While many business owners draft an initial business plan when creating their business from the ground up, a much small portion of them draft an annual business plan. This document is a bit different than an initial business plan and is important for evaluating the marketplace, creating business targets, and learning from past failures and success. The exercise of creating an annual business plan may take your business to the next level.
How Is an Annual Business Plan Different Than an Initial Business Plan?
There are many steps involved in creating a new business, and an initial business plan is usually one of them. This document is basically a blueprint of how you plan to take your business idea and turn it into an established business. It contains projections about the market, plans for growth, background information about the founders, financial projections, and more. It is an important document for business operators since it guides their actions, and it is important for outside investors since it clearly defines what the business plans to accomplish. Annual business plans are different because they focus on the operations of a business that is already established, generating revenue, expanding, and evolving. They are developed with the hindsight of a year’s worth of actual business occurring, not just projections based on research as in an initial business plan. The main benefit of creating an annual business plan is that it gives you the ability to make better decisions to improve your business based on actual business history.
Key Items to Include in an Annual Business Plan
The contents of an annual business plan can be customized of course, but there are some key elements that should be included to get the full benefits of the process of creating one. While the ordering of these items doesn’t matter much, you should include:
- An assessment of changes in your market
- An update on changes to your customer base and competitors
- Updates to changes in the company’s objectives and goals
- Major operational changes
- Details on any new or closed investments
- A thorough review of the previous year’s success and failures
- Key performance indicators for the next 365 days
Discovering and analyzing the changes in your market is imperative since you may find brand new opportunities for your business to grow. Unfortunately, you may also find that what you are offering is outdated and not useful to the market any longer, in which case you need to pivot the business.
Looking at what has changed over the course of the year in regard to your customers and competitors is a very valuable exercise. Ask yourself why new customers are coming on board or why so many are leaving. Try to uncover what strengths your competitors have gained and how those are now a threat to your operations. Likewise, see what competitor weaknesses you can take advantage of in the marketplace. These two sections alone can make you completely reevaluate what your business has to do in this upcoming year.
Of course, it is also important to review objectives, goals, operations, and finances to see if there are any major changes that need to be made to the business to continue growth. It is also important to analyze these areas to ensure there are no imminent dangers to the existence of your business.
Next, you should analyze what has and hasn’t worked over the past year by reviewing success and failures. Ask yourself what needs to change to continue the successes and avoid repeating the failures. Finally, based off the entire annual business plan, key performance indicators should be devised and reviewed regularly, especially in next year’s plan.