Annual Operating Plan: How to Build One in 8 Easy Steps

By Ariel Notterman

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Creating an effective annual operating plan (AOP) is important for any business, whether it’s a bustling startup or a well-established small business. This strategic planning tool serves as a roadmap, guiding your company toward its business objectives and fiscal year goals. Learn more about annual operating plans and how to make one to get your year started on the right foot.

Business woman smiling at her laptop.

1. Conduct a Business Review

Kick off your planning process by reviewing the previous year. Examine your financial statements, business goals and key performance indicators (KPIs) to understand where your business stands. Reflect on both the successes and the shortcomings, considering metrics and actuals to gain a comprehensive view. This step is crucial to informed decision-making by both CFOs and business owners.

2. Check In With Stakeholders

Your stakeholders, including department heads, team members and investors, play a vital role in the planning process. Their feedback can provide valuable insights into the operational and strategic needs of your business. This collaborative approach ensures that your AOP is aligned with the company’s goals and addresses the needs and expectations of all parties involved.

3. Set Your Goals and Key Performance Indicators

Define clear, achievable business goals and establish key performance indicators (KPIs) for the upcoming year. These goals should be SMART (Specific, Measurable, Achievable, Relevant, Time-bound) and directly tied to your strategic vision. KPIs will serve as quantifiable metrics to track progress and gauge the success of your initiatives.

4. Identify Obstacles

Anticipate challenges that might hinder your progress. Whether it’s cash flow issues or the challenges of launching a new product, preparing for obstacles ensures a more resilient plan. Consider internal and external factors such as market trends, competition and resource limitations.

5. Plan a Strategy

Craft a strategy that includes the initiatives necessary to achieve your business goals. This should include a blend of financial planning, marketing strategies, human resources allocation and operational tactics. Ensure that your strategy is flexible yet focused, with clear milestones for monitoring progress.

6. Create a Realistic Budget

Your operating budget is a key component of your AOP. It should realistically reflect your anticipated revenue, expenses and cash flow. Utilize financial planning tools, such as Excel or specialized SaaS platforms, to create a detailed and accurate budget. This budget should align with your strategic goals and provide a clear financial roadmap for the year.

7. Assign Roles and Responsibilities

Clarify roles and responsibilities within your team. Ensure everyone understands their part in achieving milestones and business objectives. This clarity helps to keep your team focused and aligned with the AOP’s goals.

8. Check In and Adjust as Needed

An effective AOP is not set in stone. Regular check-ins allow you to compare actual performance against your plan and make necessary adjustments. This flexibility allows your business to adapt to changes and unexpected challenges, ensuring that your AOP remains relevant and effective throughout the year.

What Is an Annual Operating Plan?

An annual operating plan is a detailed outline of a company’s projected activities over the upcoming year. It includes budgets, projected revenue, goals and strategies.

Why Do You Need an Annual Operating Plan?

An AOP provides clarity and direction. It helps in aligning the efforts of different departments towards common business goals, thereby improving the bottom line.

Where Can I Find Tools to Help Create an Annual Operating Plan?

There are numerous tools available, from Excel templates to sophisticated SaaS platforms. Microsoft offers resources for step-by-step planning, while various online platforms provide AOP and SOP (standard operating procedure) templates. These tools can help streamline the planning process and ensure accuracy and consistency.

What Are Some Common Mistakes People Make When Creating an Annual Operating Plan?

Common mistakes include setting unrealistic goals, neglecting stakeholder input, inadequate risk assessment and failing to adjust the plan as needed. It’s important to be aware of these pitfalls so you can avoid them when creating your AOP.

What Experts Say

“There were several critical steps I needed to consider when I created my annual operating plan. I started by looking at what I felt I needed to achieve to run a successful travel blog/website. This included increasing website traffic, generating revenue and growing my email subscriber list. I needed a way to understand my target audience, their behaviors, interests and preferences. Then I outlined my services.

“I did comprehensive market research on my possible competitors and the current state of the travel industry, and planned how I would make money, whether it be through advertisements, sponsor content, or affiliate marketing. I then created a content schedule, a thought-out plan on when I would release what type of content, what topics I would cover and when it would be published.

“This is a simplified overview of how I created my annual operating plan for my new business venture. The actual process did involve more steps, for instance, marketing and promotion, my financial plan and what my KPIs will be to determine my progress. Remember to stay flexible when creating your operating plan since any industry has the possibility to change rapidly.”

Saya Nagori, CEO & Travel Expert WanderDC

WanderDC is a travel hub curated by Saya, a resident of Washington DC since 2018. Since her adventures to DC as a teen, she’s loved the city and the surrounding areas. Now, she aims to give the best recommendations and insights to travelers looking to wander DC. She also shares her recommendations for the surrounding areas including Maryland and Virginia.

The Bottom Line

An annual operating plan is not just a financial document; it’s a strategic tool that guides your business through the fiscal year. Building an effective annual operating plan is a process that requires careful thought, collaboration and strategic planning. By following these steps and leveraging the right tools, you can create an effective AOP that aligns with your business needs and helps achieve your goals.

This content is for educational and informational purposes only, and is not intended as financial, investment or legal advice.

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Author Ariel Notterman

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How To Create an Annual Operating Plan for Your SaaS Business

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Carly Miller

Content Marketing Writer

Download our Strategic Financial Planning Blueprint

Business planning can be a painful process for all involved. But getting rid of it isn’t an option. A rigorous annual operating plan is what will help you maximize efficiency across the business and allocate resources to hit company goals.

Don’t spend year after year dreading each step of the process of building your business plans. Here, we’ll cover the key concepts and steps you need to know to optimize your processes and create an annual operating plan that drives value for your organization.

Table of Contents

What Is an Annual Operating Plan?

An annual operating plan (AOP) is a strategic document that a company prepares to chart its course for the upcoming year. This AOP encompasses key performance indicators (KPIs), operating budgets, and action plans designed to meet both short-term and long-term objectives. Through the annual operating plan, businesses can pinpoint and allocate their resources efficiently, ensuring they’re on track to achieve their set milestones.

Benefits of Annual Operating Plans

As a part of strategic planning, an annual operating plan ensures that all employees understand their responsibilities and can coordinate their efforts to complete your business objectives.

It enables managers to track progress and determine whether they’ll hit company milestones on time. As a result, managers can request any needed funding from the CFO ahead of time.

Here are more benefits of annual operating plans:

Make Department Plans and Strategies More Data-Driven

A data-driven approach keeps the plans and strategies of various departments more outcome-oriented by drilling down to the impact of costs per head, per month, or per vendor.

Such an approach improves the accuracy and flexibility of your SaaS revenue forecasting  by aligning revenue and expense forecasts with the primary levers for your SaaS business.

Align Cross-Functional Departments With Business Goals

Align Cross-Functional Departments With Business Goals Business leaders can curate job roles and department goals based on what’s outlined in the annual operating plan to ensure their team members align with key company objectives.

Help Highlight Potential Need for Fundraising or Spending Re-Evaluation

An annual operating plan can help you have more granular conversations with stakeholders or business owners about how changes in spending could improve performance as market and business conditions shift throughout the year.

Give Departments a Guidepost for Tracking Performance and Goals

An excellent AOP will help various departments track their progress and ensure they take the necessary initiatives to achieve company objectives throughout the fiscal year.

How To Create an Annual Operating Plan

The complexity and maturity of your company will determine the details of your annual planning process. But in general, aim to start the planning process about a third of the way through your Q4 and finish it within six weeks. This ensures decision-making is streamlined and goals are achievable.

Here are the recommended steps:

1. Organize Department-Level Data in the Main Financial Model

Creating an annual operating plan starts with categorizing data from your company to understand the previous year’s performance trends. These insights are the foundation for the rest of your planning process and will help you create a detailed plan.

Your goal in this phase is to clearly understand what teams are spending money on and find consistent and inconsistent spending across general ledger accounts.

For example, if your marketers used LinkedIn  ads  as a primary channel throughout the previous year, you might anticipate they’ll increase LinkedIn ad spending in the new year.

You can also find significant one-time expenses across departments and look for opportunities to limit these expenses to improve cash flow.

You can then use these insights to develop questions for departmental meetings.

2. Get a Read on Department-Level Plans

This is the most collaborative — and perhaps most important — part of the annual planning process. The ability to connect with department leaders, understand their needs, and contribute to their plans will enhance the effectiveness of your AOP.

The needs of the marketing, human resources, sales, and product departments differ from those of the finance department. So, communicate with their leaders to learn what they care about most rather than handing over dense spreadsheets outlining the financial plan.

Focus your conversations on past performance compared to your plans. Alternatively, you can create high-level strategic budgets and establish goals to achieve them if you don’t have historical data.

3. Translate Department Budgets to the Main Model and Scenarios

In the previous step, you worked with department leaders to understand their needs and strategies. As a result, you should have worked through various department-level scenarios by this point.

One scenario could be: What if we hire another 30 people in the production department? Is the ROI  of new product releases worth the cash impact?

Another scenario you could consider: What if we doubled our marketing acquisition budget? What effect would this have on pipeline generation ?

When you translate the department-level discussions to the primary model, you must also run what-if scenarios for the whole organization.

Having a CEO and a CFO with a good relationship can make all the difference when creating an AOP, and running these scenarios will let CFOs have a more strategic conversation with the CEO about how to handle different aspects of the current economic environment.

The models will show how different fundraising scenarios, revenue forecasting , and headcount plans affect your cash flow, runway, and burn rate.

4. Align With the CEO for Company and Board Approval

At this stage, you’ll present fully fleshed-out scenarios and plans from the third step to finalize things for the CEO  and board.

However, due to market uncertainty, you may spend more time with your CEO working out scenarios and model assumptions to determine the best path forward.

As a result, you may want to give yourself plenty of time to adjust your plans based on your CEO’s recommendations and comments.

Then, the CEO can sign off on the plans and approve the various scenarios you’ll present to the board.

5. Reforecast Throughout the Year To Keep the Plan Fresh

The value of an annual operating plan is in the process itself. You must keep it fresh monthly and quarterly. So, update your models to reflect new context about the business and macroeconomic environment.

Also, compare rolling forecasts  to the original annual plan. This comparison lets you revisit the plan with the most recent actuals and adjust based on business performance and macroeconomic conditions.

Download this blueprint and complete guide to nailing your annual planning process.

Why saas startups need to go beyond annual operating plans.

As you create your AOP for 2023, market uncertainty is forcing you to be more adaptable and agile. So, prioritize automation and data integration to address evolving business needs. You’ll need an overarching framework for centralizing, processing, and analyzing financial statements and other financial data.

You need a framework to pull all financial data  from your organization and map it into a common ontology, saving 80% of the time you typically spend cleaning data from individual record systems.

Financial tools like Mosaic provide this framework, eliminating the need to rely on engineers to develop a data architecture to support your agile planning.

How Mosaic Enables Business Growth

Mosaic provides a Strategic Finance Platform  that serves as the connective tissue for your small business. It automates financial data integration and empowers you to add more strategic value to the planning process.

Plus, the 125+ SaaS metrics make monitoring your business’s growth simple.

