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How To Create an Annual Operating Plan for Your SaaS Business

Carly Miller

Content Marketing Writer

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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.

Related Content

• 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

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Annual Operating Plan: How to Build One in 8 Easy Steps

Creating an effective annual operating plan (AOP) is important for any business, whether it’s a bustling startup or a well-established small business. This strategic planning tool serves as a roadmap, guiding your company toward its business objectives and fiscal year goals. Learn more about annual operating plans and how to make one to get your year started on the right foot.

1. Conduct a Business Review

Kick off your planning process by reviewing the previous year. Examine your financial statements, business goals and key performance indicators (KPIs) to understand where your business stands. Reflect on both the successes and the shortcomings, considering metrics and actuals to gain a comprehensive view. This step is crucial to informed decision-making by both CFOs and business owners.

2. Check In With Stakeholders

Your stakeholders, including department heads, team members and investors, play a vital role in the planning process. Their feedback can provide valuable insights into the operational and strategic needs of your business. This collaborative approach ensures that your AOP is aligned with the company’s goals and addresses the needs and expectations of all parties involved.

3. Set Your Goals and Key Performance Indicators

Define clear, achievable business goals and establish key performance indicators (KPIs) for the upcoming year. These goals should be SMART (Specific, Measurable, Achievable, Relevant, Time-bound) and directly tied to your strategic vision. KPIs will serve as quantifiable metrics to track progress and gauge the success of your initiatives.

4. Identify Obstacles

Anticipate challenges that might hinder your progress. Whether it’s cash flow issues or the challenges of launching a new product, preparing for obstacles ensures a more resilient plan. Consider internal and external factors such as market trends, competition and resource limitations.

5. Plan a Strategy

Craft a strategy that includes the initiatives necessary to achieve your business goals. This should include a blend of financial planning, marketing strategies, human resources allocation and operational tactics. Ensure that your strategy is flexible yet focused, with clear milestones for monitoring progress.

6. Create a Realistic Budget

Your operating budget is a key component of your AOP. It should realistically reflect your anticipated revenue, expenses and cash flow. Utilize financial planning tools, such as Excel or specialized SaaS platforms, to create a detailed and accurate budget. This budget should align with your strategic goals and provide a clear financial roadmap for the year.

7. Assign Roles and Responsibilities

Clarify roles and responsibilities within your team. Ensure everyone understands their part in achieving milestones and business objectives. This clarity helps to keep your team focused and aligned with the AOP’s goals.

8. Check In and Adjust as Needed

An effective AOP is not set in stone. Regular check-ins allow you to compare actual performance against your plan and make necessary adjustments. This flexibility allows your business to adapt to changes and unexpected challenges, ensuring that your AOP remains relevant and effective throughout the year.

What Is an Annual Operating Plan?

An annual operating plan is a detailed outline of a company’s projected activities over the upcoming year. It includes budgets, projected revenue, goals and strategies.

Why Do You Need an Annual Operating Plan?

An AOP provides clarity and direction. It helps in aligning the efforts of different departments towards common business goals, thereby improving the bottom line.

Where Can I Find Tools to Help Create an Annual Operating Plan?

There are numerous tools available, from Excel templates to sophisticated SaaS platforms. Microsoft offers resources for step-by-step planning, while various online platforms provide AOP and SOP (standard operating procedure) templates. These tools can help streamline the planning process and ensure accuracy and consistency.

What Are Some Common Mistakes People Make When Creating an Annual Operating Plan?

Common mistakes include setting unrealistic goals, neglecting stakeholder input, inadequate risk assessment and failing to adjust the plan as needed. It’s important to be aware of these pitfalls so you can avoid them when creating your AOP.

What Experts Say

“There were several critical steps I needed to consider when I created my annual operating plan. I started by looking at what I felt I needed to achieve to run a successful travel blog/website. This included increasing website traffic, generating revenue and growing my email subscriber list. I needed a way to understand my target audience, their behaviors, interests and preferences. Then I outlined my services.

“I did comprehensive market research on my possible competitors and the current state of the travel industry, and planned how I would make money, whether it be through advertisements, sponsor content, or affiliate marketing. I then created a content schedule, a thought-out plan on when I would release what type of content, what topics I would cover and when it would be published.

“This is a simplified overview of how I created my annual operating plan for my new business venture. The actual process did involve more steps, for instance, marketing and promotion, my financial plan and what my KPIs will be to determine my progress. Remember to stay flexible when creating your operating plan since any industry has the possibility to change rapidly.”

Saya Nagori, CEO & Travel Expert WanderDC

The Bottom Line

An annual operating plan is not just a financial document; it’s a strategic tool that guides your business through the fiscal year. Building an effective annual operating plan is a process that requires careful thought, collaboration and strategic planning. By following these steps and leveraging the right tools, you can create an effective AOP that aligns with your business needs and helps achieve your goals.

This content is for educational and informational purposes only, and is not intended as financial, investment or legal advice.

Article Contributors

Saya Nagori, CEO & Travel Expert

WanderDC is a travel hub curated by Saya, a resident of Washington DC since 2018. Since her adventures to DC as a teen, she’s loved the city and the surrounding areas. Now, she aims to give the best recommendations and insights to travelers looking to wander DC. She also shares her recommendations for the surrounding areas including Maryland and Virginia.

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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.

References and further reading

• New iBabs features
• Board orientation checklist
• How to improve board effectiveness
• Good governance checklist
• How to create an executive director work plan
• Take the Meeting Excellence Assessment

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• Find out how to appoint the chairperson of a committee and what their responsibilities are in relation to both the committee and the main board.

How to Develop an Annual Operating Plan [2022 Version]

“A goal without a plan is just a wish” is the famous quote by Antoine de Saint-Exupery, the French writer, poet, and aviator. If you clicked on the link to read this article, you are probably a lot like me… you like to plan for success so that your goals don’t just float away. For me, having a plan and process to follow is incredibly important for me. That is why I have developed an Annual Operating Plan (AOP) process to help guide my progress and make sure I am staying on track towards achieving my big goals.

Developing and following an Annual Operating Plan can work for an individual, entrepreneur, a team of professionals, a small business, or big department within an international organization. Regardless of your organizational structure, an Annual Operating Plan can be flexible and scale according to your needs.

In this post, I will be focusing on developing and executing an Annual Operating Plan for an entrepreneur. I will be your case study example in this post, an individual who is in the early stages of building a business!

What is an Annual Operating Plan?

An Annual Operating Plan is a comprehensive outline of goals, milestones, key performance indicators, and budgets to help achieve goals you have in the year to come. It is a mix of a strategic plan and operational plan in that it provides all of the strategic initiatives you have and the steps to execute against them.

Tools You Need to Develop an Annual Operating Plan

There are a couple of key tools you need to have in order to develop an Annual Operating Plan. These include:

A 12-month calendar

A blank spreadsheet

A planner system

12-Month Calendar

You can’t do effective planning without a calendar. I prefer a digital calendar (my preferred tool is Google Calendar) because I like the ability to search for key dates easily, and it makes moving appointments and milestones around easier. However, you can use any type of calendar system, including a paper calendar. For years, I used a Franklin Covey system for all my planning, with the calendar insert pages.  Whatever works for you.

