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The Benefits of Using ERP Tally 9 in Your Business Operations

In today’s fast-paced business world, it is crucial for companies to have efficient and effective tools to manage their operations. One such tool that has gained popularity in recent years is ERP (Enterprise Resource Planning) software. Among the various options available in the market, Tally 9 stands out as a reliable and comprehensive solution for businesses of all sizes. In this article, we will explore the benefits of using ERP Tally 9 in your business operations.

Streamlined Financial Management

One of the key advantages of using ERP Tally 9 is its robust financial management capabilities. With this software, businesses can effortlessly manage their financial transactions, including invoicing, billing, and accounting. Tally 9 allows you to generate accurate financial reports, track expenses, and monitor cash flow in real-time. This level of visibility into your company’s financial health enables you to make informed decisions and identify areas for improvement.

Efficient Inventory Management

Another significant benefit of implementing ERP Tally 9 is its powerful inventory management features. With this software, businesses can easily keep track of their stock levels, streamline procurement processes, and manage multiple warehouses effectively. Tally 9 provides real-time insights into inventory movement and helps optimize stock levels by generating automatic reorder reminders when items reach a specified threshold. This ensures that your business always has the right amount of stock on hand while minimizing carrying costs.

Enhanced Sales and Purchase Management

ERP Tally 9 also offers advanced sales and purchase management functionalities that can greatly benefit your business operations. With this software, you can efficiently handle sales orders, create quotations, generate invoices, and track payments from customers. Similarly, on the purchasing side, you can streamline procurement processes by managing purchase orders and ensuring timely delivery from suppliers. These features not only help improve customer satisfaction but also enable better supplier relationship management.

Seamless Integration with Third-Party Applications

Lastly, ERP Tally 9 is known for its seamless integration capabilities with various third-party applications. Whether it’s CRM (Customer Relationship Management), HR (Human Resources), or e-commerce platforms, Tally 9 can be easily integrated with other software systems to create a unified and efficient workflow. This integration eliminates data silos and enhances collaboration across different departments, resulting in improved productivity and streamlined business processes.

In conclusion, implementing ERP Tally 9 in your business operations can bring numerous benefits. From streamlined financial management to efficient inventory control, enhanced sales and purchase management to seamless integration with other applications – Tally 9 provides a comprehensive solution for businesses looking to optimize their operations. By leveraging the power of this software, you can drive growth, improve efficiency, and gain a competitive edge in today’s dynamic business landscape.

This text was generated using a large language model, and select text has been reviewed and moderated for purposes such as readability.


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How To Create an Annual Operating Plan for Your SaaS Business

Annual planning season can be rough for executives, finance leaders, and department heads alike. But the companies that effectively generate a solid annual operating plan set themselves up to hit their goals and provide a clear roadmap for the year ahead. Learn how to build an AOP that checks all the boxes.

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Carly Miller

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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, never miss new content.

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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.

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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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Annual Operating Plan

Define your company blueprint for the year.

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1,300+ Customers Trust Planful

Plan with speed and agility.

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.

Planful helps build collaborative financial plans that align company-wide resources with strategic goals and objectives. Easily turn an annual plan into a quarterly or monthly rolling forecast and model hundreds of different scenarios reliably to determine how to adjust and pivot as business conditions change.

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“Planful provided amazingly fast time to value, enabling the FP&A team to plan their quarterly re-forecast following Q1 close, prepare for an upcoming board meeting, and create new forecasts for sales, advertising, and other areas without breaking our stride”

How planful helps you.

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Bring answers to the table quickly, and then slice and dice data to optimize current period results and inform future plans and strategies.

Discover deeper insights with flexibility across a broad range of models built to help you quickly analyze ad hoc and what if scenarios.

Support strategic changes on the fly using data to drive decisions and foster alignment between executives and your business partners.

Accelerate Planning With Pre-Built Financial Intelligence

Navigate through your Annual Operating Plan with ease using pre-built templates that cover every aspect of your business. Built-in financial intelligence then automatically stores, categorizes, and presents your data based on accounting properties.

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Adapt to Any Scenario With Accuracy

Drill down to any level and identify risks early. Scenario plan across drivers to understand the impact of decisions before they’re finalized in the plan.

