A new year is right around the corner. That means it’s time to start both financial and strategic business planning for 2021 now!
If that seems daunting, it shouldn’t. The reason the last few months of a year are a good time to forecast future plans is that new plans don’t come out of thin air. They should instead be based on your plans and results from the current year. What worked? What needs rethinking? What have the strengths, weaknesses, opportunities, and trends been in 2020 and what are they likely to be in 2021?
Many companies perform a fiscal year-end review beginning about now, so it’s an ideal time to link the review with a forecast for the new year.
Conduct a Fiscal Year-End Review
Businesses should examine their annual financial data to analyze operations, in order to see any opportunities to more effectively run the company and make informed decisions. Evaluate your profit and loss statement for year. Look at expenses and be prepared to update the budget for 2021.
You should also evaluate staffing, vendors, and marketing efforts to make sure you’re staying ahead of the competition.
Finally, double-check administrative items, including factors such as insurance policies and employee benefits, to make sure they are on track and won’t lapse.
Create a Strategic Plan for the New Year
A little housekeeping now, analyzing and crunching numbers for the strategic plan, will help make your new year a successful one!
If you had a plan for 2020, that’s great! Dust it off and update it.
Remember, your strategic plan is a guide for allocating organizational resources. First, do a more in-depth evaluation of your profit and loss statement than you do in the fiscal year-end review, with an eye to your plans for next year.
Review expenses. Do you expect them to be roughly the same? To grow? Or is there a reason that expenses might decrease?
Then, update your business’s budget. Evaluate your key factors and set goals for them. Depending on the nature of your business, your critical factors may be:
- Product development
- Customer satisfaction
- Intellectual capital
- Strategic relationships
- New customer growth
- Employee retention
To forecast quantitative results such as revenue and profit, you can usually multiply your company’s year-end quantitative results by a growth factor relevant to your particular industry. Typical growth factors can range from 5% to 25%, depending on the nature of the industry.
Many businesses and sectors have been affected this year, of course, by the COVID-19 pandemic that began in March 2020. If your business operates in a sector that felt a large negative impact, such as international travel, you may want to hew to more conservative assumptions for next year.
If you took on an unusual amount of debt, such as the small business loans offered because of COVID, be sure to estimate your debt payments as well.
Planning out other factors, such as strategic relationships and intellectual capital, will depend on what happened this year and your plans for next.
Bring Your Team into the Planning Process
If your company has managers and teams accountable for each critical factor, bring them into the planning process. Actively solicit their answers to the following questions, as well as thinking about the answers yourself.
- What worked this year?
- What’s the best strategy to keep those positive elements in place?
- What didn’t work this year? What needs to be revised and rethought?
- What areas of growth are we most focused on achieving?
- What can we maximize growth in those areas?
Put Your Plan into Action!
Remember that a strategic plan, budget, and financial goals are living and working documents. Don’t put them in a drawer and forget about them! Keep your strategic plan and budget/financial goals in a prominent and easy to access place. Refer to them quarterly as you review quarterly results and plan for the next quarter.
Planning and reviewing are two of the best moves you can make for your business. Take the time now to make those moves.
Work with CBC Bank for Your Business Banking Needs
Goals and plans often need business banking and strong banking relationships. At CBC Bank, we’re in business to help you. Call us today to discuss your plans and goals.