Want to learn more about how Mosaic makes the typical high-stress top-line planning process easier for SaaS startups? Reach out for a personalized demo  and find out how you can easily create your annual operations plan.

Annual Operating Plan FAQs

What should be included in an annual operating plan.

An annual operating plan should be a concise overview of the entire company’s strategic and tactical plans for the year ahead. This should include:

  • A narrative of strategic context to go along with the proposed annual budget
  • An explanation of the current and planning organizational structure to support strategic initiatives
  • A clear outline of quantitative company goals and OKRs
  • The breakdown of departmental metrics that you’ll use to track progress

What is the difference between annual operating plans and budgets?

An AOP and a budget both address your financial structure, but they have some differences.

The differentiator is that the annual operating plan is like a document or deck that outlines overarching goals and departmental focuses. In contrast, the budget is much more numbers-driven and includes revenue goals, financial assumptions , and expense forecasts.

What is the objective of an annual operating plan?

When creating an annual operating plan the objective is to tie together forecasts, budgets and plans (including their accompanying goals and KPIs) from different departments into a single cohesive overarching plan for the company. Annual operating plans help departments align around company objectives and give each department achievable goals to work towards.

Related Content

  • A Guide to the Strategic Budgeting Process in SaaS
  • Guide to Rolling Budgets: How To, Pros & Cons, Examples
  • Top-Line vs. Bottom-Line Growth: How to Analyze and Improve Each

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How to Develop an Annual Operating Plan + Template

You may have heard the famous quote, “give me six hours to chop down a tree and I will spend the first four sharpening the axe,” supposedly by Abraham Lincoln . 

It highlights the importance of planning and preparation in order to do the job effectively. And that is the case with an annual operating plan in business. It is a document that, when prepared correctly, will create the framework your business needs to achieve its goals. 

This article helps you create the document, providing an annual operating plan template on which to base yours. 

What is an Annual Operating Plan (AOP)?

An annual operating plan, also known as an annual operations plan, is a report that lays out the elements the company needs to reach its targets, including key performance indicators (KPIs), budgets and other human, physical, educational and financial resources. It provides a roadmap to help you navigate day-to-day activities that will lead the organisation to meet its objectives. 

The document lays out the resources required by different company activities and who holds responsibility for carrying them out. It also takes into account pertinent risks for the company and how it might mitigate them to remain on course to achieve its aims.

The AOP differs from your budget and your strategic plan in the following way: 

How to create your annual operating plan

1. assess your current situation.

Look back at your performance over the last year and consider what you achieved in relation to your aims and objectives. Review how closely aligned your performance was with company values and your mission. This will help you to reset your planning for the next year. 

In which areas could you improve in the future? Consider actions that did not achieve the necessary results. For example, did a new product launch fail to spark the expected revenue boost ? Consider what you can learn in order to refine your processes going forward or whether you should cancel some activities and seek out other opportunities instead.

Analyse all areas of the business to ascertain where you can make improvements. One of these areas could include the effectiveness of your board . You can use iBabs to track board member engagement, which will allow you to identify directors who might need more encouragement or training. A more engaged board is a more effective board and that can help you move the business forward over the next year. 

2. Analyse the market climate

The risks in your sector will have a bearing on your planning for the forthcoming year. There is no point in pursuing a plan that is destined not to work because the market climate is incompatible with its success. 

This means keeping a keen eye on the industry press to spot market trends that will help you set KPIs that chime with the business environment in which you will be working. 

Discuss the plan with the CEO to find realistic routes forwards for the next business year, as well as planning contingencies that can address the shifting landscape. 

Make use of competitive landscape analysis to see what your peers are doing and how they work. This will identify opportunities to diversify and gain an advantage over your competitors. Use a SWOT analysis to better understand their strengths, weaknesses, opportunities and threats. This will help you adjust your planning framework to the market conditions. 

3. Build your business strategy

Consider what you want to achieve overall for the business during the next year based on what is achievable as the market stands. Develop a strategy that will allow you to meet your objectives, given the risks and challenges that lie in store. 

Use your board portal to facilitate collaboration between board members on this topic between meetings. This allows them to thrash out the minor details outside of the boardroom, creating more time in board meetings to discuss the more substantial aspects of the strategy. 

You should also meet with department heads to discuss what they want to achieve during the year and what they need from you to meet those objectives. Attempt to work out how you can allocate the necessary resources for them to meet their aims. Also, use historical data to give you a realistic read on their ability to deliver what is required. 

4. Create the operational plan

Using the information you have gathered, you can begin to create a framework for the day-to-day activities that will comprise your operational plan. Set KPIs to help you monitor progress during the year and adjust your plan accordingly. Allocate the necessary resources and assign responsibilities. 

Once you have selected the areas on which you want to concentrate for the twelve months ahead, set SMART goals to achieve the growth that you require. These are goals that are S pecific, M easurable, A chievable, R elevant and T ime-bound.

Ensure your goals are relevant by aligning them with your company mission and that they are time-bound by setting them for the full term of your annual operating plan.

Include your budget and financial planning within the operational plan, which allocates how that budget works in a practical manner within the organisation. Include sales targets to help you achieve the results you need to carry out your plan. 

5. Explore new technology

Consider how technology could help you meet your operational goals with the resources that you have available. 

This could include using artificial intelligence to automate some repetitive tasks and free up employees to work in other areas. When it comes to allocating human resources, you can make your plan more efficient by finding solutions that make the most of your employees’ talents. 

Another use of technology to improve your operational efficiency is to use board meeting software like iBabs to run your meetings. This allows you to implement a digital meeting management process that uses your resources more effectively. 

6. Implement your plan

Put the plan into action and communicate that plan clearly to all stakeholders. Everyone must understand which goals you are aiming for, the steps required to reach them and their role in reaching those steps. 

Use internal communications methods such as company town halls to discuss the operating plan with employees and field any questions that they might have. In order to make sure your board members understand their responsibilities, create and track action items in your board software to increase accountability. 

Once the plan is in place, make sure to review it periodically, as changes in the market may have a bearing on its current state. 

Annual Operating Plan Template

This template provides you with a basis for operational plans for businesses and non-profits, as well as for longer-term planning. It allows you to visualise your goals, the stakeholders with ultimate responsibility, the measures of success and the potential risks you could encounter. 

Why is creating an AOP important?

Creating an AOP organises the route towards your goals. Without it, you could veer off-course without being able to recognise that immediately. The steps in your plan help you to track progress more effectively and adjust accordingly if necessary. 

What is the difference between an annual operating plan and a business plan?

Your business plan is your overall aims and goals and the methods to achieve them. The annual operating plan breaks that down into a one-year timeframe and plots how you will achieve the aims of your business plan that year. 

How often should we update the annual operating plan?

You should check in on your plan regularly during the year, quarterly or even monthly. This is to ensure that you are on target and that the AOP is still on track to lead you to your goals, considering the market conditions. 

How can we ensure everyone stays engaged with the annual operating plan?

Setting SMART goals and KPIs allows all stakeholders to know where they stand and what they need to do to meet their targets. With strong internal communications, you can keep everyone informed and motivated, offering incentives and praise for meeting goals. 

How do we determine the right key performance indicators (KPIs) for our annual operating plan?

This involves selecting leading KPIs that help you predict future performance. Discuss them with relevant stakeholders to ensure that they are realistic and helpful in achieving your aims. 

How can we effectively communicate the annual operating plan to other stakeholders?

Use your internal communications channels to keep stakeholders informed about developments and progress. This could include, for example, internal webinars or emails. For boards, use your board portal software to provide documentation and action points for directors. 

Using an annual operating plan template to create a road map towards achieving your goals helps you stay on course and gain an important overview of how you need to distribute your resources during the coming year. It provides all stakeholders with targets to meet and responsibilities to carry out so everyone understands the part they will play. 

For board members, you can use iBabs’ meeting management software to digitalise your processes, keep your board on track towards completing their action items and monitor directors’ engagement with board matters. Request a demo of iBabs today to find out how to improve your workflows, accountability and effectiveness using one platform.

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A Guide to Creating an Annual Operating Plan for 2024

Why do you make resolutions at the end of every year.

The answer is quite obvious. Most of you do it to start the new year on a positive note and to make positive changes in your lifestyle in the year ahead. 

Resolutions help you resolve to change the things that need changing and enter the new year on the right foot. So does an Annual Operating Plan for businesses.

Don’t forget to add Group Health Insurance for your employees while creating an AOP for 2023. You can check out other policies such as Group Personal Accident Insurance & Group Term Life Insurance .

What is an annual operating plan?

An Annual Operating Plan is an annual layout or a roadmap?️for your business’s growth. It charts the course you should take to grow your business to desired targets. It is a blueprint of activities that you and your team choose to undertake to reach the annual milestone of the business.

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Why is AOP in Finance Important

In the financial world, the Annual Operating Plan (AOP) is crucial. It's the roadmap for a company's financial journey. AOP sets clear goals. It aligns resources with these goals. This alignment is key. It ensures focused efforts and efficient resource use.

AOP also aids in performance tracking. It offers benchmarks. These benchmarks are vital. They help in measuring progress and identifying areas needing improvement. Therefore, AOP is not just a plan. It's a tool for continuous growth.

Moreover, AOP fosters team unity. It brings everyone on the same page. This unity is essential for success. It ensures that all departments work towards common objectives. In essence, AOP is the backbone of strategic financial planning.

What Does an Annual Operating Plan Include?

An annual operating plan must include the following.

  • Objectives 
  • Business activities 
  • Resource requirements 
  • Performance Monitoring Plans 

Each annual operating plan you make will look a bit different. Use the points above as your basic outline, and add or remove other things as you see fit.

Why is an AOP needed?

Benjamin Franklin once said, ‘If you fail to plan, you are planning to fail’ . This quote sums up the fundamental importance of an operating plan. The plan is like a to-do list?that helps the teamwork collectively to achieve business goals. Imagine having no plan. You and your employees would not know in which direction your organisation is headed.

An AOP is, thus, needed to chart a course that your business should take in the coming years. It gives shape to the objectives of your organisation, thereby removing any ambiguity.

Annual Operating Plan Best Practices

Creating an effective Annual Operating Plan (AOP) is an art. Here are some best practices:

- Start with Clear Objectives : Define clear, achievable goals. These goals should align with your company's vision.

- Involve Key Stakeholders : Collaboration is key. Involve different departments. This ensures a well-rounded and realistic plan.

- Focus on Data : Base your plan on solid data. This approach ensures accuracy and relevance.

- Be Flexible : The business world is dynamic. Your AOP should be adaptable to changes.

- Regular Reviews : Don't set and forget. Regularly review and adjust your AOP as needed.

These practices ensure that your AOP is not just a document. It's a dynamic guide that drives your business forward.

Benefits of Annual Operating Plans

Aligns cross-functional department activities with business objectives.

Corporate leaders can tailor job descriptions and departmental targets according to the provisions in the annual operational plan. This guarantees that their team members are aligned with critical business goals.