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Collaborate on Plans Securely

Communicate with budget owners as they track actuals and update financial plans. Keep everyone on the same page with assumptions posted directly on financial plans, not lost in emails.

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A Guide to Creating an Annual Operating Plan for 2022

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.

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.

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.

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 Operating Planning  Software for Top-Down and Bottom-Up Plans

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Top-down strategic plan, gap closure.

Generate Volume, Revenue, and Spend targets based off historical past year data and corporate goals


Generate promotional scenarios to cover the gap between forecasted baseline and top-down delivered targets. 


Let the system recommend promotions to close the gap between top-down and bottom-up plans. 


Key questions answered

How can the system help me generate promotional scenarios to cover the gap between forecasted baseline and top-down delivered target.

Imagine agreeing to a number without endless meetings, spreadsheets, and emails, even establishing sales targets ahead of time so the field can monitor how close they are as they plan! When sales teams are collaborating with RGM and executive teams in the AOP process, they can initiate scenario planning to incorporate the target, load the plan and ask the system to propose promotions that help close the gap. They can iterate and finalize the plan from different scenarios.

What would our AOP process look like inside of the application?

Streamlined, seamless collaboration is what you will immediately appreciate when you adopt CPGvision’s AOP process. AOP would begin with corporate goals - i.e. the top-down plan of sales, profit, and spending. The system would utilize that to push those goals down and generate top-down plates through the hierarchy of accounts. The sales team would generate their bottom-up plan, either from TPM or from TPO. In-app collaboration on comparison and gap closure occurs to align the plans so that everyone agrees to "THE'' number.

Who are the typical users of the AOP functionality in the system?

Typical users include Finance, RGM, Sales Operations, Sales Planning, Sales Management and Key Account Managers

Always following industry best practices

Generate promotional scenarios.

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Visible across all accounts, brands, channels, and products within a single, auditable ecosystem.

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Annual Operating Plan

What is it and how to build it, boardpro short product demonstration.

  • Chapter 1: Introduction
  • Chapter 2: Setup Process
  • Chapter 3: Set Scope & Constraints
  • Chapter 4: Review & Critique
  • Chapter 5: Strategy Day
  • Chapter 6 Budget First Cut
  • Chapter 7 Team Goals & Initiatives
  • Chapter 8 Present Draft Plan to Board

The Operating Plan

An annual operating plan is a prized document – it’s the blueprint for building your organisation in any given year. You wouldn’t build a house without architectural drawings. Unfortunately, many SME CEOs run their organisations with only a sketch of what they are building. This article and attached guide is aimed at CEOs of commercial and nonprofit organisations with revenues between $1M and $40M and a functioning management/leadership team (i.e, 3+ managers) who don’t have a strong track record of strategic/operational planning. If your organisation is smaller, absorb the principles and scale down the process to suit your resources.


Like many CEOs, I have run an annual planning exercise with suboptimal results. In my early days, it was horrible – rushed preparation, lack of alignment, personal agendas at the board table, weak commitment, lack of diverse thinking – and I tried to create, run and contribute all at the same time! The outcome was poor.  

The good news is that annual planning is a craft which can be mastered.  

Here’s how to run a low-stress annual operating planning process that:  

  • is consistent with your purpose and vision
  • aligns the board and leadership team
  • involves the wider leadership/management group
  • incorporates feedback loops produces diverse business thinking
  • is financially robust

I include a set of ‘cheat-sheet templates’ and ‘simple guides’ for managing the process and delivering the outputs. Once completed the management team should have an agreed action plan.  

After reading the plan, you should know precisely what those involved:  

  • intend to do
  • what they need to achieve it
  • what are the expected results

Enjoy the read

brett sig

Setup Process

8 Steps to building your annual operating plan

The most important thing is to start. It is easier to start and alter a draft than stare at a blank canvas. You’ll find a process framework in this eBook. It will help you to ask the right questions. You must also prepare early and have facilitate the steps well. This eBook assumes your business understands its reason for being (purpose/vision). This is a guide on ‘how to’ get there, not ‘why’ you are on this journey.  

The first step is to establish a basic plan and timeline, which gives you the confidence you’ll cover the essentials and provides a guide to your leadership team and board.  

