7 tips on creating an annual business plan

10 min read
Brandi Johnson

Whether or not you have the time, it’s important to set some aside for business planning every year. Even if you’re a one-person business, don’t underestimate the importance of having a business plan for the next year to help guide your decisions and keep you on track.

Here are 7 ways to get started with annual business planning

With detail and care, you can create a strategic plan for the year ahead. The best thing is, once you’ve got used to following these steps, you can use them to develop your plan year after year.

  1. Start by reviewing the past year’s performance.
  2. Don’t try to plan everything for the whole year.
  3. Review your ideal customer profile.
  4. Consider the competitive landscape.
  5. Build your financial plans.
  6. Prioritize your opportunities.
  7. Use bricks and blocks style planning.

Let’s get started!

1. Start by reviewing the past year’s performance

The most common place to start with an annual review is to look at your past financial performance.

  • Did you make as much money as you planned last year?
  • Did you spend more (or less) than you planned?

As you answer these broad questions, you may need to dig deeper into what you did that earned more money, or where you over (or under) spent.

This isn’t about passing judgment on those decisions — it’s about looking at them through fresh eyes to help you make good decisions for next year.

After you’ve done the numbers analysis, it’s time to get more into the qualitative stuff. You know, how you felt about the year and what your gut is telling you.

Answer these questions:

  • What went well?
  • What did you accomplish?
  • What did you learn about your business?
  • What did you learn about your customers?
  • What didn’t go well?
  • What was your biggest challenge?
  • What would you change?

Once you’ve done this, you can start your annual business planning.

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2. Don’t try to plan everything for the whole year

When you start thinking about annual planning, you probably want to plan everything. It feels like it’s going to make everything easier.

But one of the biggest takeaways from any year is that plans need to be flexible.

A gold pen next to an open planner

When you’re business planning, give yourself a bit of a break.

Don’t try to plan every campaign and every piece of content that you’re going to create for the whole year.

Instead, use broad strokes for your plans. The landscape of your business may look very different nine months from now.

Here are two things you can plan:

Firm dates

  • Holiday launches and sales. You can confidently plan around these dates regardless of your industry, from service to e-commerce.
  • Relaunch dates. If you already have a finished product that you’re relaunching, you can set firm dates. Examples of programs that you may relaunch include opening a membership program or accepting new registrations for an online course.

Wiggle room dates

  • New product launches. Why do product launches fall into the category of wiggle room dates? Life happens. Shipments get delayed. Tech goes awry and it’s impossible to record your videos. Give yourself a bit of flexibility when you’re launching a new product, and your launch will almost certainly go better.
  • Partnerships, joint ventures and affiliate promotions. Whenever you have more than one schedule to work with, it’s good to plan for flexibility. Whether it’s a surprise sale from an affiliate program or the opportunity to collaborate with a partner earlier than expected, keeping your third-party promotion dates flexible will help you accomplish more goals.

Related: 5-step guide to new product development

3. Review your ideal customer profile

Start by looking at who your best customers are. Consider what makes them the best from a financial standpoint, and who is the best to work with.

Understanding your best customers will help you refine your target market and reach similar people who are not yet customers.

Consider these questions when refining your ideal customer profile:

  • Who are your current customers?
  • Who are your best customers or repeat customers? What do they have in common?
  • What challenges do they face (that relate to your product or service)?
  • What characteristics do they have?

If you sell to businesses, you could be thinking about an individual person OR about the company. Look at things like annual revenues, locations, technology use, staff size, etc.

B2C businesses, which sell directly to consumers, often focus on characteristics like family status, household income, beliefs and values.

4. Consider the competitive landscape

You may already have a pretty good idea of who your competitors are, but spend a bit of time re-evaluating the competition.

See who’s emerged in the past year, who has pivoted and who has shut down.

You can choose to do a full SWOT analysis or a simpler evaluation.

Either way, you should look at:

Their messaging. How do they talk about their products or services? How is that different from how you talk about your products? If they’re on social media, also look at how their followers are responding to their campaigns.

Their products. In most cases, products aren’t identical. How are their products the same as yours? How are they different? Be honest and look at how their products may be better than yours. How can you improve on your own products?

