Annual Planning: Know What You Want to Do Before You Do Your Budget
What is your approach to developing your execution plan for next year? Some companies will first develop their budgets and financial plans, then figure out what they are going to do within the budget that has been set. In this scenario, the financial plan drives the operating plan and key initiatives that the company may choose to have for the year.
I advocate a different approach to planning for your new year. Instead, try the following for your annual planning this year:
- Decide what you wish to achieve as a company next year. What should our goals and targets be?
- With the results you want to achieve, visualize a great year and build a destination postcard.
- What resources (People, equipment) do you need to achieve your destination postcard?
- Now build your financial plan and figure out if you can provide the resources to your team to achieve the plan
What if your financial budget does not allow you to achieve the plan you envisioned with all the resources and people that your team thought they needed? So you might have a gap here between what your team thought they needed and what the company can afford to fund. This is the fun part! Brainstorm how to achieve the plan with the resources that you have. Come up with innovative and creative ways to get there.
Driving your annual plan from the financial plan would be like putting the cart before the horse. Instead, coming up with your annual planning first, then working on the financial plan allows more creativity to achieve a bold and exciting plan for the new year. .
Happy annual planning!