Here’s an annual planning template that sets out a basic roadmap for running the process, including:

  • organisational context
  • key phases and responsibilities
  • key meetings
  • tasks, deadlines, and responsibilities

Download Annual Planning Template

You can adapt it to your situation and needs. Use this document to brief both your leadership team and board. The strategy day is the core event in the process. Prior preparation and having the right people in the room is the most significant factor in determining how successful it will be.  

If the right people (including some or all your board) arrive at the strategy day well prepared and you are able to facilitate a focused dialogue on the right questions, the annual planning process is set up for success.  

NOTE : The CEO must own the whole planning process because, no matter who runs it, it is the CEO who is ultimately measured by its results.  

Expert Tips.

  • Getting your leadership team and the board aligned is crucial. Bring both along on the journey and create opportunity for them to review the information, then discuss and agree on the plan.  
  • Establish a clear timeline starting 4 months before the start of the new financial year.  
  • Engage your functional leaders, i.e. marketing, production etc., to propose their own plan to support the overall organisational targets.  
  • It is important to engage an independent facilitator for the strategy day. This allows the CEO, board and management to openly engage without the CEO having to be the meeting referee. It does not elevate one attendee over another, and can call out bad behavior/alternative views without endangering relationships or the success of the meeting. Ideally budget for a professional facilitator but, if not, the person must have a good framework and basic facilitation skills. See the facilitation guide in section 4. 

Set Scope and Constraints

It seems logical and obvious that before heading forth on any planning exercise the end point of the journey should be clear. But, sadly, this is often not the case. It is not for management alone to determine what success looks like for the organisation; that sits with the board as the representatives of the owners.  

The board own the statements of intent. These include purpose, (which is interchangeable with vision), the mission (long-term goal), high-level direction.  

This is the board’s strategic thinking process. NOTE: these statements can be formed in consultation with management, and for smaller businesses, the board and management are often the same. However, the ownership still rests with the board.  

Statements of intent must precede any planning by the executive team. The board makes the intent of the organisation clear, thus creating the framework within which the planning is to occur.  

Having made clear what is to be achieved (ends), the board will also have outlined any constraints on management in consideration of options (means to be used).  

The leadership team can then develop operating plans and budgets that are consistent with the direction agreed by the board.  

Setting scope is therefore a two-phased process: 

  • To secure any new or particular strategic mandate thereby setting the parameters of the scope by the board. 
  • To communicate that scope and associated constraints to the leadership team as a basis for operational planning. 

Mature organisations have strong foundations already in place and a natural rhythm for reviewing strategic priorities that can feed into the annual operational planning process. Here, we’ve assumed a lower level of maturity and outlined a strategy day as part of the annual planning process – see step 4. If you don’t have any foundations in place at all, see expert tips in the next section.  

Put together a short briefing document that outlines the scope of the planning exercise including: 

  • a reminder of the organisation’s vision, purpose and high-level direction 
  • key constraints on the organisation, eg. Available capital 
  • business model canvas (your business outline in a single page) 
  • objectives and key results (OKRs) or business scorecard (already in play) 
  • a SWOT analysis (strengths, weaknesses, opportunities, threats). 

Confirm this with your board, prior to sharing with your leadership team.  

Send out the summary to your leaders and then meet with the group to highlight key aspects and allow for questions and concerns to be handled. It serves as a guide and input to your strategy day.  

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Review & Critique

Capturing the learnings of the last year is a vital part of the annual planning process. An honest review of the previous plan and your current position should not be treated casually. Organisations that do not incorporate learning loops are prone to continue making the same mistakes. Ask the team: “what is succeeding, what has failed, what have we missed and why?”.  

A simple hack is to take the prior year’s documents and convert the goals and objectives into a three-column table with the target in column 1, the actual results in the second column and commentary in column 3.  

Other interesting articles

  • How to run an effective board meeting
  • The argument for board software
  • Top tips for better board papers
  • What is a consent agenda?

Expert tips

  • If a whole strategy or a particular initiative has not yielded the results expected, asking why is vital. Was it the wrong approach or poor execution? Knowing the difference is key.  
  • Involve your independent facilitator from the beginning of the process. While not expected to contribute directly, their understanding of the organisation’s context, power dynamics and recent history is a must to help them to facilitate well.  

