6 Reasons Why You Need An Annual Plan
Many small business owners that I meet laugh when I ask them about their annual plan. The most common answer to the question, “Do you have annual plan?" goes something like this... "Annual plan! [audible laughter] I don't have a daily plan, how could I possibly have an annual plan!" I've found that there are a couple of reasons for this response.
First, small business owners don't think that planning is necessary because they are "running the show" and do not have to answer to a board of directors or management team. Second, anyone who has ever run a business knows how easy it can be to fall into a reactionary management system where you react to things, instead of planning for them.
If any of this is sounding familiar, then you might want to carve out some time and come up with an annual plan. Here are just a few of the benefits of creating an annual plan:
1.) Creating an annual plan makes you review your current and past performance, provides objective information on the health of your business and provides insight on changes that might need to be made.
2.) Creating projections for your business will provide you with insights into what your business will look like if you keep up your day-to-day (reactionary) management style.
3.) If you are planning correctly, you will be forced to think out of the box and look for incremental opportunities that will help better your business. By thinking outside the box you can plan for things that you may not have thought to plan while you were reacting to the daily tasks.
4.) Having a plan will allow you to accurately and strategically direct the resources at your disposal, to help support the growth outlined in your plan. i.e. people, capital, etc.
5.) When you create an annual plan, you now have something to measure your performance against; you can now answer the question, “Did we do well this quarter?" And have something to actually compare it to. Otherwise, you will continue operating in the dark, not knowing if you are improving, maintaining or losing money.
6.) With an annual plan in place you have an objective tool for accountability. Going forward your team will have a clear understanding of the direction the company is moving and its goals for the upcoming year. Now you can set goals for your team and assess their performance based on their performance.