Promotes Data-Informed Departmental Strategies and Plans

Implementing a data-informed strategy ensures that the objectives and tactics of various departments are result-driven. This strategy meticulously breaks down the effect of expenditures per employee, per month, or per supplier.

Highlights Potential Need for Fundraising

A yearly operational plan facilitates more detailed discussions with stakeholders or business owners about how alterations in spending could boost performance in response to shifts in market and business conditions throughout the year.

Provides Departments with a Benchmark for Monitoring Performance and Objectives

An effective yearly operational plan aids various departments in tracking their progress, ensuring they imp

How to create the best operating plan?

Taking a pen ?️ and paper (or powering up your computer) to make a list is easy. Anyone can do that. But to make an effective plan which would work is where the trick lies. 

So, here are some quick and easy tips ? to create an effective plan.

Create a vision board

This is the first step. After all, you can’t go on a journey without having a destination in mind!

So, create a vision board-i.e. where you see your business 1 year from now. Set the annual objectives of your business to get a clear view of the goals.

Pro-tip: When making a vision board, don’t do it alone. Involve all the departments in the planning process. Each department will know its strengths and weaknesses. Moreover, every department, working in tandem, will make it possible to achieve the identified goals. So, brainstorm ?. Take the opinions of your employees about ways you can grow the business. You never know what useful idea can be born from an effective brainstorming session!

Moreover, start early ⏰. There is no point in creating an Annual Plan in the middle of the year. The planning should be undertaken 3-4 months before the next year starts. If you did not make a plan and the year has started, do it ASAP. Do not procrastinate. 

Assess the feasibility

It is said that the goals should be S. M. A. R. T., meaning:

1️. Specific

2️. Measurable

3️. Achievable

4️. Relevant

5️. Time-bound

If your business goals fulfill this criterion, you will be able to fulfill them. So, just creating the vision board is not enough. You need to determine whether the objectives listed on the board are feasible or just some far-fetched ideas. This is an important step that differentiates an effective plan from an ineffective one. Check out whether the goals that you have envisaged are achievable or not. This is a feasibility check which should not be missed.

Pro-tip: Here again, involve all the departments to assess the feasibility of the goals. This is because the departments know whether the goals are realistic or not. Moreover, achieving the specified goals is not a one-person job. It involves all departments' collective efforts, so their involvement in the decision-making and feasibility checking phases is essential.

Go on a trip down memory lane

The past gives you a glimpse into what went wrong. That is why it is essential to check how the business performed last year- the areas that need improvement and the areas that delivered a good performance. Looking into last year’s performance would help you weed out the problem areas so that you can take steps to address and resolve them. This would ensure that the business plan that you are making is effective as the possible leaks would be plugged in.

Pro-tip: Analyse business performance over the last couple of years to better understand which areas require your attention. Use Key Performance Indicators (KPIs) to measure the business performance and measure these metrics against the industry average. If the metrics need improving, you would know where additional efforts are needed. 

Create a budget

Once the planning is done, reviewed, and assessed, it's time for budgeting. Budgeting involves laying down the expected expenses needed to achieve the envisioned goals. Budgeting also gives you an idea of the expected business expenses over the year. You can allocate specific resources when you know how much you can spend. Moreover, budgeting also helps curb unnecessary spending and boost profitability. 

Pro-tip: Don’t be too taxing when creating a budget. If you’ve envisioned grand goals for the year ahead, you would require a bigger budget. If your budget is small, the goals should also be realistic. Do not force your team to work on a shoestring budget and achieve great results.

Run it with your team 

Once the outline for the year and the budget have been set, run it with the people who would make the Annual Operating Plan a possibility - your team. Tell them about the vision that you have created for the business and ask for their opinions.

Understand whether, in your team’s view, understand whether the plan is feasible or not. What you might consider achievable, your time might not. Since they are the ones that would be putting in their efforts to make your plan a reality, they should be in the know.

Pro-tip: Conduct a strategy meeting after the plan has been outlined and the budget set. Run the plan with your team and take their approval before putting it into the process. 

After your team has approved the plan and believes it is achievable, it is time to delegate. Divide the objectives into smaller tasks and allocate them to the relevant departments. Make them accountable for the tasks delegated.

Pro-tip: Delegate the tasks to each department and agree upon a mutual timeline within which the task would be completed. 

Keep a contingency plan

The best-laid plans can go awry, and you need to be prepared for that. Even when you have taken the pains to revisit every detail with a magnifying glass, the plan that you have envisioned might not deliver the expected results. Be prepared for the same. Be prepared for your objectives or plans to fall through, for the budget to overshoot, and for any other contingency that might come your way.

Pro-tip: Invest in insurance plans to battle the financial repercussions of an emergency. Employee insurance plans provide financial benefits to employees in an emergency, while corporate insurance plans can help your business deal with unexpected losses.

Review and revisit

Lastly, a review is necessary because of changing business dynamics. Your organisation runs in a dynamic environment that might produce deviations from the set plan. A review is, thus, necessary to keep the plan in place and make amendments to the same, if needed.

Pro-tip: Be flexible with your operations. Leave room for adjustments and changes. Remember, change is the only constant. If your plan needs an amendment, do not fear it. Make the necessary changes and see how the deviation has affected the plan on an overall basis. Review the plan quarterly for checking the direction in which it is headed.

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Why Startups Need To Go Beyond Annual Operating Plans

Startups are unique. They operate in fast-paced, often unpredictable environments. Therefore, relying solely on Annual Operating Plans (AOP) isn't enough. Startups need agility. They need plans that can adapt quickly.

Beyond AOP, startups should embrace continuous planning. This approach allows for frequent adjustments. It's responsive to market changes. This responsiveness is crucial for startups.

Also, startups should focus on innovation. A rigid AOP might limit this. Flexibility in planning fosters creativity. It allows startups to seize unexpected opportunities.

In summary, while AOPs are important, startups thrive on adaptability and innovation. These qualities ensure they stay ahead in a competitive landscape.

How is AOP Different from a Budget?

AOP and a budget are often confused, but they're different. The Annual Operating Plan (AOP) is about strategy. It's a comprehensive plan. It outlines the company's goals and how to achieve them. AOP is broad. It covers various aspects of operations.

A budget, on the other hand, is about numbers. It's a financial document. It details income and expenditure. The budget is a part of AOP. It supports the AOP by providing financial limits.

In essence, AOP is the game plan. The budget is the financial boundary within that plan. Both are crucial, but they serve different purposes in a company's financial strategy.

The Bottom Line

Be a pro when it comes to creating an effective AOP. There is no universal formula for creating a winning AOP. However, these tips help. Remember that an annual operating plan is not a one-person job. While you might envision great things for your business or organisation, you need to run your dreams with your team. They would be able to give you a third-person view of whether your envisioned goals are achievable or not. 

So, when you envision the plan, go by the top-down approach. List your goals and see how they can be achieved. On the other hand, when you involve your team, give them a bottoms-up approach. Allow them to check how the envisioned goals might be achieved.

Also, do not delay creating a plan. Start the process before the year ends so that when the new year starts, you have an outline for your business that has been fool-proofed. This would give your organisation a head start in achieving the set targets.

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Q: What is an Annual Operating Plan?

A: An Annual Operating Plan (AOP) is a roadmap outlining a company's goals, actions, resources needed, and timelines for a year.

Q: Why do I need an Annual Operating Plan?

A: An AOP aligns your team's goals with the company's objectives, helps manage resources efficiently, and tracks performance throughout the year.

Q: How do I start creating my Annual Operating Plan?

A: Start by setting your goals, then detail the actions needed, identify required resources, set timelines, and determine how you'll monitor progress.

Q: Can I change my Annual Operating Plan during the year?

A: Yes, an AOP is a flexible tool and should be updated as market conditions, opportunities, or challenges change.

Q: What should I include in my Annual Operating Plan?

A: An AOP should include your goals, the actions you'll take, the resources needed, timelines for these actions, and how you'll track progress.

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Annual Operational Plan

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Every year, new objectives and goals arise in your business. They arise because there may be a new project , new industry trends, or new opportunities to bring your business to a higher level. Because of that, the flow of your operations should change yearly. Having new objectives and goals means changing the ways you do things. If you don’t change them, it would be nearly impossible to achieve those new objectives and goals. That’s why you must plan your operations annually. The next business year is fast approaching. So, start planning your operations asap using our Annual Operational Plan Template Examples.

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What Is an Annual Operational Plan?

An annual operational plan outlines the yearly activities and targets that a company or organization must follow. It emphasizes what changes were made in the operations or standard operating procedures (SOP). That said, it explains a new strategy to achieve a year’s desired business outcomes. It might also entail changes in training employees and marketing the company’s brand.

How to Prepare an Annual Operational Plan

According to Small Business Trends, business planning doubles a business’s chances of achieving success . Well, it’s not really surprising. We all know how planning, in general, guides us towards what we want to obtain. Operational planning is also a form of business planning . So, if you execute it, the upcoming year’s operations will bring success to your business. With that in mind, make sure to take note of these steps in preparing an annual operational plan.

Step 1: Set the Objectives

It wouldn’t be a plan without the objectives. So, don’t forget to set your business objectives on the operational plan. They’re the purpose of your operations and the reason why you need to plan it in the first place.

Step 2: Create a Timeline

A timeline would help in achieving the objectives on time. In creating it, emphasize what specific processes the staff must complete in every period throughout the year. You can divide the year on a weekly , bi-weekly,  monthly , or quarterly basis. In each period, you can also indicate how much the operating budget will be.

Step 3: Outline the Procedures

Next, you have to outline the operation’s new procedures. Arguably, this is the most important section of the operational plan. They show the detailed step-by-step processes in obtaining the objective you’ve set. So, if they aren’t in the plan, your staff might think that the previous SOPs are still applicable.

Step 4: Define the Employees’ Roles

Let each staff member in every department know what their roles are in the upcoming year’s operations. More or less, their roles remain the same but with some changes. Write brief descriptions about what each of them will do throughout the year.

What are the different types of operational plans?

There are two different types of operational plans. These are:

  • Single-use plans – will only be used once for one-and-done events or projects.
  • Standing plans – will be used permanently and routinely.

What are the essential elements of planning?

The essential elements of planning include:

  • Implementations

How does operational planning differ from strategic planning?

Operational planning focuses on implementing the right processes or procedures. Meanwhile, strategic planning focuses on identifying the best possible approaches to achieve certain goals.

Operational planning is an integral aspect of business management . Every year, you have to invest time and effort in executing it. Your company’s success depends on it. There’ll be challenges as you formulate your operational plan. It entails a lot of analysis and research, not just within your business, but also in the industry. Thankfully, there are available tools to make it easier for you. Among those tools are our Annual Operational Plan Templates and Examples. So download them now!

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6 steps for operations leaders to build a better annual plan

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An effective annual plan is critical to keep your teams, departments, and company together, working toward the same goals. 

As an operations leader, you oversee how your organization runs its business. By reviewing how your company performed in the past year, you and your operations teams can identify which strategies worked—and which fell short—to build an effective annual plan designed to maximize the impact of every department.

Here’s what you need to know about building a successful annual plan.