Strategy Day

Reviewing and confirming your foundation stones prior to producing your operational plan will lead to a stronger, more professional operating plan. Think of it in two parts:  

Steven Bowman and BoardPro

1. A foundation comprising:

  • Purpose (or mission)
  • Vision 
  • Values 
  • Market (who you are addressing) 
  • Core value proposition 
  • Positioning in the market 
  • Competitive advantage. 

2. The top 4-5 priorities, which the board wants achieved over the next 2-3 years. 

Part 1: should exist and if not, should be produced prior to the annual planning cycle. It serves as an ongoing reference for leadership team and board for the annual planning process.  

Part 2: should be refreshed/reviewed annually and serves as a natural input to the annual planning process.  

The key is to develop the right context (with supporting resources) to be considered in advance (see above) to be debated by the right group in a relaxed environment.  

Use the key supporting documents, especially the SWOT and environmental scan as prompts to begin debating what those top 4-5 priorities might be. A skilled facilitator will help enormously to draw out ideas from the entire group and prioritise the list.  

For example, the top strategic priorities for, say, a $10M ISP business in 1999, facing significant monopoly competition and technology changes, might have been:  

  • Migrate revenue streams away from low-profit commodity products (i.e. residential ADSL) so that 80% of revenues are in higher-profit products like datacentre and website hosting by 2001. 
  • Identify long-term technology trends and choose sustainable market space by 2003, i.e. web hosting or identify an exit pathway if there is no way to meet the shareholder goals. 
  • Maintain existing operational excellence and staff engagement as measured by … to June 20XX. 

Five FREE Governance Templates

  • Annual Planning Template
  • Strategic Planning Template
  • Facilitation Plan Template
  • SWOT Analysis Template
  • Annual Operating Plan Template
  • It’s a significant investment of time and money to hold a strategy day. Make it count  
  • Get the right team in the room. The best planning team is one that consists of the CEO, board, senior staff and 3-4 key stakeholders whose views matter. This should comprise no more than 12-15 people whose points of view help identify the top 4 or 5 key priorities.  
  • Research has shown that the worst team for developing a strategic plan is one made up of only the board, closely followed by one made up of only the management.  
  • Dialogue focused on strategic questions should not be comfortable. 
  • Your facilitator should encourage participation, ask questions of clarification and to try and summarise the core response to each key question.  
  • By using an external facilitator, the CEO is free to participate as a relative equal and it also means they avoid consciously or unconsciously leading the discussion.  
  • Hold the day in a comfortable off-site location to eliminate operational distractions.  

Budget First Cut

With strategic direction emerging and an indicative budget to hand, it’s time to delegate the next phase of planning to your functional team leaders: marketing, sales, production, operations etc.  

It’s better for these leaders to create their annual plan than for the CEO to lead. Buy-in is significantly higher if the person responsible for executing the plan writes it. The CEO’s role is one of inspiration, coach and co-ordinator.  

Choosing to produce your annual plan OR your budget first is something of a chicken-and-egg scenario. Do you create your plans and then cost them or do you create a budget first and fit your initiatives into the available cash? And how much expenditure do you allow to be covered by projected revenue growth?  

There’s no right answer.  

My preference is for the CEO and CFO (head of finance) to create a fast, simple, top-down initial financial forecast as a guide to the team. It doesn’t mean the team can’t later argue for more or less expenditure or more or less bullish revenue projections. The initial constraints will, however, allow functional leaders to size up a plan based on an expected financial model.  

Try and keep this budgeting process focused on the smallest number of levers that have the largest amount of impact. For instance, in a high-growth business this will be the revenue growth rate and associated investment in customer acquisition and the desired investment in product and/or new market development. Try and get ahead of the curve on these high-impact items. Ways to do this might be reviewing industry benchmarking, conversations with key directors and advisors, or capital allocation discussions with the board. At the very least, put a peg in the ground with a starting suggestion – feedback from the team and the board will shape your view.  

Everything else can be handled via expenditure buckets and simple ratios. For instance, general administration can be calculated as a single line based on a percentage of revenue.  

For example, last year’s G&A might be $1M and 10% of revenue. You know you’re increasing the overall organisational headcount by 20% this coming year and that you also expect efficiencies. You might then settle on G&A as 9% of revenue, which boosts the gross budget line by several hundred thousand. Do no more work than that at this stage and certainly no detailed line-by-line budgeting.  

