As we approach the end of 2024, now is the perfect time to prepare for the year ahead. While many businesses recognize the importance of annual planning/budgeting, many small and mid-sized businesses may find the process daunting or unnecessary.
As Albert Einstein said, “Make all things as simple as possible, but not simpler”. I subscribe to that same philosophy when it comes to business planning. A plan, or budget, shouldn’t be so detailed or complex that it renders itself useless. After all, it’s really just a road map to guide decisions in the year ahead.
A Simple Approach to Planning/Budgeting
One of the most effective ways to simplifying the planning process is by breaking down complex concepts into manageable steps.
To make the planning process more accessible, just get started. Start small and build upon your initial efforts. By simplifying the planning process through the tips below, you will be creating a map to guide decisions throughout the year.
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- Set Clear Goals: Define specific, measurable, achievable, relevant, and time-bound (SMART) goals.
- Break Down Tasks: Divide larger tasks into smaller, more manageable steps.
- Prioritize: Focus on the most critical tasks and avoid getting overwhelmed.
- Regularly Review and Adjust: Monitor progress and make necessary adjustments to the plan.
These tips should be applied to three fundamental plans. From the highest level to the most detailed.
1. Strategic Plan: This high-level plan outlines who the organization is. More commonly thought of as its mission, vision, values, and long-term goals. This plan provides a guiding star for aligning everyone across the organization.
2. Business Plan: This plan delves deeper into the specifics of how the business will achieve its strategic goals. It focuses efforts towards a common objective by addressing key questions such as:
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- Who are our target customers?
- What products or services do we offer?
- What is our unique selling proposition?
- How will we market and sell our offerings?
- Who are our competitors?
- What are our key performance indicators?
3. Financial Plan: This plan renders the other two plans into financial terms. It creates the financial road map to achieve the overall business plan and consists of:
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- Sales Plan: Forecasts revenue and sets sales targets.
- Operating Plan: Details the operational costs and expenses associated with running the business.
- Cash Flow Plan: Projects cash inflows and outflows to ensure sufficient liquidity.
- Capital Expenditure Plan: Outlines investments in long-term assets
If you would like help creating your 2025 Plan, the M&J CFO Navigator team is available and happy to help. Feel free to contact Robert Stephens (rstephens@mjcpa.com) or Denise Kennedy (dkennedy@mjcpa.com) with questions, or to get started.