A Blank Spreadsheet

This spreadsheet file will be used to track all of your key performance indicators on a week-by week basis. I use Google Sheets, but if you prefer Microsoft Excel… go for it! There are some other great alternatives you can use as well, such as Spreadsheet.com if you want another option.  Notion is another possibility because you can do some calculations in their table elements. Like the calendar requirement, whatever you prefer will work just fine.

A Planner System

This is where things can get a little tricky.  I do believe that you need some sort of system to track all of your workflows, milestones, documents, etc.  Tools like Evernote, Notion, ClickUp, and Trello are some examples of online tools specifically developed to help you organize and manage your work.  You can also use a combination of tools that work together, which is what I do, but again, whatever works for you and what you are going to enjoy using the most, is what is important. This is another example of where if paper works best for you, you do you. If you are a Bullet Journal person, you can totally manage all your work using that system. Franklin Covey still has a great system for managing your work using their planner tools. Digital or paper-based, there are plenty of options.

Currently, I use a combination of Trello and Google Drive to manage my workflow, so that is what you will see in most of my examples.

Developing Your Annual Operating Plan

Now it is time to start laying out your plan.  Below are the steps I take to develop my AOP and the elements I setup to stay on track with my plan.

Step 1: Structuring Your Calendar

While this whole process is about setting up an Annual Operating Plan, I really like to only focus on the next 90 days. These 90-day quarters have to be defined for the whole year, however, so now it is time to pull up your calendar and define those quarters.

A 52-week year breaks down perfectly into four 13-week quarters. I follow a calendar methodology known as the “12 Week Year”, which is based on a book by the same name written by Brian Moran. This calendar system focuses on doing your planned work over a 12 week period and then using the 13th week to reflect on the previous 12 weeks and plan for the next 12 weeks.

So if we look at 2022, here is how my four 13-week quarters will line up:

January 2, 2022 - April 2, 2022

April 3, 2022 - July 2, 2022

July 3, 2022 - October 1, 2022

October 2, 2022 - December 31, 2022

So now let’s look at the key dates and events that happen throughout each of those quarters.  I am only going to use the first quarter as my example, but know that the pattern repeats for each quarter.

The Daily Check In

Every weekday (Monday-Friday), I hold a 30-minute daily meeting with myself. For me personally, this meeting happens at 7:30 AM. This 30 minutes is devoted to setting my plan for the day. Reviewing the big tasks I want to work on or complete for the day and looking over the time commitments I have made with others. I move things around accordingly, making sure that I have all the important things time blocked on my calendar.  I don’t have this daily meeting on Saturdays or Sundays because those are less structured days for me.

The Weekly Review

If you follow the work of David Allen and his Getting Things Done methodology, you will be plenty familiar with the Weekly Review practice. The Weekly Review is where you take inventory of everything going on with your world and to check in on all the projects you currently have in motion. The Weekly Review is worthy of a post all its own, but in short, I like to review the previous week, note my key performance indicators, and glance (at a high level) the week ahead.  For me, this Weekly Review takes place every Sunday evening and usually lasts between 1-2 hours. This is a blocked time on my calendar each week.

The Sprint Review

Inside of my 12 weeks of work, I break out that time period into two week Sprints. If you follow the Scrum methodology, you will be familiar with Sprints. Sprints help me because if I just set some goals for a 12 week period, I will procrastinate in getting them done until the very end of the 12 weeks. The two week Sprints force me to break the big goals down into smaller elements and work on completing those smaller chunks every two weeks. The Sprint Review for me occurs every two weeks on Friday afternoons. I spend the two hours of time focusing on the accomplishments of the previous two weeks and plan for the next two week Sprint.

The Quarterly Review

After working through the cycle of Daily, Weekly, and Sprint Reviews, I wind down the quarter with a Quarterly Review meeting during that last week of the 13-week block. I put a bow on all the work I completed during the quarter, update all my metrics, make sure I am still trending in the right direction for my yearly goals, and set the stage for the next quarter.

All of these meetings are blocked off in my calendar for each quarter of the year.  With the calendar filled in, I move to my next step in the Annual Operating Plan, developing my key metrics.

Step 2: Developing Your Key Performance Indicators

An important part of your Annual Operating Plan is to track your progress. Whether your goals are personal or professional, having each of your goals tied to one or more metrics is crucial to staying on track.

This is where your blank spreadsheet file comes into the picture.

Below is an example of one section of my KPI spreadsheet. As you can see, the key metrics I want to track are listed down the left side, then I have a column for each week throughout the quarter where I will update the numbers for each of these metrics.

Some metrics have goals, and some are just to monitor progress.  For example, some metrics I can directly control, like the number of new blog posts I publish. Other metrics, like Indexed Pages on Google, are not entirely under my control, but are nice to track to see if my work in related areas is paying off.

I update this Key Performance Indicator spreadsheet each week during my Weekly Review meeting.

Step 3: Working Your Annual Performance Plan Each and Every Day

Now for the most important part… working your plan every day.  Through my Daily Planning meetings, Weekly Reviews, and check-ins, I use my Trello board system to make sure I complete my tasks and stay on track.

Bob Stanke is a marketing technology professional with over 20 years of experience designing, developing, and delivering effective growth marketing strategies.

Important Elements of Business Strategy Planning Process

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Your Guide to Crafting an Effective Annual Operating Plan

An annual operating plan is the backbone of your brand’s financial success—it guides your operations, goal-setting, and financial decision-making. 

But, if you have yet to build your own annual operating plan, the process can seem intimidating. The six-step checklist below will help you build an operating plan that works for your business, accommodating your current financial status and facilitating future growth. 

With simple financial analysis, budgeting, planning, and auditing, your brand will be ready to conquer the next fiscal year.

What is an Annual Operating Plan?

An annual operating plan is a strategic planning document that shapes your business’ financial activities for the coming year. But, you may have heard it called another name , like:

• An annual budget
• A master budget
• An operating budget
• A customized, brand-specific name

An annual operating plan serves as an overview of your financial functions. Some of its primary purposes include:

• Defining strategic, year-long goals
• Establishing financial targets and budgets
• Monitoring and dictating incentive-based pay structures
• Identifying and maintaining your cash position
• Outlining funding requirements

While your annual operating plan will likely be built primarily by your finance team, you will also need to seek input from other departments, including:

• Advertising
• Purchasing and Procurement
• Customer service

If you operate a small business, you may oversee all of these departments yourself or carry out their duties—and you will need to draw on all of your professional expertise when building an effective annual operating plan. 

How to Build an Annual Operating Plan from Scratch

So, how do you build a robust, useful annual operating plan? These six steps will guide you through developing an airtight plan for your business’ short-term financial future. 

#1 Generate Key Financial Reports

The first step to building an annual operating plan is generating three key financial reports :

• The income statement – A description of money made and spent
• The balance sheet – A list of assets and liabilities—funds available and funds owed
• The cash flow statement – A ledger of cash receipts and purchases over a specific period

Each of the reports above will help you determine how much money your business currently has, how much it needs to spend to continue operating, the amount owed to other businesses or individuals, and the ratio of revenue to expenses. This collectively comprises the critical data you need to start building your annual operating plan. 

#2 Establish a Sales Budget

With a clear picture of the money available to you and your recent financial history in hand, you can begin budgeting. 