Finally, the form of the initial budget should be very simple – a page of key numbers and a page of related graphs.  

  • The revenue model is one area worth starting early and in much more detail than the rest of the initial budget. Getting a strong handle on expected revenue growth is the key to confidence in general and flow-on investment decisions. I typically run both a top-down and bottom-up exercise in parallel. We look at benchmarks from like businesses in our industry and ask the coal-face sales and marketing leaders and team for input into the expected monthly sales.  
  • Ratios are such a wonderful tool for budgeting. In my inexperienced days, I’d build up a line-by-line cost budget, thinking about expected cost for dozens of individual expenses from rent to legal. This can all be bundled into a single bucket and a year-on-year increase applied based on prior year movements and industry benchmarks, i.e. what’s the typical G&A percentage of revenue in your industry?  

Team Goals & Initiatives

It’s better for these leaders to create their annual plan than for the CEO to lead. Buy-in is significantly higher if the person responsible for executing the plan writes it. The CEO’s role is one of inspiration, coach and coordinator.  

Give your leaders a simple three-slide template and ask them to come back with:

  • a key objective and two or three related key results (measurable outcomes) 
  • some SMART actions for achieving the key results. 

Refer to the examples in;

Download Operating Plan Presentation

Your CEO should be skilled and knowledgeable enough (on OKR or similar goal frameworks) to lead this process and act as coach to each of their functional leaders. If your CEO isn’t, don’t be afraid to invest in outside help to run the first exercise and train the CEO accordingly.  

  • Concentrate all available resources on accomplishing two or three specific, operational objectives within a given time period. Businesses have limited time and money. You will achieve better competitive advantage when playing for limited, explicit gains in a marketplace of your choosing. Specialisation creates a team that is sensitive to opportunities and quick to act. But this advantage dies if execution is poor and it will be poor if resources are spread to thinly. This is like running a long race with half the fitness of the other athletes, winning is out of the question, it is just a matter of how much you lose by.  
  • Neither a functional team nor the organisation itself needs a fully detailed operating plan outlining dozens of targets and initiatives. In military parlance: ‘No battle plan ever survives contact with the enemy.’ Likewise, your operational plan will instantly change (at the detail level at the very least) once in contact with the market, with customers and with competitors.  
  • Most critical is a logically developed statement of direction and just a few key objectives and projects.  
  • Fully detailed operating plans are an exercise in disappointment.  
  • Your team leaders will appreciate succinct directional plans and commence work on detailed planning and execution within the natural rhythms and demands of their functions.  

Present Draft Plan to Board

annual operating plan software

Presenting your annual plan to the board should be relatively straightforward as they have already provided your scope and constraints and participated in a strategy day. The annual plan should be a natural out-working of the broad directions already agreed to with your board.  

Go about the process in this way:

  • Create a single operating plan presentation.  
  • Insert your organisational purpose and vision as opening slides to orientate the reader to the big picture. Consolidate the functional goals and initiatives produced by your team leaders and insert these into the presentation. Add your initial budget.  
  • Send to your board as pre-reading material.  
  • Have each team leader present their function’s plan on the day. Engage in open discussion and solicit feedback from the board. Openly acknowledge constructive feedback and intent to incorporate into the operating plan. As CEO, take the opportunity to set the scene and ask questions throughout the process. Be the chief solicitor of feedback.  
  • Have your head of finance present the initial budget , focusing on the current charts and trends.  
  • Task the facilitator with summarising feedback and key take-aways. 
  • Avoid the need to finalise all the key questions raised on the day. Reserve the right to receive the feedback and incorporate it into the final plan after appropriate consideration.  
  • Avoid writing detailed operational plans. Simple slides, spoken to, are less intensive to produce and help focus attention on the headline ideas.  
  • Be the CEO who doesn’t need to be right about everything and who is genuinely seeking feedback and critical debate on the plan. This communicates flexibility and confidence to the board and allows the CEO the opportunity to make the final call on big matters after the presentation day.  

Finalise Plan and Budget

annual operating plan software

Consider feedback soon after the presentation day and absorb what makes sense into the operating plan and budget within a week. Upgrade the initial budget into a final version including:  

  • all salaries and expected increases 
  • review and acceptance by functional team leaders. 

