If you’re like us, you’ve heard a lot about the importance of business plans. However, we don’t hear much about a tool that’s even more important – your annual plan.
The annual plan brings your business plan to life. The business plan tells you “what.” The annual plan answers the question “how.”
Many people equate “the budget” to the annual plan. In reality, your budget is the financial side of your annual plan. It defines the goals and sets the limits you can spend to reach those goals. The annual plan defines the activities that will be undertaken to reach the goals, given the resources available.
The annual plan then is just as important as the business plan and the budget. In fact, we think it’s even more important because it forces you to think through the details of how to get the job done. The annual plan, then, is the tool that helps you implement and execute.
Processes and projects
Any organization can be thought of as a combination of processes and projects. Processes are ongoing; they help maintain the status quo. Projects are finite, with a beginning and an end; they lead to growth.
Your annual plan defines the projects that you will undertake to reach your goals. For example, you may have a goal to increase sales by 10% this year. To reach your goal, you may:
- hire and train an additional sales rep
- purchase a new piece of equipment
- hire and train six new production people
- attend a trade show
These are all projects! They all relate to the goal of increasing sales by 10% this year. Develop the skill of isolating goals and determining what projects are required in order to reach it.
Breaking it down
A year is a long time (although the older we get, the shorter it seems!). Serial projects may be required to reach a specific goal. The timing of those projects must be considered.
So you’ll want to think in shorter intervals than a year. We recommend monthly. Let’s take the example we discussed earlier – increase sales by 10% this year.
You may think it’s as simple as increasing sales by 10% month after month. The problem with this is it’s not likely to happen that way. The odds are high that you need to ramp up – early in the year, you won’t plan to grow as much; later in the year, you’ll plan to grow more.
If you don’t factor in the ramp-up, you’ll get discouraged early because you won’t be hitting your monthly goals. You may settle for lower growth.
That’s where the projects come into play with the monthly breakdown. You may hire and train the sales rep in the first month. The trade show is scheduled for the second month. You order the new equipment and install it in the third month. You hire and train the new production people in the fourth month.
Depending on the size of your company, different departments may oversee each of these projects. However, it’s all coordinated to obtain the common goal of increasing sales by 10%.
As the saying goes, you can’t expect what you don’t inspect. Each month, you can review your progress so you know how you’re doing. Then you can make any necessary adjustments to keep on track.
An annual plan is a living document that gives your plans life. It takes you beyond goal-setting to help you get focused on goal-getting!
