Get Finances in Order

The first step in planning is to look back at your business’ financial performance for the year. If you have an accounting system already set up and have been keeping it up to date throughout the year, then you’re in good shape. If you haven’t been keeping your accounting system up to date or don’t have one in place, now’s a great time for you to put that infrastructure in place. Start by taking some time to go through your computer and physical files to gather documents related to your business income and expenses over the year. Check for files in your spreadsheets, bank and credit card statements, and receipts. Organize this data and enter it into an accounting system. If you need to, hire a bookkeeper or an accountant to help you get this done. When all your data is in the accounting system, you can run reports to look at your monthly financial statements and drill down into specific areas of your income and expenses.

Review Operating Data

In addition to your financial statements, you have a variety of other data in your business. Think about the processes and systems you use in your day-to-day operations. Through these processes and systems, you collect data that shows how potential customers become aware of your business, how well you are converting potential customers into paying customers, the costs of delivering your products and services, the efficiency and quality of your product and service delivery, your customers’ level of satisfaction, and your ability to retain and build loyalty with your customers. Gathering and reviewing this data will help you understand the performance of your operations and identify ways to optimize them for financial sustainability and positive community impact.

Assess the Business’ Position

The next step is to use the financial and operating data and other information you have about your business to assess your business’ current position. In our case, we use our traditional business analysis packages. On top of this, it is always a good idea for entrepreneurs to do their own SWOT Analysis. A SWOT Analysis is a four-quadrant matrix that allows you to look at your business’ Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal to the business and relate to the organization, resources, systems, processes, and leadership involved in the business’ operations. Opportunities and threats are related to external factors in the economy, politics, regulation, technology, industry, market landscape, and customer demand that are either affecting the business now or have the potential to affect the business in the future. This is a great exercise if you are working as part of a team, as you can engage other team members in providing input on the strategy.

Set Priorities

Entrepreneurs need to create goals. The best form of doing this is with Objectives & Key Results, or OKRs. When used properly, this framework supports the development of organization-wide priorities and outcomes and how they scaffold down to the individual worker level, creating greater alignment between individual actions and the common goals. Again, if you are working as part of a team, this is another opportunity to collaborate on the direction of the business. Start with defining no more than three objectives for the year. Looking at the business’ SWOT analysis, ask the question, “What will further the business’ purpose while leveraging its strengths and improving upon its weaknesses over the next year?” These objectives should be aspirational and meaningful, and be aligned with the business’ mission, vision, and values. Within each objective, set no more than three key results. Ask the questions, “How will we accomplish this objective? How will we measure progress toward this objective?” The key results break down the objective into smaller goals, making it easier to track progress. The most effective key results are those that are specific, measurable, attainable, realistic, and time-bound.

Prepare Project Plans

For each of your OKRs, start preparing high-level project plans that map out the major milestones, timeline, and resources needed to achieve each of the key results. Remember that time is our most valuable resource. When we start executing on our OKRs without project plans, we run the risk of wasting our precious time doing, undoing, and redoing activities. By putting a little thought into project planning, we can typically reduce overall time and increase effectiveness in executing the project. With high-level project plans for each OKR, you can see where the project timelines and resources overlap, identify any contingencies, and determine how to integrate work on the projects into your day-to-day operations.

Create a Budget

The last step is to turn the annual goals and project plans into a budget for the year. This is the monthly forecast of your business’ income, expenses, and cash flow for the upcoming year. Your budget should be based on historical financial performance as well as projected growth, and should reflect the goals and initiatives in your annual strategic plan. For example, if one of your goals is to increase revenue by a certain percentage, then your revenue projection in the budget should increase by that percentage. In addition, your expense projections should reflect the additional marketing and sales activities and costs to deliver the products and services to meet that percentage increase in revenue. Your budget should also include the costs associated with any non-revenue generating initiatives in your strategic plan. For instance, if you are planning on developing a new product or service, you should include the costs associated with that project over its timeline.

Once you have your annual strategic plan and budget for next year, you can measure progress against it on a monthly basis and make adjustments as needed. As you become consistent in implementing an annual strategic planning process and monthly reviews, you’re likely to gain greater precision in your goal setting and projections and increased confidence in your ability to achieve them.

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