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Annual plans drive clarity and accountability 

With an annual plan, departments can start the year off with a strong understanding of the overall vision and how their work contributes to larger business goals. Without an overarching plan, it can be difficult to understand how a specific project or initiative moves the business forward. 

Clear goals establish benchmarks for project progress

Your annual plan shouldn’t be a set-it-and-forget-it goal. Rather, periodically check project progress against your annual plan so you can see how your operations teams are doing. Doing this throughout the year will not only give you a sense of how your teams are tracking towards their overall goals—it can also help you understand if they’re ahead or behind schedule, and adjust accordingly. 

If you notice that a specific initiative is not on track to meet the strategic goals outlined in your company’s annual plan, you can use this data to pivot and double down on—or divest from—specific initiatives. 

Establish concrete goals for a specific time period

The more specific your goal, the more concrete your action plan. Providing detailed and specific goals gives your employees a clear understanding of what work to prioritize and what deliverables they’re responsible for. 

Make sure your goals are measurable, as well. Clear KPIs and OKRs demonstrate how tangible work connects back to larger business goals. 

6 steps for annual business planning

The annual planning process often takes place near the end of the calendar year or at the end of your company’s fiscal year. As you get closer to annual planning time, consider these six steps of the annual planning process. 

1. Reflect on previous strategies—and develop new ones

Before your business can start planning for next year, ask yourself, your stakeholders, and your operations teams: How did we perform against the strategies laid out in last year’s annual plan?

No matter the answer, use these recent data points to steer your decision-making when building your next annual plan. That could mean doubling down on big programs or initiatives born in the last year—or going a different direction entirely. 

A well-built annual plan factors in reflection on what did and didn’t work—and improves off of it.

2. Transform your business’s greatest needs into goals

After reflecting on last year’s performance, hone in on the most significant growth and improvement opportunities. Use this for guidance as you construct company- and department-wide goals.

It helps to have a consistent framework for goals across the business, to accelerate the goal-setting process and ensure greater understanding of goals within all corners of the organization.

The exact goal framework you use will depend on your company, but a few good ones to consider are: 

The Objectives and Key Results (OKR) method , which helps your business set goals using the framework “I will [objective] as measured by [key result].”

Key Performance Indicators (KPIs) , which use leading and lagging indicators to track how you’re performing towards your goals. 

The SMART goals framework , which helps ensure the goals your organization sets are specific, measurable, achievable, realistic, and time-bound.

3. Create an action plan to maximize impact

The next step is to create an action plan for your business to achieve the goals outlined in step three. Your action plan should outline the list of steps your teams need to take to accomplish their goals. Think of an action plan like the map you’ll use to arrive at your final destination. 

From there, delegate the work laid out in the action plan to specific teams and departments. Connecting the work that your operations teams complete to larger company goals makes it easier for each team to understand the impact their work has on the business.

4. Ensure the annual plan is everyone’s plan

Not everyone can be involved in building the annual plan for your company—but every team member should feel like their work is seen and accounted for in the plan. 

As the annual plan comes together, meet with leaders and employees across the business to ensure varying perspectives and priorities are factored into the final product. This step is critical for getting buy-in and generating excitement across the business. 

You don’t want to be in a position where you’re just telling everyone what the annual plan is—you want to bring every department along for the journey and get them excited about what they’re working toward in the coming year. Consider conducting a presentation to not only share the company plan and why this plan matters, but also to outline timelines and how departments will use it to achieve the company’s goals. 

5. Execute your strategy, monitor metrics, and adjust as needed

At this point, your organization’s annual plan is completed, but nothing is ever fully set in stone. As the year progresses, make sure you’re continually monitoring success metrics and KPIs. If the results of your strategies are not behaving as you expected them to, it’s important to adjust so your business will still hit the goals outlined in your annual plan. 

6. Repeat again for next year 

At the end of the year, it’s time to start the process over again. Align with your strategic plan, look back at the past year’s results, and create another plan to achieve those business goals. 

What does a good annual plan include?

Effective annual plans should contain components that are essential for completing the work outlined in the plan itself, and context for why this plan will be effective. Here are a few examples of components you would find in an annual plan:

Reports of the previous year’s performance: Your company’s annual plan for the upcoming year should be based on the data from the previous year’s performance. This provides context for your teams as to what they’re capable of doing within one calendar year.

Budget estimates: A common KPI investors track is return on investment (ROI). Knowing how much money different teams are spending makes it easier for your organization to calculate ROI and adjust strategies. Providing budget estimations also gives departments the context they need for the amount of resources they have at their disposal for the year.

Clear and specific goals: Annual plans should use the SMART goal framework so that your company can easily measure progress and report back on it later. 

Important milestones: Your business can accomplish a lot of work within one year—but to do that, each department needs to know how they're doing. Milestones operate like checkpoints, giving teams and departments a sense of direction and an idea of how they're pacing against annual goals.

Project buffers and contingency plans: Unexpected things happen all the time, and it’s better to be prepared than caught off guard. Develop a contingency plan for how your organization will get back on track in the event of an unexpected roadblock. Also set aside some resource buffers, such as a small portion of your company’s budget, to accommodate for unexpected expenses.

Gear up for next year

After a year of hard work, it’s time to reflect back and plan for more great things in the future. While annual planning takes time, collaboration, and thoughtful strategy, the efforts show in the form of your business success. 

Still have questions? We have answers. 

What is annual planning.

Annual planning is the act of developing a strategy for the upcoming year based on the learnings from the current year’s performance. This provides an opportunity for your operations teams to iterate on strategy from the past year and incorporate those learnings into your upcoming plans. 

In essence, your annual plan should contain: 

The goals your business needs to achieve

A strategy for how your organization will hit those goals

Clear tactics for what each department will work on

Any important milestones that benchmark progress

What’s the difference between annual planning and strategic planning? 

Strategic planning and annual planning are both important business planning methods that help set your team's strategy for the future. However, the scale of these planning strategies are different.

Strategic planning is the long-term strategy for your business. This encompasses a basic roadmap of how business should develop within three to five years. You will use your strategic planning process to inform your annual plan. 

Annual planning represents all of the goals and strategies that you want your business to achieve, similar to a strategic goal. The main difference here is that an annual plan only encompasses one calendar year, instead of a few years. If you think of it like a pie, annual planning is just one slice of the larger strategic plan pie.

When should your operations teams start annual planning?

Begin your annual planning process during Q4, so you can begin day one of Q1 with your plan in hand. If that’s not an option, do your annual planning as close to the start of the new year as possible. 

There are two benefits to planning earlier. First off, you’ll beat the end-of-year crunch, and avoid the stress that traditionally comes with the end of the year. Additionally, if you run an efficient annual planning process with your leadership team, your operations teams will still be free to execute on high-impact projects throughout Q4.

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Annual Planning: Plan Like a Pro In 5 Steps (+ Template)

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Get ready to take your strategic annual planning game to the next level! This process is essential for companies who want to set a clear direction for the future and ensure everyone is working towards the same goal. 

But, let's be real, executing a killer strategic plan is easier said than done. That's why we're here to help you. 

In this article, we'll dive into the nitty-gritty of annual planning and cover all the tips and tricks you need to know. From involving the right people to communicating your plan like a pro, we've got you covered. 

We'll also share some common pitfalls to watch out for and provide real-life examples to help bring it all to life. 

So, whether you're a seasoned planning pro or just starting out, get ready to learn how to make your annual strategic planning a total success!

In this article, you’ll discover:

What Is Annual Planning?

  • The Benefits of The Annual Planning Process

5 Steps To Build A Highly Effective Annual Plan

The only annual planning template you need in 2023.

  • 7 Mistakes to Avoid When Conducting Annual Strategic Planning

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Annual planning is about turning long-term business goals into short-term action plans for the year ahead. It contains insights from past performance and a clear roadmap with a timeline. This yearly plan should be realistic and achievable, while also being ambitious enough to move the business forward.

Annual planning is your opportunity to take the previous year’s wins, knocks, and lessons and adjust your strategy to help your business grow consistently and become better.

Boilerplate definition aside, imagine if IBM still focused on building business-centric PCs, BMW still only made airplane engines, or Tata focused on producing steel. They wouldn’t be the companies they are today.

Annual planning and regular reviews help you proactively adapt to changes and steer your organization in the right direction to get the business results you want by the end of the year or toward your vision in the future.

The Benefits Of The Annual Planning Process

Whether it’s your IT, supply chain , pricing, marketing, operations , or sales strategy—improving, pivoting, or optimizing your annual planning approach from one year to the next year is non-negotiable. The annual planning process will help you assess the effectiveness of your business strategies and make adjustments to keep up with customer needs and market trends.

An effective annual planning process for the new year can offer:

  • Strategic clarity: Annual strategic planning helps define and align goals, mission, and values, leading to more focused and effective decision-making across all levels of the organization. This in turn sets a clear and consistent direction for future initiatives, maximizing the organization's potential to achieve success.
  • Focus: By regularly reviewing and updating its strategic plan , your organization stays focused on long-term objectives instead of being constantly sidetracked by day-to-day operations.
  • Benchmark performance: An annual strategic planning process helps you measure and track progress on key strategic initiatives , and evaluate the progress made compared to last year.
  • Gaps and opportunities: By regularly reviewing your strategic plan, your teams will identify gaps and opportunities for improvement and innovation, which can help you stay ahead of your competition.
  • Resource allocation: By aligning your strategic plan with your budget, you can allocate resources that will support your goals and cut costs from misaligned initiatives.
  • Engagement and buy-in: Involving key stakeholders in the strategic planning process will increase engagement and buy-in across your organization, leading to a more cohesive and motivated team.

A clear and execution-ready annual plan that focuses on the big picture and pays attention to the details can be the glue that binds your teams together. And this is crucial if you want to reach this year’s goals with greater speed and efficiency. Plus, it’s much better than the alternative of just winging it and hoping for the best!

📚 Recommended read: How To Create An Effective Annual Operating Plan (+Template)

Don’t get us wrong—creating and managing a yearly planning process can be a daunting task. But, with the right approach, you'll be able to get it right and start executing faster. Here's how to do annual planning the right way:

1. Analyze your performance and identify opportunities

Before you set goals , you should do an analysis of your company's current performance, market, and competitors to see where you stand. 

Here are some tools you can use in the process: 

  • SWOT analysis
  • PESTLE analysis
  • Porter’s Five Forces
  • Competitive analysis 
  • Financial performance of the previous year
  • Gap analysis  

A better understanding of your current performance can help you make data-driven decisions in the next steps of the planning process. 

Want to make it fail-proof? Don’t forget to include key stakeholders who will be involved in the day-to-day execution of your annual plan. 

Here’s who should be included in the analysis process: 

  • Executive leadership: They are responsible for setting the overall direction and strategy for the organization.
  • Department heads and team leaders: They can offer insights into team capabilities and resources. They can provide insight into the specific needs and challenges of their teams and ensure that their operational plans align with the annual plan.
  • Employees: Employees often have valuable insights and ideas that can help improve the plan. By involving them in the planning process, you can tap into this wealth of knowledge and potentially identify new opportunities or challenges that may not have been considered otherwise.
  • Customers: Customer feedback is critical to understanding the needs and priorities of the target market.
  • Suppliers and partners: Depending on the nature of the business, it may be beneficial to involve suppliers and partners in the strategic planning process. They can provide valuable insights into industry trends and potential challenges. 