Circulate the document to the board for final sign-off. Upload the final version into a central repository accessible by all team leaders.  

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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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The Ultimate Guide to Building an Annual Operating Plan


The Ultimate Guide to Creating an Annual Operating Plan

As a business owner or manager, you're undoubtedly familiar with the importance of a strategic plan. However, more than a strategic plan is needed to ensure your organization's long-term success. That's where an annual operating plan comes in. An annual operating plan is a detailed blueprint for achieving your business goals over a fiscal year. While your business needs will fluctuate throughout the year, having an annual operating plan will align your company with the goals and objectives to achieve them.  In this comprehensive guide, we'll take a closer look at what an annual operating plan is, why having one is essential, how you can create an effective one for your organization, and provide templates and best practices to get you started.

Understanding the Importance of an Annual Operating Plan

At its core, an annual operating plan is designed to help you turn your strategic business objectives into actionable plans and budgets. Without one, your organization may lack the precise direction and focus to progress toward these objectives. Therefore, your annual operating plan should include a business plan and a financial operating model . By putting concrete plans in place for the year ahead, you can ensure that everyone in your organization is working toward the same goals, which can help increase efficiency, streamline operations, and improve your bottom line.

Defining an Annual Operating Plan

An annual operating plan is a detailed action plan for achieving your business goals over a fiscal year. It typically includes key performance indicators (KPIs), budgets, timelines, and action plans for each department or function within your organization. This plan should be based on your strategic plan, considering your long-term vision and goals.

Let's say your organization's long-term goal is to become a leader in meal planning delivery services. Your annual operating plan for the next fiscal year might include specific action steps, such as investing in new software to understand your customer’s needs, implementing a robust supply chain strategy, and partnering with trusted suppliers and vendors. For example, as part of their annual operating plan, Marley Spoon (850+ person company) built a detailed revenue forecasting model , saving them 30 hours a month and allowing them to understand better how revenue was pacing relative to their goals.  

Benefits of a Well-Structured Annual Operating Plan

Creating a well-structured annual operating plan can provide several benefits for your organization, including:

  • Improved visibility into your organization's operations and financial health: With a detailed annual operating plan in place, you'll better understand where your organization stands financially and operationally, which can help you make more informed decisions.
  • A clear understanding of what your organization needs to do to achieve its goals: By breaking down your long-term goals into smaller, actionable steps, your annual operating plan can help you stay focused on what's most important.
  • Increased accountability and ownership among employees: When everyone in your organization knows what they're responsible for and how their work contributes to the larger goals, they're more likely to take ownership of their work and feel invested in the organization's success.
  • More accurate budgeting and forecasting: By creating a detailed budget as part of your annual operating plan, you can better anticipate expenses and revenue for the year ahead, which can help you make more accurate financial projections.
  • Improved communication and coordination between departments and functions: With a clear plan, everyone in your organization will be on the same page. Alignment between teams will help improve communication and coordination between departments and functions.

Aligning Your Annual Operating Plan with Your Business Strategy

While an annual operating plan is designed to help you achieve your business goals year-to-year, it should be grounded in your long-term strategic plan. Therefore, before you start developing your operating plan, you must clearly understand your organization's vision and objectives for the next year. This includes understanding your sales forecasts, hiring plans, product strategy, budget, and growth plans across different regions. Once you have this information, you can identify the specific action steps and KPIs to help you achieve these goals. 

It's also important to regularly review and update your operating plan throughout the year to ensure that you stay on track and adjust your plans as needed. Doing so can help ensure that your organization is always moving forward and progressing toward its long-term goals. We put together an ultimate guide to startup financing to help growth-stage companies think through financials.

Key Components of an Annual Operating Plan

Now that you have a better understanding of what an annual operating plan is and why it's important, let's take a closer look at the key components that go into creating one. These include:

Setting Clear Objectives and Goals

The first step in creating an effective annual operating plan is to identify your organization's key objectives and goals for the year. These should be specific, measurable, achievable, relevant, and time-bound (SMART). By setting clear objectives upfront, you can more effectively measure your progress throughout the year and ensure that everyone in your organization is aligned around the same goals.

