Before you start annual planning, pull together three things: the previous 12 months’ P&L by month, a balance sheet through your last close, and a summary of loans or credit lines — plus a forecast of revenue you already expect for the rest of the year.
How to do annual planning for your business
I know, I know, you’re just getting the kids back to school. Can I give you a second?
I get it. I also get the same flood of calls each November from founders:
“I meant to start annual planning earlier. Can we get it done in the next two weeks?”
They had good intentions. They put it on their goals for the year. They said they’d enjoy summer and then get things on track. But there we are, on the Wednesday before Thanksgiving, trying to make it happen. We can triage, but the reality is, starting in November means we finish in January or February.
And that’s okay. Better to do something when you can than nothing. But something curious happens next: the following year, the planning happens a lot earlier.
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Instead of November, we start planning in September, August, sometimes even June. Because once you go through a strategic planning cycle, you realize that Q4 is not the time to decide what to do, but to execute your plan.
Because you see that your customers have already made their big decisions by January. If you have corporate customers, they’re asked to build their annual budgets in the fall. If they intend to keep working with you, they’ll ask you to support their planning process long before January.
What happens next? You make something up. I’ve seen plenty of founders respond with some version of, “How about we raise prices 5%?” The ol’ SALY, same as last year. That should be enough, right?
And to your credit, you may have a good mental estimate of your costs to know that’s a good enough answer. But in many cases, you’ve just left a good chunk of profit on the table. You made the decision to keep the customer, but you don’t know if it was the right thing for you.
With even a little bit of time put toward planning, you can avoid guessing.
Whether you have two hours, half a day, or a full day, I’m going to walk you through what to review, what questions to ask, and what you should leave the session knowing.
What you need before you start
Regardless of how much time you have, pull together the basics first.
No shocker here, you’ll need some financial reports. From your accounting system, I recommend:
- The previous 12 months’ P&L (may be called an income statement or statement of profit and loss in your system), by month
- A balance sheet through your last financial close
- A summary of any loans or lines of credit
Why not just the P&L? Because it doesn’t reflect your actual cash. Your P&L is your record for operating expenses and tax deductions. But your cash balances, distributions, and debt payments don’t show up there.
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The second thing is a summary forecast of what other revenue you have coming in for the year. If you have contracts and invoices, you can pull this from your accounting system. If you don’t, write out a quick summary of money you’re owed and what you expect to sell for the rest of the year.
You need to know where you stand before you start making bets about the future.
If you have 2 hours
Let’s be honest. If you only have two hours, you’re not making an annual plan. You’re building good habits. And that’s okay.
With your two hours, get grounded on where you stand financially.
Then ask yourself:
- What’s happening in my industry that I need to understand better?
- How is this business going for me?
- Am I making the money I wanted to make?
- Am I working on the things I wanted to work on?
- How did I do on the goals I set for this year?
If you aren’t doing monthly or quarterly reviews, you’re probably not going to answer every question that comes up within the time you allowed. Use this time to identify the questions that matter and stake time to work on the answers. Put the follow-up work in your calendar, broken up into 30-90 minute chunks.
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That could be researching a trend in your industry or asking Claude to help you understand a competitor. It could also be scheduling time with customers or another founder who’s been where you are and might have some sage advice.
If you have half a day
A half day gives you enough time to move from gathering information and organizing yourself to making some decisions. I’d still spend the first hour in the financials — you want to know how the year is shaping up before you start thinking about next year.
Then ask yourself: How is this business going for me?
If the answer is, “Pretty well,” maybe next year is about doing more of what’s already working. If the answer is, “This isn’t really working the way I hoped,” now we have something to solve.
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From there, I like to organize my thinking around three buckets:
- What do I want to start doing?
- What do I want to stop doing?
- What do I want to keep doing?
With half a day, you actually get to start answering some of those questions.
Thinking about a new service? Spend an hour researching it. Wondering if your market is changing? Go look. Curious whether a different pricing model could work? Run some numbers. You have enough time to follow your curiosity while it’s fresh.
If you have a full day
Setting aside a day for planning should get you through a good amount of the evaluation, with some critical thinking time.
I’d break it into three focused work sessions:
- Start with your financials and an honest assessment of how the business is working for you.
- Then spend time looking outside your business. What’s changing in your market? What are competitors doing? Are there products or services you should be considering?
- After lunch, start evaluating the numbers. For example, if you added a new service, what would it actually look like? What would you charge? What other expenses would you have? Would you need to expand your team?
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You probably won’t have every detail settled by the end of the day, but you should know the direction you want to head, have the broad strokes of next year’s goals, and a clear list of the things you still need to figure out and talk to customers about.
Don’t forget your customers
You might outline an awesome plan, but it needs to be tested. Don’t skip this step.
Find time to talk to your customers:
- If you’ve sketched out a new service, test their appetite. Would they buy it? How much are they willing to pay? What problem does it solve for them?
- If you’re thinking about changing your pricing, test whether they can make it work with their new budget.
- If you’re wondering whether you’re solving the right problems, ask.
You don’t need to make big decisions in a vacuum. This is why I don’t do “done-in-a-day” planning anymore. As soon as we take those ideas into the world with customers, we inevitably find some adjustments, and sometimes, some new opportunities.
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That’s why I encourage clients to check in with their own customers, human to human. Ask how things are going, what they’re planning for next year, and what they need from you. And if you’re thinking about taking the business in a new direction, float the idea and see what comes back.