👉Bonus tip: Don't let analysis paralysis slow you down! Set a timeline, prioritize data, make informed decisions, and don't overthink it. Move into the execution phase as fast as possible. Adapt later.

2. Formulate your strategy 

The data and insights from Step 1 should inform the formulation of your strategy for the coming year. At this point, you should have a clear sense of direction and objectives that your company wants to achieve in the coming year. 

💡 To identify and formulate your strategy, consider the following questions with your team:

  • What is the business problem that we are trying to solve?
  • What are our core strategic objectives , and how will we measure success?
  • What are our key strategic initiatives, and how will we prioritize them?
  • What are our key performance indicators , and how will we track progress?
  • Are there potential risks , and how will we mitigate them?
  • What resources will we need, and how do we allocate them?

Answering these questions will help you test the validity of your strategy and identify any potential gaps or risks that need to be addressed. In this way, you'll build a solid foundation for your annual plan and increase the chances of its successful execution.

3. Build your annual plan

Next, you’ll need to turn your strategy into a detailed roadmap that outlines the steps you’ll take to achieve your annual strategic objectives and goals. 

It’s like taking a map from a broad view of the journey to a more detailed look that zooms in on the roads and landmarks you’ll need to follow to reach your destination.

📝Your annual plan should include the following:

  • 🔎 Focus areas: The specific areas of the company or its operations that need improvement.
  • 📌Goals and objectives: Specific outcomes the company wants to achieve in its yearly plan. 
  • 📈Measures: Deliverables and KPIs to track progress toward your company’s goals and objectives.
  • 📤Actions: Specific actions or projects to achieve goals and objectives.
  • 😎Owners: Individuals or teams responsible for implementing the actions.
  • 📆Due dates: Specific deadlines and milestones throughout the year.
  • 💰Budget: Allocating the resources to achieve goals and objectives.

👉Here’s how Cascade can help you:  

Cascade’s strategic planning feature gives your annual planning process a standardized and structured approach that includes all the key elements for success. It helps you set high-level annual goals, break them down into smaller initiatives, and assign owners to drive accountability.

4. Create tight alignment with your teams

If the leadership team’s job is to set high-level company priorities to frame key strategic initiatives, then it’s up to specific business functions or teams to chart out the path to reach those strategic goals .

The first step in ensuring strategic alignment is to clearly communicate the plan to all employees. This can be done through regular meetings, company-wide presentations, and other forms of communication, such as a central location for your annual plan that is easily accessible to your stakeholders.

The key is to make sure that everyone understands the goals and objectives of the plan and how their work fits into the bigger picture.

With Cascade , you can link your annual strategic plan to individual departmental or team plans in a single source of truth. As a result, it's easier to ensure that everyone in the organization is aligned with the goals and objectives and monitor the progress being made toward those goals.

alignment cascade (1)

An example of the Cascade alignment view is where you can see how each plan aligns with the company's annual plan and drill down to evaluate performance.

5. Monitor progress and adjust your plan

Gone are the days of static, set-in-stone strategic plans! It's time to embrace flexibility and be willing to make changes as needed. Your annual plan is a flexible, dynamic roadmap that should be adjusted as circumstances change or new information becomes available. The key is to stay focused on your goals and objectives, and be ready to pivot when needed .

Here are some steps that you can take to monitor the annual plan and adapt as needed:

  • Set up a system for tracking progress: This can be done using a variety of tools, including spreadsheets, strategy reports , strategic planning software , or status reports . 
  • Establish regular review meetings: These meetings can be weekly, monthly, or quarterly, depending on the needs of your organization. The key is to make sure that progress is regularly reviewed and that any issues are identified and addressed in a timely manner.
  • Monitor key metrics: Track the most important KPIs that will help you quickly catch underperforming areas and evaluate the success of your annual plan and business strategies. 

If you want to be a savvy business leader, you need to always be monitoring progress, the business environment, and adjusting your plans accordingly. So, let's ditch the rigidity and embrace the flexibility of modern strategic planning and strategy execution! 

With Cascade’s powerful data visualization, you can connect multiple data sources from spreadsheets, project management tools, or business intelligence tools in a single place. You'll be able to uncover powerful insights and deliver accurate reports to help stakeholders make better decisions.

Plus, Cascade's drill-down capabilities allow you to easily explore and interact with your data to gain deeper insights in real time.

Ready for some serious annual planning made easy-peasy? We've got just the thing for you—our annual planning template ! This bad boy is like your own personal planning sidekick, packed with all the goodies you need to align your teams, monitor performance, and rock this year.

Think of it as a one-stop shop for all your annual planning needs. It’s pre-filled with examples that can guide you through the planning process, or you can customize it with your own information.

2023 strategy plan template

It’s a great alternative if you want to get out of messy and ineffective spreadsheets. Plus, it's got a super simple layout, so you won't be bogged down by a bunch of unnecessary features. This template can help, regardless of whether you work at a startup or an enterprise-sized company. And no matter the industry you’re in. 

Don't believe us? Give it a try! We guarantee it'll make your annual planning process a whole lot smoother and its execution a whole lot faster. So what are you waiting for? 

Sign up for a free forever plan with Cascade, add the annual planning template to your profile, and level up your game. It’s that simple. 

👉 Click here to get instant access to your annual planning template.

7 Mistakes To Avoid When Conducting Annual Strategic Planning

Alright, before you dive deep into your yearly planning session, let's talk about the elephant in the room: planning and execution mistakes . In this section, we're diving into some of the most common blunders made during the annual planning process, so you can dodge them like a boss. 

  • Lack of stakeholder engagement: Failing to involve critical stakeholders in the planning process can lead to a siloed plan that doesn’t align with the organization's capacities, needs, and priorities. 
  • Unrealistic goals: Be sure your planning is grounded in your situation's realities and consider your organization's resources, skills, and timelines. This is why it’s crucial that you consult with various stakeholders when planning and executing your strategy. If you need a goal-setting framework, you can check OKRs (Objectives and Key Results). Or take a look at these 5 best strategic planning models to help you set SMART goals. 
  • Lack of flexibility: View your plan as a flexible roadmap, not a rigid set of rules, and be prepared to adapt as the business environment changes. The “perfect plan” doesn’t exist. As 76% of corporate strategy leaders report significant pivots in strategic plans happening more frequently, you need to be ready to expect the unexpected. 
  • Lack of resources: An annual plan that doesn’t consider your team member’s knowledge and skill sets won't result in tangible outcomes. Additionally, ensure that your business has the necessary resources and that your annual plan won’t cause a cash flow crunch.
  • Inadequate communication: Clear and transparent communication is crucial for success, so communicate plans to all stakeholders and ensure they understand the goals and how they fit into the organization's overall strategy.
  • Lack of follow-through: Nobody wins if your teams aren’t hitting goals, and your strategy is just a document collecting dust. According to Cascade’s Strategy Report , less than 20% of team members review progress weekly. Set up regular progress reviews and take corrective actions as needed. Ignore this pitfall, and you’ll set your strategy up for failure.
  • Misalignment between business strategy and team goals: Strategy execution is a team sport, and everyone needs to be on the same page. Share annual business goals with your team leaders and their team members. Let them set their team goals independently, give them feedback, and ensure buy-in early on.

Ready to tackle your annual planning with confidence? 

Remember, the key to success is having a clear plan in a single source of truth, organization-wide alignment, and being flexible enough to adapt when necessary.

And as a final reminder, don't forget to check out our annual planning template! It's the perfect tool to help you structure your plan, get your teams aligned with your strategic priorities, and keep track of your progress so you can adapt quickly if needed. 

So don't miss out, book a demo with one of our strategy experts or sign up today for free , and let's get started!

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5 Easy Steps to Develop an Annual Operating Plan

Priyanka Bhadani

Priyanka Bhadani

Planning is the only way to minimize inefficiencies and allocate resources properly to ensure the best outcome. In the business world, planning is a requirement for streamlining operations and fixing the mistakes that caused problems in the past. Regular planning will help to focus on what's really important, achieve growth, and increase profit margins. During the planning process, it's important to write both short-term goals and long-term goals. Short-term goals are better for maintaining day-to-day operations because they can easily be attained by taking a series of small-steps. While long-term goals are also an effective motivating factor, they cannot be achieved without several years of meeting small-term goals. Successful companies outline their smaller goals in annual reports to optimize performance tracking and focus on improving future operations.

Build an Annual Operating Plan in 5 Steps

build an annual operating plan in 5 steps 1612827448 7620

  • What business units perform key tasks?
  • Who is responsible for overseeing these projects?
  • How many resources are needed to perform key tasks?
  • Is there any sort of financial risk involved in working towards these goals?
  • How can the organization mitigate disruptions and risks to ensure success?
  • Business Activities
  • Desired Results
  • Standards to Maintain Quality
  • Hiring Requirements and Current Employee Requirements
  • Milestones and Timeframes
  • Metrics Used to Track Performance

How to Create an Annual Operating Plan

The primary purpose of an annual operating plan is to help a company focus on what's important so it can achieve growth objectives for the following year. It serves as a motivator and ensures accountability throughout the organization. Decision-makers can curate job roles and department goals based on what is outlined in the annual operating plan to ensure alignment with key company objectives. Best practices for creating an operating plan include-

1. Assess the Strategic Plan

An annual operating plan is a tool used to ensure the success of a strategic plan . Therefore, without a strategic plan in place it is impossible to write an annual plan. The business owner should make certain that the strategic plan has all of the necessary components to ensure the quality of the annual plan. A strategic plan typically includes a vision statement, mission statement, core values of the organization, a SWOT analysis, long-term goals, annual goals, and required actions.

2. Identify Business Objectives

2 identify business objectives 1612827448 4194

The goals included in the annual plan should be for the following year and are not long-term objectives. Best practices include listing 5-10 simple goals and then listing the actions required to meet them. This may include improving asset management, enacting quality control techniques, implementing data security measures, or revamping the onboarding process.

3. Pick Key Performance Indicators

A set of KPIs is needed to measure and track the progress towards meeting these objectives. It's better to utilize leading key performance indicators that predict future outcomes rather than lagging key performance indicators that finds trends in historical information. This is the optimal solution when mapping out goals in the future, as processes are new and cannot always be compared to older processes without more data. Every objective should be SMART, or specific, measurable, attainable, relevant, and time-bound. It's also critical to review KPIs with all involved stakeholders to gain any feedback and ensure everyone is on the same page.

4. Identify a Tracking Solution

4 identify a tracking solution 1612827448 6398

Once KPIs are determined, the company can discern which method to use to track them. KPI dashboards, advanced analytics, weekly meetings, excel spreadsheets, task management software, or one-on-one check-ins are the most common methods to track performance. It's important to make sure everyone knows how their progress will be tracked to ensure workplace accountability.