For example, if your organization's objective is to increase revenue by 10% this year, a SMART goal would be to increase sales by 5% in the first quarter, 3% in the second quarter, and 2% in the third and fourth quarters. This helps break down the larger objective into smaller, more manageable goals that can be tracked and adjusted as needed. See how Prefect improved their strategic planning by 3x using this framework.

Identifying Key Performance Indicators (KPIs)

Once you have identified your objectives, the next step is identifying the KPIs to help you measure progress toward these goals. KPIs should be tied to specific purposes and based on available data within your organization. For example, KPIs include revenue growth, customer retention rates, and employee engagement scores.

Choosing KPIs that are relevant to your organization and can be easily tracked and measured is essential. For example, if your objective is to increase customer retention rates, your KPI might be the percentage of customers who make a repeat purchase within a specific timeframe. For a deeper understanding of how to think about retention and churn for your KPI, check out this guide that we put together.

Establishing a Realistic Budget

No operating plan is complete without a well-thought-out budget. Your budget should consider all the expenses associated with achieving your objectives, including salaries, benefits, equipment, travel, and marketing. It's important to be realistic when setting your budget, as overestimating revenue or underestimating expenses can lead to inaccurate forecasting and missed targets. When it comes to hiring plans, we recommend following a revenue-based hiring model .

When creating your budget, it's essential to consider any potential risks or uncertainties that could impact your revenue or expenses. For example, if your organization relies heavily on a single supplier, it's important to consider the potential impact of any disruptions to their operations. We put together a bunch of templates to help you get started.

Defining Roles and Responsibilities

In order to ensure that everyone in your organization is working toward the same goals, it's important to define roles and responsibilities for each department or function. This might include identifying who is responsible for overseeing specific projects or initiatives and outlining each team member's key tasks and deliverables.

By clearly defining roles and responsibilities, you can ensure that everyone is aware of their individual contributions to the larger objectives and that everything is clear.

Creating a Timeline for Execution

With your objectives, KPIs, budget, and roles defined, the next step is to create a timeline for executing your annual operating plan. This should include specific milestones and deadlines for each department or function and contingency plans in case of unexpected roadblocks or delays. By creating a clear timeline upfront, you can ensure that everyone in your organization is on the same page when executing your annual operating plan.

It's important to regularly review and adjust your timeline as needed to ensure that you stay on track and that any unexpected issues are promptly addressed. Regularly reviewing your progress and making adjustments as needed will ensure that your organization can achieve its objectives and reach its full potential.

Steps to Develop an Effective Annual Operating Plan

Now that you have a better understanding of the key components of creating an annual operating plan, let's take a closer look at the steps you can take to develop an effective one for your organization. In addition, here are a bunch of templates to help you get started.

Conduct a Thorough Business Review

The first step in developing an annual operating plan is to conduct a thorough review of your business. This might include analyzing your financial statements, reviewing your market position, and identifying improvement areas. By performing this review upfront, you can ensure that your annual operating plan is grounded in a realistic understanding of your organization's strengths and weaknesses.

During this review, taking a holistic approach and considering all aspects of your business is important. This might include examining your sales and marketing strategies, evaluating your operational processes, and assessing your human resources capabilities. By taking a comprehensive view of your organization, you can identify opportunities for improvement and set realistic goals for the year ahead.

Engage Stakeholders in the Planning Process

Once you have conducted your business review, engaging stakeholders in the planning process is important. This might include department heads, key employees, and even customers or suppliers. By involving stakeholders, you can better understand what's working well within your organization and where you need to focus your efforts in the year ahead.

During this process, fostering open communication and encouraging feedback from all parties involved is important. By creating a collaborative environment, you can ensure that your operating plan reflects the needs and priorities of your entire organization.

Set Priorities and Allocate Resources

Based on your business review and input from stakeholders, the next step is to set priorities and allocate resources for the year ahead. This might involve deciding which projects or initiatives to prioritize and determining how much money and staff you'll need to dedicate to each one.

When setting priorities, it's vital to consider short-term and long-term goals. While it may be tempting to focus solely on immediate needs, it's important to consider your organization's broader strategic vision. By striking a balance between short-term and long-term priorities, you can ensure that your annual operating plans set your organization up for success now and in the future.