There are two crucial arms of your business, and you will need to create spending, earning, and saving guidelines for each one:

• Sales functions
• Production functions

To develop your sales budget, you will need to determine:

• How much your sales department can actually sell during the coming year
• The funds needed to reach their sales benchmarks, supporting functions like:
• Overhead, including:
• Employee training
• Software and hardware
• Marketing and advertising
• Customer relationship management (CRM)

You can use past spending data to estimate the resources needed for your sales team to reach its goals. 

#3 Create a Production Budget

Equally crucial to the sales department that directly generates revenue through clients purchasing your products or services—you need to fund the various production teams that develop, build, transport, and troubleshoot them. 

Building a production budget is similar to determining a sales budget. Ask yourself two crucial questions to determine how much money you will need to reach your production goals:

• How much can the production department create with its current resources?
• Resources include:
• Trained staff
• Programs or digital tools
• Available workspace
• How much money will it take to achieve production benchmarks?
• Like the sales team, be sure to account for costs associated with:
• Materials acquisition and storage
• Standard operating procedures (SOPs)

When setting goals for your production team, use operational data from the previous year as a guidepost, making changes to account for shifts in the market and overall capacity. 

#4 Outline Fixed Expenses, Non-Cash Expenses, and Non-Operating Expenses

Once you establish the estimated costs for your sales and production arms, you need to outline other financial elements that will impact your cash flow, operations, and fiscal reporting at year-end. These elements fall into one of three categories, and include:

• Fixed expenses , or financial obligations that are unlikely to change, such as:
• Rent or real estate costs
• Internet and other communication utilities
• Management staff salaries
• Costs to administer the employee benefits program
• Non-cash expenses , or exchanges that do not directly impact your cash flow, like:
• Depreciation
• Amortization
• Deferred costs
• Non-operating expenses , or money spent outside of sales and production, including:
• Tax payments
• Gains and losses
• Interest paid to loans

#5 Set Goals and Determine Needs

Your sales budget, production budget, and miscellaneous expenses will form the bulk of your annual operating plan. But, after you lay out the numbers, you can determine what to do with them by setting goals and determining what you will need to reach them. 

To ensure realistic goal-setting, set two types of benchmarks:

• Conservative goals that you can accomplish with relative ease
• Stretch goals that you can tackle if you encounter more prosperity than expected

If you want to bring on more staff to increase productivity and profits, for example, you could lay out your goals as follows:

• Conservative goal : Hiring five new employees
• Stretch goal : Hiring ten new employees
• Needs : Funds to pay and train new staff and money to expand your workspace

#6 Plan Implementation and Auditing

Your annual operating plan should also outline implementation procedures and internal auditing practices—essentially, an standard operating plan (SOP) for putting your plan into practice. 

Create protocols for:

• Issuing budgets to individual team members or departments
• Reviewing budget comments and requested changes
• Processing and approving requests for additional funds
• Regularly reviewing the budget throughout the fiscal year
• Implementing changes to protocols, goals, and needs

It will be much easier to administer, maintain, and review your plan once you create a stepwise implementation protocol.

Build an Annual Operating Plan with CFO Hub

Building an annual operating plan will help you determine how much money you have to work with during the next fiscal year, how to divide your available funds, and what to do to secure future profits and additional growth. 

Even seasoned business owners can encounter difficulties with financial planning—when you need expert advice, CFO Hub can help. 

Our experienced team of full-time, part-time, and fractional finance professionals can fill any niche on your accounting team—whether you need help preparing for an audit , general bookkeeping support , or large-scale CFO services , CFO Hub can help you navigate your financial operations with ease.

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How to Craft an Annual Operating Plan

As a visionary restaurant leader, you’re likely no stranger to strategic planning. However, a strategic plan alone won’t suffice for sustained success in the dynamic restaurant industry. This is where the Annual Operating Plan takes center stage. The Annual Operating Plan serves as a guide for your organization’s journey over the fiscal year. In this post, we’ll dive into creating an Annual Operation Plan. We’ll explore what an Annual Operating Plan entails, underscore its importance, offer insights into crafting an impactful plan, and share best practices to embark on this critical expedition.

Appreciating the Importance of an Annual Operating Plan for Restaurants

An Annual Operating Plan is your road map for the upcoming year, translating your larger visions into actionable plans and budgets. Without one, your team may lack the clarity and alignment needed to make progress on the priorities and metrics that matter most to having a successful coming year. I often see companies set budgets for the coming year without engaging the stakeholders who have to deliver on those budgets or drafting an operating plan that supports the accomplishments of the planned financial journey. It’s important that your annual plan address several key components: growth, people, operations and finances. Planning for the year ahead ensures everyone in your organization works on the same goals in the same sequence, increasing efficiency, streamlining operations, and improving your business’s performance.

When to Draft Your Annual Operating Plan

The best time to draft your annual operating plan depends on your fiscal year and the seasonality of your business. September or October is generally the right time to start yearly planning, depending on the intensity of your planning process and the seasonality of your business. Generally, companies plan on a calendar year cycle (January to December). December is typically one of our busiest sales periods in the restaurant business. Even though January is typically a slower month, planning in January means you’ll be planning while your team is already executing. The goal is to complete the plan by about Thanksgiving so everyone can focus on operations from the day after Thanksgiving forward.

Defining an Annual Operating Plan

An Annual Operating Plan is a detailed action plan for achieving your business goals over the coming year. It typically includes key performance metrics, budgets, priorities, timelines and plans for each business function. This plan should be based on your broader strategic plan and be aligned with your company’s vision, mission and values.

Let’s say your organization’s vision is to be the leading brand for serving high-quality tapas meals worldwide. Your annual operating plan for the next fiscal year might include specific action steps, such as laying the foundation for a franchise program or writing a more thorough operations manual to license the business beyond company-owned restaurants. The annual plan would align organizational leaders to key deliverables and establish SMART goals to measure achievement.

Benefits of a Well-Crafted Annual Operating Plan

Crafting a well-structured Annual Operating Plan can provide several benefits for your organization, including:

• Better line-of-sight into your organization’s operations and finances. With a detailed plan in place, you and your team will better understand where you are, where you’re going, and how you’ll get there together to deliver better results.
• Clarity around how you’ll achieve results in the coming year. By breaking down your longer-term goals and vision into smaller, actionable steps, your plan can help you focus on the priorities that matter the most.
• Increased accountability among your team.  When everyone knows the priorities they are responsible for and how they contribute to the larger goals, they are more likely to take ownership of their work and deliver results to support organizational success.
• More accurate operational and financial forecasts.  By creating a detailed budget as part of your annual operating plan, you can better anticipate economic changes for the coming year, which can help you make more accurate financial projections.
• Improve communication and coordination between departments and functions. With everyone clear and aligned around one plan, the organization will be on the same page about how you win in the coming fiscal year. Alignment between teams helps improve communication and head issues before they happen.

Components of an Annual Operating Plan

Now that we’ve covered what an Annual Operating Plan is and why it’s important to your business let’s review the key components that go into creating one.

Set Clear Goals

The first step in creating an effective annual plan is to identify your key objectives and goals for the year. These should be specific, measurable, achievable, relevant, and time-bound (S.M.A.R.T.). By setting clear goals upfront, you can more effectively measure and manage your progress as the year progresses.