5. Communicate the Plan

Finally, it's critical to make sure that everyone understands the new plan, what is expected of them, and what workflows/requirements have changed. At the start of the new year, business leaders should set time aside to communicate the annual plan with each department. Weekly meetings can assist in tracking the progress towards implementing the annual plan and make certain workers know how to measure their own performance each day.

Key Takeaways

key takeaways 1612827449 5578

  • An annual plan describes the finances, budgets, tasks, and key performance indicators needed to operate the business and achieve key objectives.
  • To write an annual operations plan , business leaders should first find their strategic plan and ensure its quality. They should next identify business objectives. These should be short-term goals that are specific, measurable, attainable, relevant, and time bound.
  • After picking a set of objectives, business leaders can determine which key performance indicators will be used to track performance.
  • A tracking system must be determined and used to monitor the progress towards achieving these goals. Finally, the plan must be communicated to everyone involved to make certain they are on the same page.

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Annual Operating Planning – Moving Beyond the Spreadsheet (and It’s Not Too Late)

Learn from ComplySci’s CEO Amy Kadomatsu and Strategic Adviser Jean-Marc Levy on how to run an effective annual operating planning (AOP) process.

Kelly Ford Buckley

Kelly Ford Buckley

It’s that time of year, and by now, you probably have at least the draft of a “plan” in place for the new year. But is that plan a financial one or an operating one?  If it’s a budget in a spreadsheet developed based on discussions between the CEO and CFO, guess what? That’s not an annual operating plan (AOP). The AOP should drive the financials; it provides the necessary glue that aligns the organization on strategy, measurements of success, and the resources necessary to execute. AOP development is an important muscle that leaders build over time, and a well-run process not only delivers on the alignment objective, but also builds confidence with your team and your board that goals can be achieved.

During our recent CEO Summit, ComplySci ’s Amy Kadomatsu and Jean-Marc Levy shared their method for charting where they are going and how they are going to get there on an annual basis. The key ingredients for their AOP process are as follows.

One Plan . There’s one annual plan -- not one for management and one for the board… and no ‘base case,’ ‘expected case,’ and ‘optimistic case.’ A single blueprint ensures absolute alignment up and down the organization and with the board in order to increase the likelihood of successful execution. The exception to this rule can be the bookings number, which may be higher than the core plan shared between management and the board. And, of course, in this time of COVID, there should be a separate cash plan that prepares for worst cases.

Urgency & Iteration . For ComplySci, the team establishes and trusts the process with an AOP calendar that starts in August and includes weekly check-ins to iterate on specific topics. A little over-management is goodness because it helps manage course corrections, eliminate surprises, and ultimately, alignment at every step. Hard deadlines and attendee requirements drive urgency, and board related milestones are the ultimate tool to further emphasize both urgency and accountability.

aoptimeline

Data. Data. More Data. Brutal honesty is a guiding principle for ComplySci’s AOP process, and that is achieved by working with a reliable data set. A comprehensive view of the business via metrics helps the team face the facts, identify the most telling, most critical metrics, and shines a bright light on the “what we should not be doing” items. Many startup and growth-stage companies have their fingers on some, but not all of the data needed, which is probably the most common reason why corners are cut in the annual planning process and companies start the year with too many priorities and initiatives. Gathering and distilling the necessary data is simply a must – just one of those “eat the crust first” things.

The Rally Cry. The combination of #1-3 above enables prioritization of the key drivers and associated 6-10 key metrics moving the needle for the business. Distilling this into a one-page Rally Cry makes it real for every employee. Functional one-page plans further cascade the objectives and measurements down into the organization.   Watch Amy and Jean-Marc’s session for ComplySci’s Rally Cry. Below is another illustrative example.

aop-1

To watch the full CEO Summit session with Amy and Jean-Marc, click Beyond the Spreadsheet:   Creating Annual Operating Plans That Drive Results . There’s still time to optimize your AOP before we reach the new year!

(And in preparation for January’s board meeting, you might also enjoy the Dos, Don’ts, Great Ideas, and Pitfalls of Reviewing Annual Operating Plans with Your Board ).

Kelly leads firm operations, including investment development, value creation, portfolio management, finance and marketing. She also manages investments in enterprise SaaS and fintech, serves on Edison’s investment committee, and is the pioneer of our Edison Edge value creation platform.

Annual Operating Plans: A Comprehensive Guide for CPG Success

Learn all about annual operating plans (AOP) and how they drive business decisions. Discover the key components and benefits of an AOP in this blog.

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At the heart of business management and the strategic planning process lies your annual operating plan (AOP) - a crucial blueprint that guides you through the intricacies of achieving your financial goals year after year. 

Determining your organization’s goals, priorities, and resource allocation can be a daunting task. Without the proper roadmap and planning, you may struggle to align your efforts and make the right decisions. A strong AOP process is key to successful navigation.

Let’s dive into the key components that constitute an AOP and explore the process of setting strategic objectives and creating action plans that drive your organizational growth.

What is an annual operating plan (AOP) in finance?

AOP is a comprehensive plan that links an organization's financial objectives to the strategies and specific initiatives that will be employed to achieve those objectives. It serves as a blueprint for managing the financial resources and operations of a company or department within a larger organization.

AOP capabilities graph

How is AOP different from a budget?

The terms AOP and budget will occasionally get used interchangeably; however, these two terms are quite different. A budget is actually a key component of AOP Planning. The budget itself is a specific detail of how funds will be spent, focusing on ensuring that objectives are met in a financially responsible and efficient manner.

How is trade spend management linked to AOP?

Since trade promotions are typically the largest budget item (after cost of goods), trade has a particularly outsized role in the AOP planning process. Finance, revenue growth management (RGM) and sales teams all collaborate during AOP to generate the strategy and guidelines for trade spending. 

Consumer goods (CG) organizations, in particular, are always striving to get the most bang for their buck out of their trade spend, and AOP is a point in time when a particular focus is placed on post-event analytics and trade promotion optimization (TPO) .  

Who within a CPG company is involved in AOP?

The AOP process is typically led by finance, starting with the CFO who works with the executive team to create the topline targets for sales, revenue, and spending. On the trade side, finance, RGM, and sales collaborate as a cross-functional team to ensure that the AOP is aligned with the company’s vision, mission, values, and goals. 

That’s not all; the AOP should also balance the supply and demand of the products, meet customer expectations and satisfaction, and achieve revenue and profit growth for the year.

What is the role of finance in the AOP process?

Finance plays a vital role in the AOP process by offering valuable financial guidance, conducting thorough analysis, and providing comprehensive reporting. It assists in establishing revenue and profit targets, allocating resources and budgets, assessing the financial viability of plans, and continuously monitoring financial performance and changes throughout the 12-month period.

What is the role of RGM in the AOP process?

RGM is a strategic function aimed at maximizing a company's revenue and profitability through the utilization of data-driven insights and analytics. By leveraging these tools, RGM empowers businesses to make informed decisions regarding pricing, promotions, assortment, and trade investments. 

The primary objective of RGM is to optimize sales and marketing strategies, encompassing various aspects such as target markets, customer segments, channels, products, prices, promotions, and distribution strategies. RGM also plays a crucial role in evaluating the return on investment (ROI) for each plan, identifying best practices, and deriving valuable lessons for future optimization.

What is the role of field sales in the AOP process?

Sales plays a very important role in implementing the sales and marketing plan for the AOP process. They receive their portion of the company’s targets for sales and spend (Top Down) and create promotional strategies for their accounts (Bottom Up). They collaborate with their counterparts in finance and RGM to close any gaps between the top-down and bottom-up plans. They must also foster robust relationships with customers and retailers. 

The sales team facilitates effective communication and negotiation of the plan's terms and conditions, ensuring its compliance and successful execution. They also gather valuable feedback and insights on customer requirements and how to collaborate best to meet both company and customer goals. And sales actively adapts the plan in response to evolving market dynamics and customer feedback, ensuring its continued effectiveness.

What are the key steps in the AOP process?

The AOP process for CG companies typically involves several key steps. While the specific details may vary depending on the company's size, structure, and industry, there are some important actions:

  • Review the current situation and performance of the company, including its strengths, weaknesses, opportunities, and threats (SWOT analysis).
  • Define the strategic objectives and initiatives for the year, aligned with the company’s vision, mission, and values.
  • Develop the sales and marketing plan, including the target markets, segments, customers, channels, products, prices, promotions, and distribution strategies.
  • Develop the operations plan, including the production, inventory, procurement, logistics, quality, and service strategies.
  • Develop the financial plan, including the income statement, balance sheet, cash flow statement, capital expenditure plan, and key performance indicators (KPIs).
  • Spread the corporate targets for sales and spend through the product and geography hierarchy so that each component of marketing and sales understands their objectives.
  • Align and communicate the AOP across the organization and get approval from the senior management and board of directors.
  • Execute and monitor the AOP throughout the year and make adjustments as needed based on changing market conditions and customer feedback.

How can AOP Planning be improved with TPx software?

One difficult aspect of the AOP process is keeping everyone aligned on what the specific objectives are. Sales, revenue, profit, and spend are numbers that are not particularly static throughout the process. 

Having all of your members collaborate in a single system that tracks each person’s share of the numbers throughout this fluid process is a huge success factor. At CPGvision , our trade promotion execution (TPx) system features AOP functionality in one single system, enabling key players to remain focused on enhancing the plan instead of finding the numbers.

Get in touch with us today and find out how our CPGvision platform can streamline your AOP journey and help you achieve your objectives.

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How to craft an annual operating plan.

As a visionary restaurant leader, you’re likely no stranger to strategic planning. However, a strategic plan alone won’t suffice for sustained success in the dynamic restaurant industry. This is where the Annual Operating Plan takes center stage. The Annual Operating Plan serves as a guide for your organization’s journey over the fiscal year. In this post, we’ll dive into creating an Annual Operation Plan. We’ll explore what an Annual Operating Plan entails, underscore its importance, offer insights into crafting an impactful plan, and share best practices to embark on this critical expedition.

How to Craft an Annual Operating Plan

Appreciating the Importance of an Annual Operating Plan for Restaurants

An Annual Operating Plan is your road map for the upcoming year, translating your larger visions into actionable plans and budgets. Without one, your team may lack the clarity and alignment needed to make progress on the priorities and metrics that matter most to having a successful coming year. I often see companies set budgets for the coming year without engaging the stakeholders who have to deliver on those budgets or drafting an operating plan that supports the accomplishments of the planned financial journey. It’s important that your annual plan address several key components: growth, people, operations and finances. Planning for the year ahead ensures everyone in your organization works on the same goals in the same sequence, increasing efficiency, streamlining operations, and improving your business’s performance.

When to Draft Your Annual Operating Plan

The best time to draft your annual operating plan depends on your fiscal year and the seasonality of your business. September or October is generally the right time to start yearly planning, depending on the intensity of your planning process and the seasonality of your business. Generally, companies plan on a calendar year cycle (January to December). December is typically one of our busiest sales periods in the restaurant business. Even though January is typically a slower month, planning in January means you’ll be planning while your team is already executing. The goal is to complete the plan by about Thanksgiving so everyone can focus on operations from the day after Thanksgiving forward.