Their pricing. Are they more or less expensive than your products and services? How does that pricing impact their position in the market?

And the final overarching questions:

  • How can you win against each competitor?
  • How do the overall shifts in the market create new opportunities?
  • What new threats are there in the market? (e.g. new competitors, shifts in customer preferences or behaviors.)

5. Build your financial plans

There are two approaches to revenue planning for your business for the year ahead: top-down and bottom-up.

Canadian bills and coins

In a top-down approach, you will start with your revenue goal and then figure out how you will get there based on what you have to sell.

For example, a wedding photographer may be planning to book 30 weddings for the peak wedding season. If big weddings aren’t back on the schedule, that same photographer may do more small events or even start offering virtual photoshoots.

In a bottom-up approach, you start by identifying what you have available to sell, and then how much you can earn from that. Then you figure out how to bridge the gap.

Either way you choose to budget, you may find gaps between what you want to make and what your current capacity (of time or product) can get you. That’s where our final step becomes the most important.

The other side of financial planning is your cost planning. Consider what new purchases and expenses you’re going to have in the new year. This includes expanding your team, buying new equipment or software, investing in training and spending on ads.

Your revenue plan, combined with your cost plan, gives you insight into how profitable your year could be.

6. Prioritizing your opportunities

Once you’ve mapped out your yearly business plan, don’t overlook the importance of prioritizing the opportunities. If you’re like most entrepreneurs, you’re constantly getting new ideas for things you can create in your business.

But not all of them are created equal.

Start by doing a brain dump — getting all of those ideas out of your head and onto paper. If you’ve been collecting up ideas over the course of the year, get those out too.

Then use these questions, inspired by Charlie Gilkey’s self-help book “Start Finishing,” to evaluate your opportunities and goals.

  1. Which of these items wouldn’t actually hurt at all if you cut them?
  2. Which of these items would you be relieved to no longer be planning to do? (Remember, some of them may still be non-negotiable, like paying quarterly taxes!)
  3. Which of these goals are “shoulds,” or relate to other people’s priorities, rather than your own?
  4. Which of the items are good ideas, but don’t directly relate to something that frustrates, annoys, angers, inspires, nourishes or calls to you?
  5. What’s the most important thing you want to celebrate this time next year?
  6. Which causes the most gut-wrenching anguish when you consider cutting it?
  7. Which are you most likely to wake up two hours earlier or stay up two hours late or steal time elsewhere to create time to do?
  8. Which will matter the most in five years?

7. Use bricks and blocks style planning

After you’ve identified your top priority — the first big thing you want to accomplish in the year ahead, it’s a great time to break down that goal into action steps.

Remember, each step of your action plan needs to be concrete, measurable and attainable. If you have a team, you’ll also need to assign the person responsible for getting it done.

There’s one more component to add to your project plan: bricks and blocks.

Haven’t heard of this one?

Bricks and blocks help you get more done, even on your busiest days. Bricks and blocks are categories of tasks based on how long they take:

  • Bricks are smaller tasks and activities — things that take 15-20 minutes to complete. This could be delegating part of a project, testing a workflow or creating the first draft of a blog post.
  • Blocks are bigger tasks that take longer and more concentration — up to two hours. These are where a lot of magic happens with your projects — and often when you get into a flow. Examples of blocks are writing sales pages or email sequences, recording lessons for a new course or digging into programming.

If your action is bigger than a brick or a block, then break it down further.

Smaller steps make it easier to get started and easier to keep going.

Whenever you finish a task, your brain releases a load of dopamine — the neurotransmitter that makes you feel accomplished and happy.

In most project management systems, you can apply your own labels — often through some sort of a tag or colour. Pick colours that stand out and make it easy for you to see where you can spend time to advance your goals.

When you sit down to work, pick tasks based on how long you have and what your energy is like. Sometimes even if you’ve got two hours to work, you may choose to knock out five or six bricks instead of a block.

Bricks and blocks aren’t just great tools for your big projects. You can also use it for anything that you need to do in your business — from recording podcast episodes to scheduling social media posts.