company should have a reasonable “long-term” business plan for the next few years. But we can never really be “perfect” in “seeing” the distant future. An annual business plan is the iteration necessary to get closer to “perfection” in as little as one year.
What is an annual business plan? This is the process of creating a one-year business plan aimed at achieving short-term goals that align with the entrepreneur’s overall long-term goals and vision. A business plan for the year identifies and synchronizes individual goals for the year, how they will be achieved, and by which staff and units they will be achieved. Also, identify resources that may need to be deployed and when and how to provide them.
The annual business plan unwittingly goes beyond the financial budget, which tends to be the sole concern of many entrepreneurs before the new fiscal year begins. It is also a task for the company to perform and accomplish within the next year.
A great yearly plan provides a clear platform for achieving your desired goals. A good business plan gives employees a clear purpose and sense of what to do, and gives investors a benchmark to measure performance. Enables improved operational efficiency. In addition, annual business planning aligns long-term planning in ways that help you seize new opportunities and address unanticipated challenges.
Annual business planning process: First, the timing of the planning process is critical. As I said earlier, plans should be made before the start of the new year. This allows people and units to be clear about their expectations and allows organizations to provide the resources they need before they are needed. We advise that this is the minimum amount of time required to The bigger the business, the bigger this gap should be. Developing a business plan when the year has already started is derelict and irrelevant.
The “right” people should be involved in developing an annual business plan. Some of the required information needs to be thrown from the bottom up, while others need to be thrown the other way around. Engagement in planning should be robust, pragmatic, and fact-based. If an assumption is made, it should be clearly understood as such. At the end of the process, the agreed details should be documented and communicated throughout the organization as required. One of the interesting things about annual business plans is that some targets may be revised upwards and others downwards. In either case, the important thing is to have the right rationale for whatever decision is made.
Components of the Annual Business Plan: Similar to performance appraisals, the annual business planning process looks at the internal functions and external environment in which the business operates. Some schools of thought suggest that annual plans should include a review of the business’s mission and vision. I will not subscribe to this Instead, the annual plan is believed to help guide the organization to stay on the determined mission towards achieving the desired vision. Replanning becomes essential and urgent. Additionally, typical components of an annual plan should include:
- What did you learn from last year’s performance review? Last week, I mentioned that the knowledge gained from last year’s performance review should provide insights you can use in next year’s review. What are your failures and what can you do about them? What are your successes and how can you take advantage of them?
- What are your New Year’s goals? You should set realistic and reasonable goals based on your mission and vision and what you did in the previous year and the resources you have or may be able to source. Goals and objectives, as they say, should be ‘smart’ like ‘specific’, ‘measurable’, ‘achievable’, ‘relevant’ and ‘time bound’.
- What are your market and supply chain goals? Business is fundamentally about markets. Therefore, the annual plan should clarify what needs to be achieved in the market in terms of volume, market share, profit margin, etc. The decisions you make about your market goals will influence your production and overall supply chain planning. Where will the raw materials come from and how much will they cost? What should be the production efficiency? How will you sell and reach the market?
- What does your human resources plan look like? Human capital is the most important resource you need to achieve your company’s goals. Therefore, he has to prepare three sub-plans for his employees. First, assess the individual skills and abilities. Second, have a continuous development program. The third is to set specific goals for each individual and their units about what to expect in the coming year.
- Financial goals and budgets: The annual budget, even the final measure, is just one component of the annual business plan. Financial targets drawn from market targets, production plans, etc. should be summarized in an annual budget. Annual operating budget reveals resource management plans, new/recurring capital investments, sales forecasts, overheads, cash flow forecasts and funding needs, expected operating profitability, asset and liability positions, etc. It is a document to A budget serves as a benchmark document against which actual results are measured.
If you have not conducted a performance review for the last 11 months and have not made plans for 2023, you are not entitled to end your leave. Please return to the office with key staff and complete by 12:00 midnight on December 31, 2022. If you are likely to succeed, you must have a clear eye and a clear mind about what you will do in 2023. .
Year-end activities should be conducted in a timely and thorough manner. They help you know where you are, where you want to go, and how to get there.