Defining an Annual Operating Plan

An Annual Operating Plan is a detailed action plan for achieving your business goals over the coming year. It typically includes key performance metrics, budgets, priorities, timelines and plans for each business function. This plan should be based on your broader strategic plan and be aligned with your company’s vision, mission and values.

Let’s say your organization’s vision is to be the leading brand for serving high-quality tapas meals worldwide. Your annual operating plan for the next fiscal year might include specific action steps, such as laying the foundation for a franchise program or writing a more thorough operations manual to license the business beyond company-owned restaurants. The annual plan would align organizational leaders to key deliverables and establish SMART goals to measure achievement.

Benefits of a Well-Crafted Annual Operating Plan

Crafting a well-structured Annual Operating Plan can provide several benefits for your organization, including:

  • Better line-of-sight into your organization’s operations and finances. With a detailed plan in place, you and your team will better understand where you are, where you’re going, and how you’ll get there together to deliver better results.
  • Clarity around how you’ll achieve results in the coming year. By breaking down your longer-term goals and vision into smaller, actionable steps, your plan can help you focus on the priorities that matter the most.
  • Increased accountability among your team.  When everyone knows the priorities they are responsible for and how they contribute to the larger goals, they are more likely to take ownership of their work and deliver results to support organizational success.
  • More accurate operational and financial forecasts.  By creating a detailed budget as part of your annual operating plan, you can better anticipate economic changes for the coming year, which can help you make more accurate financial projections.
  • Improve communication and coordination between departments and functions. With everyone clear and aligned around one plan, the organization will be on the same page about how you win in the coming fiscal year. Alignment between teams helps improve communication and head issues before they happen.

Benefits of a Well-Crafted Annual Operating Plan 1. Better line-of-sight into your organization's operations and finances. 2. Clarity around how you'll achieve results in the coming year. 3. Increased accountability among your team. 4. More accurate operational and financial forecasts. 5. Improved communication and coordination between departments and functions.

Components of an Annual Operating Plan

Now that we’ve covered what an Annual Operating Plan is and why it’s important to your business let’s review the key components that go into creating one.

Set Clear Goals

The first step in creating an effective annual plan is to identify your key objectives and goals for the year. These should be specific, measurable, achievable, relevant, and time-bound (S.M.A.R.T.). By setting clear goals upfront, you can more effectively measure and manage your progress as the year progresses.

Here are a couple of big items to consider in setting your objectives and goals:

  • How do you plan to grow and evolve your existing footprint of stores?
  • How, where and when will you grow into new locations?
  • What’s in next year’s plan that can’t be avoided (a lease or credit facility ends, must-do compliance projects, etc.)

Identify Key Performance Indicators (KPIs)

Once you set your SMART Goals and objectives, the next step is identifying the KPIs to help you measure progress toward your goals. KPIs should be tied to specific purposes and based on available data. Typically, we focus on Same Restaurant Sales, Traffic, Speed of Service (if in quick service or fast casual), Customer Satisfaction, Team Member Engagement, and Financial Performance Metrics.

Choosing relevant KPIs that can be easily tracked and measured is essential. An issue I often see is choosing KPIs to measure success that the business doesn’t currently have the capability of measuring. Another is that the KPI dashboard is so big that it’s rarely updated or used. Ensure you’re realistic in your KPI approach – focusing usually leads to higher-quality outcomes.

Setting a Realistic Budget

No Annual Operating Plan is complete without a well-thought-out budget. Your budget should consider all expenses associated with achieving your plans, including needed salaries, capital expenditures, and project investments. It’s important to be realistic when setting your budget, as overestimating revenue or underestimating expenses can lead to inaccurate forecasting, missed targets, and serious cash issues.

When creating your budget, it’s important to consider any potential risks or uncertainties that could impair your revenue or expenses. The restaurant industry is rife with unpredictable risks: economic, supply chain, regulatory, labor, and competition, to name a few.  While you can’t predict every uncertainty, you can plan for things like coming roadway construction or new competitors in your current trade areas.

Defining Roles and Responsibilities

To ensure that everyone in your organization is working toward the same goals, it’s important to be clear about the roles and responsibilities of each department and function. This might mean identifying who oversees specific projects or initiatives and outlining each team member’s key tasks and deliverables. By clearly defining roles, you can ensure everyone knows their contributions to the larger objectives.

Creating a Timeline for Execution

With objectives, KPIs, growth, budgets and roles defined, the next step is to create a timeline for executing your Annual Operating Plan. Your timeline should include specific & realistic milestones and deadlines for each department or function and contingency plans for unexpected roadblocks or delays.

This is a good time and place to build a detailed annual calendar for your business mapping out key events, milestones, accounting cycles, meeting cadences, activities and initiatives throughout the year. The calendar is a visual roadmap that helps you stay organized and committed to your plans.

Developing Your Annual Operating Plan

Now that we’ve covered the components of an Annual Operating Plan let’s review steps you can take to develop an effective plan for your restaurant business.

Conduct a Thorough Business Review

The first step in your annual planning process is thoroughly reviewing your business. This should include reviewing sales, operational, people, marketing and financial results. It also means looking for bright spots and areas for improvement based on recent activity in the business.

The thorough business review is a great place to deploy a SWOT and/or PEST analysis:

  • In the SWOT analysis , the planning team brainstorms internal strengths, internal weaknesses, external opportunities, and external threats of the business in four quadrants. The team then looks for connections between the quadrants.
  • In the PEST/PESTLE analysis, the planning team weighs the socioeconomic factors into planning. PEST includes political, economic, socio-cultural, and technological). PESTLE adds legal and environmental factors.

SWOT Diagram

By taking a comprehensive review of your restaurant business and the environment in which you operate, you can craft an Annual Operating Plan that identifies opportunities and sets realistic goals for the year ahead.

Engage Stakeholders in the Process

Once you have conducted your thorough business review, it’s time to engage stakeholders in the planning process. This likely includes your entire management team, key team members from operations, and even an outside facilitator. If you’d like a facilitator to guide you through this process, I’d be happy to help. Just contact me about your needs.

Fostering open and honest communication and encouraging feedback is very important during the annual planning process. By creating a collaborative environment, you can ensure that your Annual Operating Plan reflects the needs and priorities of your entire restaurant business. You want to avoid environments where there are “meetings outside of meetings” or where key stakeholders choose not to share their input.

Set Priorities and Allocate Resources

Based on your business review and stakeholder input, the next step is to set priorities and allocate resources for the year ahead. This should involve deciding which projects or initiatives to prioritize, what headcount to add in what order, and how much money you and your team will need to invest to achieve your objectives and goals.

When setting priorities and timelines, it’s critical to consider the entire year rather than hyper-focus on the first one or two quarters of the plan year. While it may be easy to focus on immediate needs, it’s important to consider your plan for the broader year and strategic vision. Make sure you balance your plan to deliver results in the near and long term.

Develop Actions Plans and Assign Accountabilities

With your priorities and resources in place, the next step is to develop action plans for achieving your goals and objectives. This typically involves breaking down larger goals into smaller, more manageable tasks and assigning accountability for each task or initiative.

This is a good place to be clear on the differences between goals, projects and tasks, which can get tricky during planning. Here is a breakdown of the differences between these three concepts:

Goals, Projects, Tasks: What's the Difference?

A goal is a broad, high-level statement that defines a desired outcome or result. Goals provide an organization’s or individual’s overarching direction and help guide decision-making and resource allocation. They are typically aligned with the organization’s mission, vision, and long-term objectives. Goals are often qualitative and may not have a specific deadline. Examples of goals in strategic planning for a restaurant group might include

  • Become a recognized leader in sustainable dining within the next five years.
  • Increase revenue by 15% over the next fiscal year.

A project is a temporary and unique endeavor with a defined scope, objectives, and timeframe to achieve a specific goal. Projects are more specific and focused than goals. They involve coordinated activities, resources, and tasks to produce a deliverable or outcome. Projects are often broken down into phases or stages, requiring planning, execution, monitoring, and control. In the context of a restaurant group, a project might be:

  • Launch a franchising sales program within nine months.
  • Implement a customer loyalty program by the end of the year.

A task is a discrete and specific action or activity that must be completed to contribute to completing a project or goal. Tasks are smaller project components and are actionable steps that individuals or teams can perform. They are often time-bound and measurable. Tasks are the practical, day-to-day activities that move a project forward. In the restaurant industry, tasks might include:

  • Create a menu for the new farm-to-table concept.
  • Design promotional materials for the customer loyalty program.

When developing action plans, it’s essential to be specific and measurable. Each task or initiative should have a clear objective and a defined timeline for completion. Additionally, assigning accountability for each task is critical to ensure everyone knows their role and responsibilities.

Monitor Progress and Adjust as Needed

Your Plan vs Reality

Finally, regularly monitoring your progress toward your goals and KPI targets is important. Typically, checking in on KPIs monthly and have a more extended quarterly stepback meeting to review and assess your plans, budgets, and timelines. It’s essential to be objective and data-driven during monthly or quarterly reviews. Quarterly stepbacks are another great place to use an outside facilitator. Don’t rely on opinions or assumptions. Instead, use data and facts to assess your progress and make decisions about adjusting your operating plan. It is also essential to stay flexible and responsive to ensure your annual plan remains practical and relevant throughout the year.

Common Problems to Avoid

As the “Your Plan vs. Reality” graphic illustrates, things rarely go as planned. Here are a few common problems I see in the Annual Operating Plan process that you should try to avoid:

  • Too few people involved : Building the Annual Operating Plan isn’t a CEO/CFO job. It’s a job that should meaningfully involve all stakeholders noted above. Excluding stakeholders from the process can result in incomplete or uninformed decisions.
  • Especially not involving the Operator’s voice: Restaurant General Managers have a better pulse on trade areas, local hurdles, and potential momentum builders to help inform annual operating plans. Involving the Operator’s voice allows you to build a more accurate plan and get buy-in from the Operators when it comes time to execute.
  • Overambitious goal and priority setting : Setting unrealistic or overly ambitious goals can lead to frustration, burnout, and failure to achieve the desired outcomes. Objectives should be challenging but attainable, and resources should be realistically allocated.
  • Especially being too optimistic about New Restaurant Openings : Set realistic timelines, capex, and operating budgets for New Restaurant Openings. Rather than trying to perfectly time new restaurant openings, consider setting a new restaurant sales week goal accretive to the budget rather than trying to guess NRO schedules perfectly.
  • Writing your plan and never looking at it again : If you spend the time and resources to build a plan, it’s crucial also to spend time and resources executing it. Failing to monitor, check and adjust as outlined above will make it difficult to track progress, stay focused, and determine the success of your plans.

In Conclusion

While creating an Annual Operating Plan may seem daunting, it’s critical to your business’s long-term success (especially if it’s rapidly growing). By defining your goals, KPIs, budget, and timelines upfront, you can ensure that everyone in your organization is working toward the same objectives, which can help increase efficiency, improve communication, and drive better business results.

Need Support?