Here are a couple of big items to consider in setting your objectives and goals:

• How do you plan to grow and evolve your existing footprint of stores?
• How, where and when will you grow into new locations?
• What’s in next year’s plan that can’t be avoided (a lease or credit facility ends, must-do compliance projects, etc.)

Identify Key Performance Indicators (KPIs)

Once you set your SMART Goals and objectives, the next step is identifying the KPIs to help you measure progress toward your goals. KPIs should be tied to specific purposes and based on available data. Typically, we focus on Same Restaurant Sales, Traffic, Speed of Service (if in quick service or fast casual), Customer Satisfaction, Team Member Engagement, and Financial Performance Metrics.

Choosing relevant KPIs that can be easily tracked and measured is essential. An issue I often see is choosing KPIs to measure success that the business doesn’t currently have the capability of measuring. Another is that the KPI dashboard is so big that it’s rarely updated or used. Ensure you’re realistic in your KPI approach – focusing usually leads to higher-quality outcomes.

Setting a Realistic Budget

No Annual Operating Plan is complete without a well-thought-out budget. Your budget should consider all expenses associated with achieving your plans, including needed salaries, capital expenditures, and project investments. It’s important to be realistic when setting your budget, as overestimating revenue or underestimating expenses can lead to inaccurate forecasting, missed targets, and serious cash issues.

When creating your budget, it’s important to consider any potential risks or uncertainties that could impair your revenue or expenses. The restaurant industry is rife with unpredictable risks: economic, supply chain, regulatory, labor, and competition, to name a few.  While you can’t predict every uncertainty, you can plan for things like coming roadway construction or new competitors in your current trade areas.

Defining Roles and Responsibilities

To ensure that everyone in your organization is working toward the same goals, it’s important to be clear about the roles and responsibilities of each department and function. This might mean identifying who oversees specific projects or initiatives and outlining each team member’s key tasks and deliverables. By clearly defining roles, you can ensure everyone knows their contributions to the larger objectives.

Creating a Timeline for Execution

With objectives, KPIs, growth, budgets and roles defined, the next step is to create a timeline for executing your Annual Operating Plan. Your timeline should include specific & realistic milestones and deadlines for each department or function and contingency plans for unexpected roadblocks or delays.

This is a good time and place to build a detailed annual calendar for your business mapping out key events, milestones, accounting cycles, meeting cadences, activities and initiatives throughout the year. The calendar is a visual roadmap that helps you stay organized and committed to your plans.

Developing Your Annual Operating Plan

Now that we’ve covered the components of an Annual Operating Plan let’s review steps you can take to develop an effective plan for your restaurant business.

Conduct a Thorough Business Review

The first step in your annual planning process is thoroughly reviewing your business. This should include reviewing sales, operational, people, marketing and financial results. It also means looking for bright spots and areas for improvement based on recent activity in the business.

The thorough business review is a great place to deploy a SWOT and/or PEST analysis:

• In the SWOT analysis , the planning team brainstorms internal strengths, internal weaknesses, external opportunities, and external threats of the business in four quadrants. The team then looks for connections between the quadrants.
• In the PEST/PESTLE analysis, the planning team weighs the socioeconomic factors into planning. PEST includes political, economic, socio-cultural, and technological). PESTLE adds legal and environmental factors.

By taking a comprehensive review of your restaurant business and the environment in which you operate, you can craft an Annual Operating Plan that identifies opportunities and sets realistic goals for the year ahead.

Engage Stakeholders in the Process

Once you have conducted your thorough business review, it’s time to engage stakeholders in the planning process. This likely includes your entire management team, key team members from operations, and even an outside facilitator. If you’d like a facilitator to guide you through this process, I’d be happy to help. Just contact me about your needs.

Fostering open and honest communication and encouraging feedback is very important during the annual planning process. By creating a collaborative environment, you can ensure that your Annual Operating Plan reflects the needs and priorities of your entire restaurant business. You want to avoid environments where there are “meetings outside of meetings” or where key stakeholders choose not to share their input.

Set Priorities and Allocate Resources

Based on your business review and stakeholder input, the next step is to set priorities and allocate resources for the year ahead. This should involve deciding which projects or initiatives to prioritize, what headcount to add in what order, and how much money you and your team will need to invest to achieve your objectives and goals.

When setting priorities and timelines, it’s critical to consider the entire year rather than hyper-focus on the first one or two quarters of the plan year. While it may be easy to focus on immediate needs, it’s important to consider your plan for the broader year and strategic vision. Make sure you balance your plan to deliver results in the near and long term.

Develop Actions Plans and Assign Accountabilities

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

This is a good place to be clear on the differences between goals, projects and tasks, which can get tricky during planning. Here is a breakdown of the differences between these three concepts:

A goal is a broad, high-level statement that defines a desired outcome or result. Goals provide an organization’s or individual’s overarching direction and help guide decision-making and resource allocation. They are typically aligned with the organization’s mission, vision, and long-term objectives. Goals are often qualitative and may not have a specific deadline. Examples of goals in strategic planning for a restaurant group might include

• Become a recognized leader in sustainable dining within the next five years.
• Increase revenue by 15% over the next fiscal year.

A project is a temporary and unique endeavor with a defined scope, objectives, and timeframe to achieve a specific goal. Projects are more specific and focused than goals. They involve coordinated activities, resources, and tasks to produce a deliverable or outcome. Projects are often broken down into phases or stages, requiring planning, execution, monitoring, and control. In the context of a restaurant group, a project might be:

• Launch a franchising sales program within nine months.
• Implement a customer loyalty program by the end of the year.

A task is a discrete and specific action or activity that must be completed to contribute to completing a project or goal. Tasks are smaller project components and are actionable steps that individuals or teams can perform. They are often time-bound and measurable. Tasks are the practical, day-to-day activities that move a project forward. In the restaurant industry, tasks might include:

• Create a menu for the new farm-to-table concept.
• Design promotional materials for the customer loyalty program.

When developing action plans, it’s essential 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 everyone knows their role and responsibilities.

Monitor Progress and Adjust as Needed

Finally, regularly monitoring your progress toward your goals and KPI targets is important. Typically, checking in on KPIs monthly and have a more extended quarterly stepback meeting to review and assess your plans, budgets, and timelines. It’s essential to be objective and data-driven during monthly or quarterly reviews. Quarterly stepbacks are another great place to use an outside facilitator. Don’t rely on opinions or assumptions. Instead, use data and facts to assess your progress and make decisions about adjusting your operating plan. It is also essential to stay flexible and responsive to ensure your annual plan remains practical and relevant throughout the year.

Common Problems to Avoid

As the “Your Plan vs. Reality” graphic illustrates, things rarely go as planned. Here are a few common problems I see in the Annual Operating Plan process that you should try to avoid:

• Too few people involved : Building the Annual Operating Plan isn’t a CEO/CFO job. It’s a job that should meaningfully involve all stakeholders noted above. Excluding stakeholders from the process can result in incomplete or uninformed decisions.
• Especially not involving the Operator’s voice: Restaurant General Managers have a better pulse on trade areas, local hurdles, and potential momentum builders to help inform annual operating plans. Involving the Operator’s voice allows you to build a more accurate plan and get buy-in from the Operators when it comes time to execute.
• Overambitious goal and priority setting : Setting unrealistic or overly ambitious goals can lead to frustration, burnout, and failure to achieve the desired outcomes. Objectives should be challenging but attainable, and resources should be realistically allocated.
• Especially being too optimistic about New Restaurant Openings : Set realistic timelines, capex, and operating budgets for New Restaurant Openings. Rather than trying to perfectly time new restaurant openings, consider setting a new restaurant sales week goal accretive to the budget rather than trying to guess NRO schedules perfectly.
• Writing your plan and never looking at it again : If you spend the time and resources to build a plan, it’s crucial also to spend time and resources executing it. Failing to monitor, check and adjust as outlined above will make it difficult to track progress, stay focused, and determine the success of your plans.