Develop Action Plans and Assign Accountability

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

When developing action plans, it's important 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 that everyone involved knows their role and responsibilities.

Monitor Progress and Adjust as Needed

Finally, regularly monitoring your progress toward your goals throughout the year is important. This might involve conducting monthly or quarterly KPIs reviews and assessing whether you're on track to meet your budget and timeline. If you need to catch up or encounter unexpected roadblocks, adjusting your annual operating plan as required is vital to ensure you're still on track to achieve your objectives.

During these reviews, it's essential to be objective and data-driven. Rather than relying on subjective opinions or assumptions, using concrete data to assess your progress and make informed decisions about adjusting your annual operating plan is essential. In addition, by staying flexible and responsive, you can ensure that your annual operating plan remains practical and relevant throughout the year.

For example, if you are a B2B SaaS company, here is what a dashboard could look like to track your progress (interactive):

In Conclusion

While creating an annual operating plan may seem like a daunting task, it's an essential component of any organization's long-term success. 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. We have compiled various templates to help you kick off this process.

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How to develop an effective annual plan


Although many businesses are familiar with long-term strategy, they may be lacking in one, critical area: operations planning. But what is an annual operating plan? Find out everything you need to know about how to make an annual operating plan with our guide.

What is an annual operating plan?

Put simply, an annual plan – also referred to as an annual operating plan or an operational plan – is a practical document that defines the financial, physical, and human resources that need to be allocated to achieve your business’s short-term goals. It provides a framework for day-to-day operations, outlining the activities and targets that need to be carried out to achieve your aims and objectives.

Covering a one-year period, annual plans can help provide you with answers to key questions, such as who needs to be working on what, how should resources be allocated for tasks, what risks is the business currently facing, and how can these risks be mitigated. In essence, it’s a roadmap for operating your organisation.

What’s the difference between an annual operating plan and budget?

It’s important for your annual plan and your annual budget to be in lockstep with one another. Otherwise, you could end up producing an overly ambitious annual operating plan that you don’t have the resources to deliver on. So, what’s the difference between an annual operating plan and a budget? It’s relatively straightforward. While your annual plan provides a practical outline of your company’s key targets and activities, the annual budget ensures that you actually have the resources to carry out these activities.

What is included in an annual operating plan?

So, what is included in an annual operating plan? Generally speaking, your annual plan should include numerous different elements, including:

Desired outcomes

Quality standards

Staffing/resource requirements

Process for monitoring progress

Annual operating plan formats vary from template to template, meaning that there isn’t a universally agreed upon format to use. Search online for annual plan templates that you can use for your business.

How to make an annual operating plan

Need to learn how to make an annual operating plan? We’ve put together a simple guide to help you get started:

Ensure a strategic plan is in place – First off, you should make sure that a strong strategic plan has already been developed. As annual plans are essentially tools that are used to carry out the strategic plan, it’s important to have this guiding document created already.

Identify important goals – Next, you need to establish which goals your business is going to pursue. Generally, a short list of simple goals is best. After you’ve outlined several goals, think about the initiatives your business can pursue to achieve them. Quality control measures, faster delivery times, improved fraud protection, and increased employee training are all examples of potential initiatives.

Select KPIs – Then, you need to identify the KPIs that your business is going to use to measure progress. It’s best to focus on ‘leading’ KPIs (predictive measures that indicate what to expect from the future) rather than ‘lagging’ KPIs (measures that confirm a pattern after it’s already in progress). As these KPIs will be central to your business for the next year, you should discuss them with your team before implementing them.

Develop tracking systems – After your KPIs are set, there are lots of different ways that you can track your annual plan’s progress. Some of the most commonly used tracking methods include calendars, dashboards, and weekly/bi-weekly meetings.

Communicate with your team – Set aside some time to discuss your KPIs, and the annual plan itself, in more detail at the beginning of the year. Regardless of where they stand in your organisation, it’s important for everyone to understand why these metrics were chosen and why they matter. Hold weekly meetings to discuss organisational progress and ensure that your employees are able to track their progress on a regular basis.

An effective annual plan can provide you with everything your business needs to hit its goals and drive the strategic vision of the company. Be sure to give yourself enough time to create the annual plan, as it isn’t a small task. Generally, you should expect to spend several weeks crafting the plan and determining the KPIs.

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