If you’re scaling your business from a few locations to many, reviewing strategic alternatives, articulating a growth strategy, or anything else relating to strategically expanding your restaurant business, don’t hesitate to contact us at Consult to Grow®. We would love to be part of your restaurant journey! Ready to get started?

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How to create an operating plan

Sean McDonald

Today BoardPro is proud to introduce our very own CEO and co-founder, Brett Herkt . 

brett-a-blue-1

We sat down with Brett to discuss the key elements of creating an annual operating plan. We specifically wondered about the best timeline for success when building an operating plan, as well as his top tricks of the trade. 

Brett's position as a leader in the world of governance, coupled with his hands-on experience leading organisations to success, made him the perfect person to answer our questions. Keep reading to gain insight into this essential process and find out what exactly Brett thinks about the often overlooked parts of an operating plan. 

Q: In your opinion, what are the top three most important things that should be considered when creating the annual operating plan?

It’s important to ask the following questions: 

  • Do I have a clear vision and purpose statement and a strategic plan that should guide my operating planning?
  • Have I got enough time to pull this together before the start of the planning period?
  • Do my managers have the capability to pull together sensible functional objectives and key results (OKRs) or will I need to help them produce them?

Q: Can the annual operating plan be edited mid-year? If so, how often does it happen?

Yes, it can and should be edited as a living document – with certain provisos. The board or other stakeholders will have expectations of outcomes for the planning period.

The plan owner (usually the CEO or equivalent) should be focused on achieving those expected outcomes, and the means should be within their discretion. A good CEO will keep their board (and/or stakeholders) alongside them on the journey to achieving those outcomes and the course corrections required to get there.

Q: Can you give some tips on how to set realistic goals to achieve to be included in the annual operating plan?

  • Create some healthy tension around developing goals.
  • The CEO and finance manager might develop some targets based on historical performance and simple ratios like applying a similar growth rate.
  • Invite line managers to create bottoms-up goals.
  • Compare and contrast and invite the team to discuss what realistic and stretch goals might look like.

Q: What is the best way to keep track of what has been set in the annual operating plan?

Link high-level goals and activities into your regular reporting regime, to the board and to the business.

Q: Who should be involved in the development and creation of the annual operating plan?

It should be overseen by the CEO, driven by the line managers responsible for delivering outcomes and with opportunity for the wider team to have input and visibility.

Q: What are the most important documents that need to be looked at in order to create a stellar annual operating plan?

  • Vision and purpose statements 
  • Strategic plan (see detail below)
  • Any financial constraints or mandates, such as maintaining reserves
  • The budget should be built alongside and in conjunction with the operating plan

Q: What are some of the biggest mistakes one can make when creating the annual operating plan?

  • Starting with a budget
  • Not involving the line managers who will deliver much of the outcomes
  • Not having any common sense of vision and purpose or strategy 
  • Failing to establish any constraints set by the board before commencing

Q: Is there anything that is essential but is commonly overlooked when creating the annual operating plan?

A beginner’s trap I fell into as a new leader was to try and combine the strategy and operating plan into one document. A strategy is ideally three to four pages that define a destination in, say, three years' time and broad-stroke descriptions of the top three to four things required to get there. It usually includes a SWOT analysis, so the reader knows the context for the plan and a summary of the vision and purpose of the organisation.

An operating plan is a more precise but still high-level statement of the organisation's goals and actions over the next 12 months. It is also usually broken down by organisational function. 

If you are a CEO of an organisation with revenues between $1 million and $40 million and would you like to improve your strategic and operational planning, be sure to watch our recorded webinar on the eight steps to building your annual operating plan. This also includes our topic white paper and 7 business templates to help you in your planning process.

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The Annual Operating Plan, but from a collaborative effort across all business leaders, sets the tone for the year. It’s where you make decisions that align the company’s overall strategy with business execution. But gathering the data necessary to make insightful decisions shouldn’t be a slow, manual process.

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Free Operational Plan Templates

By Andy Marker | July 11, 2022

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We’ve rounded up the most useful collection of free organizational plan templates to record and track the goals and resource needs of your business or organization. 

Included on this page, you’ll find a basic operational plan template , a nonprofit operational plan template , a three-year operational plan template , and a five-year operational plan template .

Basic Operational Plan Template

Basic Operational Plan Template

Download Basic Operational Plan Template Microsoft Excel | Microsoft Word  

Use this basic, customizable operational plan template to create a detailed roadmap for your organization. With this template, the path to reaching your goals will be clear to all stakeholders, and team members will know exactly what tasks need to be completed and when. 

Having efficient and clear processes in place is critical for reaching your organizational goals. Learn more in this guide to operational excellence principles .

Nonprofit Operational Plan Template

Nonprofit Operational Plan Template

Download Nonprofit Operational Plan Template Microsoft Excel | Microsoft Word

Nonprofit organizations often have complex, long-term strategic goals. This operational plan template for nonprofits will help you develop a clear set of tasks and accountability measures to keep everyone apprised of next steps. Use this template to identify your goals, establish a clear plan, set and track your budgets, assign stakeholders, and implement reporting protocols. 

This guide to operations strategies will give you an overview of the steps necessary to develop a comprehensive plan for your organization.

Three-Year Operational Plan Template

3-Year Operational Plan Template

Download Three-Year Operational Plan Template — Microsoft Excel  

Your operational plan might include long-term tasks and deliverables. Use this operational plan template to chart your organization’s needs over a three-year period. Enter specific goals, delivery dates, responsibilities, and necessary resources on this customizable template to track progress and ensure that you are on your way to reaching your strategic goals. 

Your business or organization might also benefit from an operational audit, which is a chance to conduct a deep dive into strategic planning and to increase accountability. See this comprehensive guide to operational audits to learn more and gain access to additional resources and templates.

Five-Year Operational Plan Template

5-Year Operational Plan Template

Download Five-Year Operational Plan Template — Microsoft Excel  

Long-term planning is a key element of any organization. This five-year operational plan template gives you a detailed look at the steps and resources needed to reach your goals. Track deliverables, responsible parties, and resources in this customizable template. This template also helps team members visualize long-term needs and stay on top of their responsibilities and timelines. 

See this guide to operations management for more information, tips, tricks, and future trends in managing your organizational resources.

What Is an Operational Plan Template?

An operational plan template is a form that captures key details about a work plan. An operational plan includes specific actions and resources needed to reach certain milestones. It is more detailed and specific than a strategic or business plan.

Operational plans help project managers identify resource needs, maintain accountability, implement a reporting process, and maintain a budget.

Operational plan templates templates vary by type but typically include the following:

  • Delivery Date: Enter target completion dates for each task in your plan.
  • Evidence of Success: Write a short statement explaining how you will know when the goal has been achieved. 
  • Executive Summary: Describe the plan in a short paragraph that specifies how it differs from or relates to other plans in your organization.
  • Goals: Enter specific goals or milestones of your larger strategy or business plan.
  • Responsible Parties: Include the names of the stakeholders who are responsible for each task.
  • Resources Needed: Enter all resources necessary to complete each task, including on-hand resources and those you will need to procure.
  • Risks: Note any risks you may encounter.
  • Title: Enter the plan name or title.

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The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

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COMMENTS

  1. The Complete Guide to Writing an Annual Operating Plan

    An annual operating plan is a practical document noting your financial, physical, and personnel resources to achieve a specific business goal. Annual operating plans allow you to create the day-to-day frameworks to carry out your business objectives.

  2. Annual Operating Plan: How to Build One in 8 Easy Steps

    Creating an effective annual operating plan (AOP) is important for any business, whether it's a bustling startup or a well-established small business. This strategic planning tool serves as a roadmap, guiding your company toward its business objectives and fiscal year goals.

  3. How To Create An Effective Annual Operating Plan (+Template)

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  4. How to Develop an Annual Operating Plan [2022 Version]

    An Annual Operating Plan is a comprehensive outline of goals, milestones, key performance indicators, and budgets to help achieve goals you have in the year to come. It is a mix of a strategic plan and operational plan in that it provides all of the strategic initiatives you have and the steps to execute against them.

  5. Annual Operating Plans: Definition + How to Write Them

    An annual operating plan (AOP) is a strategic document that a company prepares to chart its course for the upcoming year. This AOP encompasses key performance indicators (KPIs), operating budgets, and action plans designed to meet both short-term and long-term objectives.

  6. How to Develop an Annual Operating Plan + Template

    An annual operating plan, also known as an annual operations plan, is a report that lays out the elements the company needs to reach its targets, including key performance indicators (KPIs), budgets and other human, physical, educational and financial resources.

  7. Your Guide to Crafting an Effective Annual Operating Plan

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  8. Guide 2024: Mastering Annual Operating Plan Strategies

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  14. Budget vs Annual Operating Plan (AOP) : Understanding the ...

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  15. 5 Easy Steps to Develop an Annual Operating Plan

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  17. Annual Operating Plan Definition: AOP meaning in finance

    An Annual Operating Plan (AOP) is a financial planning tool used by businesses to anticipate their revenue and expenses for the upcoming year. It's a crucial component of effective financial management and is typically developed by business owners, senior managers, or department heads. The purpose of the AOP in finance is to outline projected ...

  18. Understanding your Annual Operating Plan (AOP)

    What is an annual operating plan (AOP) in finance? AOP is a comprehensive plan that links an organization's financial objectives to the strategies and specific initiatives that will be employed to achieve those objectives.

  19. Annual Planning Templates: How to Make your 2021 Annual Plan

    An annual business plan is a work plan that outlines the goals, resources and operations a company will execute in a 1-year period. It usually includes an annual budget, project deadlines, roles and responsibilities. In other words, the annual plan acts as a roadmap for the organization and aligns internal teams to the yearly business goals.

  20. How to Craft an Annual Operating Plan

    An Annual Operating Plan is your road map for the upcoming year, translating your larger visions into actionable plans and budgets. Without one, your team may lack the clarity and alignment needed to make progress on the priorities and metrics that matter most to having a successful coming year. I often see companies set budgets for the coming ...

  21. Hit the Ground Running in 2022 with an Annual Operating Plan

    An Annual Operating Plan (AOP) is a comprehensive. Every January 1st, millions of Americans make New Year's resolutions, and by the end of February, nearly 80% of people fail to keep their goals. By failing to keep yearly goals, businesses risk severe consequences and miss out on the opportunity to manage their business more productively. An ...

  22. How to create an operating plan

    Nov 23, 2022 9:46:16 AM Today BoardPro is proud to introduce our very own CEO and co-founder, Brett Herkt . We sat down with Brett to discuss the key elements of creating an annual operating plan. We specifically wondered about the best timeline for success when building an operating plan, as well as his top tricks of the trade.

  23. Annual Operating Plan

    The Annual Operating Plan, but from a collaborative effort across all business leaders, sets the tone for the year. It's where you make decisions that align the company's overall strategy with business execution. But gathering the data necessary to make insightful decisions shouldn't be a slow, manual process.

  24. Free Operational Plan Templates

    Download Five-Year Operational Plan Template — Microsoft Excel. Long-term planning is a key element of any organization. This five-year operational plan template gives you a detailed look at the steps and resources needed to reach your goals. Track deliverables, responsible parties, and resources in this customizable template.