In Conclusion

While creating an Annual Operating Plan may seem daunting, it’s critical to your business’s long-term success (especially if it’s rapidly growing). 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.

Need Support?

If you’re scaling your business from a few locations to many, reviewing strategic alternatives, articulating a growth strategy, or anything else relating to strategically expanding your restaurant business, don’t hesitate to contact us at Consult to Grow®. We would love to be part of your restaurant journey! Ready to get started?

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Operational Plan: Everything You Need To Know (2024 Guide)

The old way of planning no longer works in complex and unpredictable business environments, and companies are struggling to find their feet on shaky ground. As we’ve seen with many of our customers and strategies in Cascade, organizations can no longer count on executing three or even five-year strategic plans.

The new reality forces companies and their operations teams to adapt their operational plans more frequently and within shorter time frames if they want to reap benefits faster than their competitors. Organizations need to work on their strategic instinct and fast adaptability to enhance their operational efficiency .  

And that requires big changes—including building a flexible operational plan, supported by the right tools and systems that help you achieve real-time centralized observability and empower a strategic response to external disruptions.

Read this article to build a bulletproof operational plan that includes all the key elements necessary to overcome unpredictable business chaos. You’ll also get free templates that will help you rapidly adapt and align your teams.

✨Bonus: We’ve included pro tips from business leaders in our network to help you identify gaps in your strategy execution and build resilient business operations.

What Is An Operational Plan?

An operational plan is action and detail-oriented; it needs to focus on short-term strategy execution and outline an organization's day-to-day operations. If your operations strategy is a promise, your operational plan is the action plan for how you will deliver on it every day, week, and month.

Put simply, an operational plan helps you bridge the gap between business strategy and on-the-ground execution and ensures that the organization is on track to achieve its long-term goals.

Benefits of operational planning

• Clear definition of relationships between cross-functional teams in different departments and responsibilities for each to eliminate duplicated efforts.
• Tighter alignment between corporate or business unit strategic plans and on-the-ground execution, helping the organization meet its business targets.
• Strong operating system that enables the company to quickly adapt, deliver operations goals, and monitor performance.

Operational planning vs. strategic planning

Operational planning deals with the day-to-day details and short-term goals, while strategic planning focuses on the big picture and long-term direction of an organization.

To put it in simpler terms, operational planning is about the "how" of daily tasks, while strategic planning defines the "what" and "why" for future success.

📚Recommended reading: Strategic vs. Operational Planning

Kickstart Your Operational Planning Process: Lay The Foundation

The quality of your operational plan will depend on your input. A successful operational planning initiative will consider these aspects:

• Who will be involved? Identify and include employees, customers, and the management team in the planning process to gain valuable insights from the front lines, ensuring better strategy and execution buy-in.
• What are your internal capabilities? Assess internal capabilities by conducting an internal analysis , including resource requirements, operating budget, and talent skills. Talent management and employee engagement are just a few of the many challenges that COOs will have on their operations agenda.
• What environment are you operating in? Conduct an external analysis (e.g., PESTLE or Porter’s 5 Forces ) to inform your approach and identify optimization opportunities and risks, keeping you agile in a changing market.
• Is it aligned with your organization’s strategy? Ensure alignment of your operational plan with your organization’s strategic plan to actively support the company's long-term vision and contribute to key business metrics.

👉🏻 Once you’ve gathered this information, you can develop an operational plan to help you execute business strategies.

Key Elements Of Your Operational Plan

Enough chit-chat; it’s time to put your operational plan together. We've built this based on our proven and tested approach, used by over +45,000 Cascade users.

See how Cascade Strategy Execution Platform enhances operational efficiency by reducing duplication and aligning teams toward common goals. It effectively eliminates waste resulting from misalignment, fostering smoother operations and improved performance.

Here’s a recap of the five key elements your plan must consider:

Choose key metrics aligned with the company goals

Selecting your operational plan's key metrics isn't a mere exercise in tracking numbers; it's about laser-focused alignment with your business needs and objectives. These metrics are the tangible indicators of your organization's efficiency and performance. They serve as the compass, guiding your daily decisions and actions toward achieving concrete results.

By precisely aligning these metrics with your company's core objectives, you ensure that every initiative and action within your operational plan directly contributes to achieving tangible results.

An aligned operational plan makes it easier to:

• Communicate roles and responsibilities to all employees so they know how their efforts contribute to overall business success.
• Identify and address operational bottlenecks and inefficiencies that could derail strategy execution.
• Motivate and engage employees to work toward strategic objectives and deliver on business outcomes.

Remember that the role of operations is to close the gap between your organization's strategic goals and what is being done on a daily basis to make them happen.

👉🏻 How Cascade can help:

With Cascade’s Metrics Library , you can bring your operating and financial business-level goals together with your strategy under one single roof. This makes reporting & governance easy, accurate, and less time-consuming by connecting your business data to your key business initiatives.

Through Cascade’s integrations , you can consolidate your metrics in one place, importing your data directly from business systems, data lakes, BI tools, or even spreadsheets.

Define the focus areas of your operational plan

The focus areas of your operational plan are the key areas of the business that the plan will address.

This will depend on your business plan. Think about how the business operates and how it succeeds. Do you need to pursue short-term cost reductions while simultaneously pursuing longer-term growth and transformation initiatives? Your operational plans must be built on these strategic priorities.

For example, you can prioritize your focus areas based on the most relevant business strategies or by specific departments. Some examples of focus areas could be:

• Administration
• Human Resources

💡Tips to help define the focus areas of your operational plan:

• Identify the business's key challenges and opportunities.
• Consider the business's overall long-term strategy and key metrics and how the operational plan's focus areas can support these objectives.
• Bring other people on board to help you identify what needs to be addressed by the operations plan.

Create strategic objectives for your operational plan

Strategic objectives are specific goals aligned with the operation’s strategy and focus areas. They represent what you want to achieve in each focus area and will serve as the building blocks of your plan, ensuring that it’s focused and actionable.

Some examples of strategic objectives:

• Reduce costs by 10% within the next year by implementing more efficient processes and streamlining the supply chain over the next year.
• Launch three new products in the next fiscal year to expand your product lines and increase revenue.
• Increase customer satisfaction scores by 5% within the next six months.

💡Tips for defining strategic objectives include:

• Ensure your objectives are specific, measurable, achievable, relevant, and time-bound (SMART).
• Consistently align objectives with your operational plan's focus areas and the company's goals.
• Don’t be afraid to get input from other people about your objectives.

Identify and prioritize projects

It’s time to identify and prioritize the projects that need to be executed. Remember, projects are action plans to help you achieve your strategic objectives.

Project planning should include thinking about time frames, task assignments, and deliverables (and prioritizing).

