Annual Planning: Why and How



I actually got this idea from one of the classes I had to take for my MBA, Strategic Management. It was a class on running your business at the very highest level, the level where you don’t worry about how the widgets are made or whether UPS is better than FedEx to deliver them. The level where you look at the very fundamentals of the company: Do we make the best widgets? Do we want to make the best widgets, or the cheapest widgets, or what? Is the widget industry even going to exist in 10 years? Do our policies and company culture support our widget-making goals? Just what are we doing here, anyway?

What I propose to you is that you ask essentially the same questions about yourself, thinking of yourself as a one-person or two-person company (depending on whether you have a partner/spouse, and whether or not you two want to form a merger). What does your company do to make money? Is that a good choice in the long run? What changes are occurring in your industry, and what do they imply about your future ability to make money? How else could you make money? Of the available options, which ones do you actually wish to pursue?

So the following is my process. My boyfriend and I take a long weekend, and go up to his parents’ summer home in the mountains to talk it over, someplace where we don’t have cell phone service and can’t be interrupted.

Step 1: What’s Going On?

This is the part where you examine external factors that are in your environment.

What threats exist in the marketplace for you or your industry? Examples include new regulations (if you make money in real estate or banking), changing economics (if you make money on stuff that people can live without in a recession), changing social trends (if you make money off explaining technology that old people don’t understand but kids do), or changing technological trends (if you make money with cassette tapes).

Contrariwise, what opportunities exist in the marketplace? Are people looking for a product/service that you don’t provide, but could? Could you make your product cheaper, or better? Have you gotten job offers, or considered going back to school, or had a friend say they’d help you start a business? Take a look at your threats, too: they can often be turned into opportunities if you look at them correctly (being one of the few who keeps up with regulations, adapting your product to make it useful to recession victims, being the first to convert your product to be ipod compatible).

Pick the most important opportunities, and the most important threats, and keep them on hand; you’ll need them in a bit.

Step 2: What am I doing?

This is the part where you examine your company to figure out what you do well, and what you do poorly.

What are the strengths of your self or your partnership? Are you creative? Committed? Detail-oriented? Patient? Good with people? Good with machines? Do you have resources not available to others? Do you have knowledge or training that can help you provide value to others?

What are the weaknesses of yourself or your partnership? Do you have trouble being realistic? Are you terrible at follow-through? Do you tend to get bogged down in details and lose sight of the big picture? Are you impatient? No social skills? No technology skills? No money? Not enough school?

Pick out the most important strengths and the most detrimental weaknesses, and go dig out your opportunities and threats. It’s time for…

Step 3: SWOT Analysis — Where do we stand overall?


SWOT stands for Strengths, Weaknesses, Opportunities, Threats. (Sound familiar?) This is where you put the internal and external analyses together, and see how they interact. Are there strengths that can help you overcome threats? Or opportunities you could take better advantage of if you fixed one of your weaknesses? Look especially for places where weaknesses will exacerbate threats — these must be watched carefully; and places where strengths line up well with opportunities — these are most likely the paths you should pursue.

Step 4: Set objectives

Now that you have some idea of what’s going on around and inside you, it’s time to think about what you want to do. Some of your objectives may be suggested by the opportunities you see, and especially the strength/opportunity pairings. Others may be related to your weaknesses, and your desire to overcome them. Still others may have nothing to do with the SWOT, and be intrinsic to you (“I want to be more spiritual”, “I want to have kids”.) At any rate, write them all down and make sure they’re SMART (Specific, Measurable, Attainable, Relevant, and Timely.

Step 5: Establish Annual Projects

Some of your goals may be well achievable inside a year. Others, like running a marathon or preventing global warming, may take longer. But for each goal, figure out what you can work on this year to make progress towards it.

Please note: people usually overestimate what they can do in a year, but vastly underestimate what they could do in five years. Odds are quite good that you won’t actually meet all your objectives. This year (unless some remarkable stuff happens in the next 4 months), I’m going to fail completely on 4 of my projects, make partial progress on 7 of them, and complete only 1. Is this depressing? A little. But not very much. Because last year, I made progress on precisely none of my goals. Progress on 8 of them feels fantastic!

Anyway, make yourself a list of all your projects for the next 12 months. I like to keep this list on my computer with a file for each project — that way I have a list, but I also have a place to put notes, dates, ideas, and so on. (Actually I use MS One Note, and much as I hate to admit that Microsoft could be right about anything, it is a fantastic tool for this job.) You might prefer physical manila folders, or a 3-ring binder. Whatever works for you, just make sure you have some kind of project tracking in place. I’m going to be asking you for this list in a later post.

Step 6: Celebrate!

Ta-Da! Doesn’t that feel good? Now, whenever you sit down to plan your month, week, or day, you know what you’re trying to accomplish with your time. You have a yardstick against which you can measure your progress. This will make the rest of your year much more productive.

At this point I usually go out to dinner and see a play with my boyfriend, but make up whatever kind of celebratory ritual makes sense to you. You deserve it.

Resources for Further Reading
Project Management in a Nutshell

Steve Pavlina on Planning

The Family CFO


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