Here are some examples of project ideas:

• Localize sourcing for critical semi-finished materials.
• Streamline the supply chain to reduce costs and improve efficiency.
• Find and develop an alternative logistics channel.
• Implement a new customer service training program to improve customer satisfaction scores.
• Implement a new technology that will enable end-to-end supply chain visibility.

💡Tips for defining and prioritizing projects:

• Identify the specific actions and activities needed to achieve each strategic objective.
• Prioritize the projects based on their importance, feasibility, and potential impact on the business.
• Involve stakeholders in defining and prioritizing the projects to ensure their needs and concerns are heard.

Identify and track key performance indicators (KPIs)

Finally, you’ll need to know if your operational plan and day-to-day activities result in outcomes.

Set KPIs for key initiatives and strategic objectives to measure success, ensure alignment, and identify performance gaps in your operational plan.

Some examples of operations KPIs are:

• Inventory costs
• Costs of goods sold
• Revenue growth
• Employee retention rate
• Customer satisfaction score

💡Tips for defining and tracking KPIs:

• Align KPIs with your strategic objectives and focus areas so that you can track the plan's progress against these specific goals.
• Add both lagging and leading indicators .
• Instead of using multiple disconnected spreadsheets and project management tools, consider live dashboards or reporting systems to track the KPIs and monitor progress over time.

👉🏻 How Cascade can help build your plan:

Cascade’s planner feature enables you to build your operational plan with structure and ease by breaking down the complexity from high-level initiatives to executable outcomes. Define your key elements (focus areas, objectives, projects, and KPIs), and share the plan with your teams. You’ll get full visibility of the plan’s progress in real-time, allowing you to identify gaps, quickly update the plan, and communicate the change with your team with a single click.

👉🏻 If you don’t want to start building the plan from scratch, use our free Operational Plan Template pre-filled with examples of focus areas, objectives, projects, and KPIs that you can customize to meet your organization’s needs.

Operational Plan Examples & Templates

Here are five operational plan examples to help you create plans for your teams. You can use one master operational plan or set up an operational plan for each department.

Master Operational Plan Example

This Operational Plan Template will help you close the gap between business goals and day-to-day operations. You'll be able to set goals and KPIs for your top priorities and work with the operations team to deliver operational excellence and business results.

HR Plan Example

This HR Operational Plan Template can be used to meet staffing requirements, manage human capital and align human resources activities with your strategy. HR managers in any industry can create a clear operational plan that can be constantly monitored, adapted, and improved.

IT Plan Example

If you’re in the IT team, try out this IT Plan Template to get your IT operational planning up and running fast. It comes prefilled with focus areas and KPIs relevant to IT operations; you can easily customize workflows and deliverables to your needs.

Marketing Plan Example

This Marketing Plan Template can help you efficiently understand and plan your digital marketing operations using best practices. Use it to quickly set up priorities and get your social media and marketing teams moving on tasks that will make an impact.

Finance Plan Example

This finance-focused template is ideal if you want to get on top of your finance operations plan. Use it to allocate and distribute financial resources across your organization and get real-time updates through your dashboard and reports—which are great tools to create a visually compelling financial summary that clearly shows your key metrics.

💡Pro Tip: To ensure successful execution, it's crucial to align not just your master operational plan with your overarching strategic plan, but also all the operational department plans.

With the Alignment Maps feature, you’ll be able to visualize how your top-level business strategy breaks down into functional and operational plans. This empowers COOs and CFOs to consolidate their operational plans in one place, creating tighter alignment between the finance and operations teams and improving cross-collaboration to build more resilient operations.

Want to dig deeper? Use the Relationships feature to see the relationships between connected objectives from your plans and understand how your different department goals contribute to the core business metrics and goals. This view will allow you to clearly map dependencies, blockers, and risks that may lie along your journey.

5 Tips For An Effective Operational Plan And Its Execution

1. don’t underestimate the power of transparent communication.

Regularly communicate the operational plan and progress to all relevant stakeholders to build the necessary buy-in and support. Your employees must know your goals and the roadmap, and team members should understand their role in its execution. This business transparency will help everyone row in the same direction.

“Clarity regarding strategy is one of the key drivers of autonomous execution. If people understand what you’re working toward and have guardrails in place, they can be empowered to make their own decisions and don’t need everything to be ‘run up the chain’ to get approved. This allows you to move fast and at scale.” — Sam Sterling , Chief Strategy Officer, Akqa

2. Keep moving forward and adopt a growth mindset

Keep the momentum going and ensure that the plan is executed effectively. Regular monitoring and reviews can help identify and address any challenges or obstacles that may arise.

Schedule regular reviews and check-ins and provide the necessary support to ensure projects are on track and moving forward.

“I think adopting a growth mindset is super important. This means having the confidence to fail fast, try something new and empower people to do that.” — Ken Miller , General Manager, Azure Intelligent Cloud at Microsoft

With the Team Updates functionality, every team member can post updates on key measures, actions, and objectives. This will give you real-time visibility into performance and help you identify possible risks before it’s too late—without having to schedule extra meetings or nag your team members for updates.

3. Make strategic moves and change fast when you need to

Your operational plan should be flexible, adaptable, and open to adjustments. This means keeping an eye on progress, making corrections if needed, and being willing to adapt the plan to changing circumstances or new opportunities. As McKinsey suggests, you can consider creating a team that will be able to collect data, link analysis with action, and offer quick responses to rapid changes.

“Traditionally, companies would have taken that piece of paper and gone out and said: we're going to execute it, start to finish. Then get into the formulation of the strategy, what we need to hit, and what the end product result will be like. But what we do know is that’s never the case. Along the way, you're going to have bumps, and inevitably, you’ll need to change from that original picture.” — Annie Lucchitti , Marketing Manager, Unilever

4. Empower your operations team and boost efficiency

Effective operational planning requires the engagement and empowerment of your team. Involve stakeholders in the planning process and provide them with the necessary resources. Give them context and an opportunity to set goals and prioritize initiatives. This will help you boost engagement and hold them accountable for progress.

“I think it just works at every single level. Are people allowed to be themselves at work? Personally, are they at peace? Are they happy? Productivity happens when people have the right skills, but also when they are engaged and happy. If one of those fails a bit, productivity will start decreasing.” — Joan Torrents , Global Sourcing Manager, TESCO.

5. If it isn’t measured, it isn’t managed

Don’t underestimate the importance of tracking and measuring progress against the operational plan's goals and objectives. Set milestones, enforce KPIs, and stay on top of progress. Doing this will help you stay on course, empower you to act quickly, and provide valuable insights into what is going wrong.

“Data is a foundational element in the strategy definition phase as well as in the strategy execution phase as it helps create a baseline, identify key priorities, set goals, and measure progress.” — Erica Santoni , Principal, Diversity Equity & Inclusion, Intuit

Use Cascade’s Dashboards to monitor your day-to-day progress on key metrics and critical business and strategic information in real-time.

Compile the information in powerful reports and executive summaries in seconds with pre-built templates. Share them with your key stakeholders —internal and external— and invite them to collaborate on your strategy together.

Execute Your Operational Plan With Cascade 🚀

What good is an operational plan if no one executes it? If your organization wants to operate at a higher level, static tools like Excel spreadsheets, PowerPoints, Google Docs, and/or project management tools aren’t the solution.

❌They aren’t designed for adaptive strategy and planning.

❌They often lead to siloing and hinder effective cross-collaboration.

❌They make it challenging to measure progress and slow down decision-making.

With Cascade as your central operating system, you can stop running business operations blindfolded and embrace rapid, coordinated, and data-driven decision-making.

Get your Operational Plan Template to get started with a dynamic plan that will lead to actual outcomes for your business and see faster results from your strategy.

Or take Cascade for a spin! Start today for free or book a 1:1 product tour with Cascade’s in-house strategy expert.

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Annual Operating Plan(AOP): A Guide to Business Success

Welcome to our comprehensive guide on mastering the Annual Operating Plan (AOP) – a crucial tool for achieving business success. This guide will provide you with advice and examples to understand financial planning and achieve long-term growth.

For business leaders, understanding the AOP is crucial for steering their company in the right direction.

The AOP is a detailed plan. It shows how much money a business expects to make from selling its products or services. It also includes the costs of these goods or services, the company’s expected spending, and the final profit. Importantly, it provides a schedule for when money will come into and go out of the business.

This article aims to explore the AOP in detail. We’ll explain what it is, why it’s important, and how it’s different from a regular budget. We’ll discuss the tools needed for creating an AOP, the steps to build one, and the challenges you might face. Whether you’re running a small business or leading a department in a large corporation, this guide will help you understand and implement AOPs effectively.

Key Takeaways Table

Understanding aops in finance.

Before diving into the nitty-gritty details, it’s important to grasp the essence of an Annual Operating Plan. Essentially, an AOP is a detailed roadmap that outlines an organization’s financial goals, objectives, and strategies for the upcoming year. It serves as a blueprint for aligning resources, setting targets, and monitoring performance .

What is an Annual Operating Plan (AOP)?

An Annual Operating Plan, or AOP, is a key tool in finance. It helps businesses predict their income and expenses for a coming year. This tool is essential for good financial management. It’s usually made by business owners, top managers, or heads of departments.

Key Parts of an AOP

To create an effective AOP, it’s crucial to understand its key components. These typically include:

a) Revenue Forecasting : Accurately predicting revenue streams is essential for setting achievable targets and allocating resources accordingly. By analyzing historical data, market trends, and customer insights, organizations can make informed revenue projections.

b) Expense Budgeting : Careful budgeting of expenses is vital to ensure that resources are allocated efficiently. This involves analyzing past expenditures, identifying cost-saving opportunities, and prioritizing investments that align with strategic objectives.

c) Cash Flow Management : Maintaining a healthy cash flow is crucial for the smooth functioning of any business. An AOP should include strategies to optimize cash inflows and outflows, ensuring that the organization has sufficient liquidity to meet its obligations.

d) Performance Metrics : Defining key performance indicators (KPIs) is essential for monitoring progress and evaluating the success of the AOP. By setting measurable targets and regularly tracking performance against these metrics, organizations can identify areas of improvement and make necessary adjustments.

AOP in Action

In finance, AOPs are used by all types of businesses. From small local shops to big corporations, these plans help in making key decisions. Banks, investors, and other financial groups use them too. They look at AOPs when deciding to lend money, invest in a business, and more.

How Does an AOP Work?

The goal of an AOP is to plan and budget for the upcoming year. It does this by forecasting revenue and expenses. This forecast shows when money will come in and go out. Once made, an AOP guides important business decisions. It’s also used to compare actual results with planned ones. This helps businesses see where they can improve.

Why is an AOP Important?

By forecasting income and expenses, an AOP helps you plan and budget for future growth. This is vital for businesses looking to expand or invest more. AOPs also guide decisions in finance. This makes them popular among banks and investors. They show that a business is moving in the right direction and is likely to succeed.

Best Practices for AOP Success

To maximize the effectiveness of your AOP, consider the following best practices:

a) Collaboration: Involve key stakeholders from various departments in the planning process to ensure a holistic approach. This fosters cross-functional collaboration and enhances the accuracy and relevance of the AOP.

b) Flexibility: While it’s important to set ambitious goals, it’s equally crucial to remain flexible and adaptable.

AOP vs. Budget – What’s Different?

Understanding the Budget A budget in business is a financial plan showing what resources a company has to spend. It is like a map that outlines the financial resources available and how they will be used to reach business goals.

Defining the Annual Operating Plan An AOP, on the other hand, is more detailed. It’s like a travel itinerary. It not only outlines goals (destinations) but also includes the strategies (activities) and time frames (schedules) for each activity. It shows how the resources will be effectively used to achieve the goals.

Budget as the Foundation The budget provides the financial foundation for the AOP. It shows the financial resources and expenses needed to reach the organization’s goals.

AOP as the Roadmap The AOP, like an itinerary, gives context. It ensures that money (resources) is used effectively. While a budget focuses on finances, an AOP concentrates on goals, strategies, and initiatives.

Financial Plan vs. Comprehensive Plan A budget is a plan showing how an organization will spend its money, usually over a year. An AOP is more comprehensive. It outlines the organization’s objectives, strategies, and initiatives for the year.

Level of Detail and Focus Budgets are detailed, showing exactly how money is being spent. An AOP offers a broader view of an organization’s goals and strategies. The focus of a budget is financial, while an AOP focuses on operational aspects.

Time Horizon and Uses Budgets usually cover a single year. An AOP might cover a multi-year period. A budget is used for controlling spending. An AOP guides decision-making and helps meet organizational objectives.

Involvement and Monitoring Creating a budget is often the finance department’s job. An AOP involves more stakeholders, like department heads. Budgets are for monitoring spending, while AOPs monitor progress towards objectives.

The Essential Tools for Developing an AOP

The Foundation for AOP Development Creating an effective AOP requires some fundamental tools. These tools make the process smoother and more structured.

A 12-Month Calendar Having a calendar for the full year is crucial. It helps you visualize the entire year at a glance. This assists in planning out when different parts of the AOP will be executed.

A Blank Spreadsheet Spreadsheets are invaluable for organizing and calculating financial data. They help in laying out all the numbers, from revenues to expenses, in a clear and editable format.

A Planner System A planner system is beneficial for keeping track of tasks, deadlines, and meetings. It ensures that all aspects of the AOP are managed and monitored effectively.

The Role of Technology In today’s digital world, various software tools can aid in creating an AOP. These tools can automate calculations, facilitate data analysis, and provide templates for structuring the plan.

Importance of Collaboration Tools Collaboration tools are essential, especially in larger organizations. They allow different departments to contribute to and view the AOP, ensuring alignment and transparency.

Steps to Create an AOP

Step 1: Initial Research and Analysis Before creating an AOP, it’s important to understand your organization’s current state. This involves looking at the past year’s performance. Use different data sources, such as financial statements and operational reports, to get a complete picture. This step ensures that your AOP is realistic and grounded in actual business performance.

Step 2: Consult with Key Stakeholders The success of your AOP depends on how well it aligns with your company’s overall goals. Meet with key figures like the CEO and CFO to discuss business priorities. Also, consult with department heads for insights into departmental needs. Their input will help set realistic objectives and ensure everyone is on board with the plan.

Step 3: Set a Budget and Allocate Resources Your AOP should include a detailed budget. Start by defining your revenue goals and figuring out what you need to sell to meet these targets. Collaborate with department heads to assess resources like manpower and equipment. List out all expenses, from labor to marketing, to see how resources should be distributed to achieve your goals.

Step 4: Prepare the Plan Now, define your KPIs and set specific targets. Link these targets to initiatives, projects, and actions that will help achieve them. Whether you operate with multiple departmental plans or a single AOP, ensure each department outlines their key projects and action plans.

Step 5: Review and Approve Make sure your AOP considers the needs of all stakeholders. Have different departments review the plan to ensure alignment and collaboration. After internal reviews, seek approval from the board or executives. This step ensures buy-in at the highest levels for smooth implementations.

Step 6: Execute and Monitor With the AOP approved, it’s time to put it into action. Ensure every team member understands their responsibilities and the time frame for completing them. Regularly monitor progress against the KPIs established in your plan. Regular reviews (weekly, monthly, or quarterly) are essential to stay on track.

Why AOPs Matter

Strategic Planning and Organizational Alignment An AOP is a critical part of strategic planning. It ensures that all employees understand their roles and how they contribute to the company’s goals. This alignment is crucial for coordinated efforts and achieving business objectives.

Tracking Progress and Setting Milestones With an AOP, managers can track progress against company milestones. This foresight allows them to request funding or make necessary adjustments in advance, ensuring goals are met on time.

Benefits of a Data-Driven Approach AOPs make department plans and strategies more data-driven. This approach improves accuracy and flexibility in forecasting, particularly for businesses like SaaS startups. It aligns revenue and expense forecasts with key business levers, making plans more outcome-oriented.

Aligning Departments with Business Goals An effective AOP aligns cross-functional departments with the overall business goals. It ensures that team members’ roles and departmental objectives are in line with the company’s strategic vision.

Identifying Needs for Changes in Spending or Fundraising An AOP can highlight the need for adjustments in spending or additional fundraising. It facilitates detailed discussions on how changing expenses could affect performance as market conditions evolve.

Providing a Guidepost for Performance and Goals A strong AOP helps departments track their progress. It ensures that necessary initiatives are taken to meet company objectives throughout the fiscal year.

Facing AOP Challenges

Identifying and Addressing Roadblocks Developing an AOP can present several challenges. Identifying potential roadblocks early in the planning process is key to ensuring a smooth execution. This may include resource limitations, changing market conditions, or internal resistance.

Importance of a Repeatable Process Establishing a repeatable process for creating an AOP is vital. It keeps the planning on track and ensures consistency year after year. A well-defined process provides a clear starting point and a structured path forward, making the planning more efficient and effective.

Navigating Organizational Complexity In larger organizations, the AOP process can be complex due to the involvement of multiple departments and stakeholders. Ensuring clear communication and aligning different parts of the organization with the overall plan is crucial for success.

Managing Expectations and Aligning Goals Balancing expectations and aligning various departmental goals with the company’s overall objectives can be challenging. It requires effective communication and collaboration across all levels of the organization.

Adapting to Changes The business environment is dynamic, and changes are inevitable. An effective AOP must be flexible enough to adapt to these changes without losing sight of the long-term objectives.

Ensuring Comprehensive Involvement Involving all relevant stakeholders in the planning process is critical. It ensures that different perspectives are considered and that the plan is comprehensive and realistic.

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Keeping Your AOP Up-to-Date

The Dynamic Nature of Business In the fast-paced business world, conditions can change rapidly. An AOP must be a living document, adaptable to new situations and information.

Regular Reforecasting One of the key practices in maintaining an AOP is regular reforecasting. This involves updating the plan to reflect new business contexts and macroeconomic environments. By doing so, the AOP remains relevant and useful throughout the year.

Comparing Forecasts with Original Plans It’s crucial to compare rolling forecasts with the original plan. This comparison allows businesses to adjust their strategies based on actual performance and emerging trends.

Flexibility in Planning Flexibility is vital in an AOP. It should allow for adjustments in strategies and objectives as new opportunities or challenges arise.

Continuous Monitoring and Adjustment Continuous monitoring of the plan’s execution is important. This involves regularly checking progress against the established KPIs and making necessary adjustments to stay on course.

Engaging Stakeholders in Updates Regularly engaging stakeholders in the updating process ensures that the AOP remains aligned with the overall business strategy and operational capabilities.

AOP for Different Businesses

Tailoring AOPs to Business Needs The structure and focus of an AOP can vary greatly depending on the type of business. Different industries and company sizes require unique approaches to planning.

Small Businesses and Startups For small businesses and startups, especially in the SaaS sector, AOPs need to be agile and adaptable. These businesses face rapidly changing market conditions and growth trajectories. Their AOPs should focus on flexibility and quick adjustments.

Large Corporations In contrast, large corporations might use AOPs for more comprehensive, long-term strategic planning. Their plans often involve multiple departments and complex coordination. The focus is on aligning various parts of the organization with the overarching corporate strategy.

Industry-Specific Considerations Different industries also have specific requirements for AOPs. For instance, manufacturing companies might focus more on production and inventory planning, while service-oriented firms might prioritize customer acquisition and retention strategies.

Adapting to Market Trends All businesses, regardless of size or industry, must consider current market trends and economic conditions when developing their AOPs. This ensures that the plan is relevant and effective in achieving the intended goals.

Incorporating Technology The use of technology in AOP development is increasingly important. Advanced software solutions can help businesses of all sizes create more accurate and dynamic operating plans.

Advantages and Disadvantages of AOPs

Advantages:

• Strategic Alignment: Ensures all departments work towards common business goals.
• Resource Optimization: Helps in efficient allocation and management of resources.
• Improved Decision-Making: Provides a clear financial and operational roadmap for informed decisions.
• Flexibility: Can be updated to reflect market changes and new business insights.
• Goal Tracking: Facilitates monitoring of progress towards business objectives.

Disadvantages:

• Time-Consuming: The process of creating an AOP can be lengthy and resource-intensive.
• Complexity: For large organizations, aligning all departments can be complex and challenging.
• Rigidity Risk: If not updated regularly, AOPs can become outdated, leading to misguided strategies.
• Over-Reliance: Excessive dependence on the plan may hinder quick responses to unexpected market shifts.
• Resource Drain: In smaller companies, the process might divert critical resources from day-to-day operations.

Real-Life AOP Examples

Case Studies of AOP Success Examining real-life examples of successful AOP implementation can offer valuable lessons and best practices. Here, we look at how different companies have effectively utilized their AOPs.

Example 1: Retail Industry In the retail sector, a well-known brand used its AOP to navigate a challenging market. By focusing on key performance indicators like customer footfall and average transaction value, and adjusting their inventory and marketing strategies accordingly, they were able to boost sales and improve profitability.

Example 2: Manufacturing Sector A manufacturing company’s AOP focused on production efficiency and cost management. By carefully planning their procurement and production schedules, they reduced waste, improved turnaround times, and increased customer satisfaction.

Example 3: Technology Startups A SaaS startup used its AOP to balance rapid growth with financial stability. Their plan included aggressive sales targets coupled with a detailed cash flow analysis. This approach helped them manage their burn rate while scaling up operations.

Lessons Learned These examples highlight the importance of setting clear objectives, closely monitoring performance, and being ready to adapt the plan as needed. They also show how AOPs can be tailored to specific industry and company needs.

Best Practices in AOP Implementation

From these case studies, best practices emerge, such as the importance of aligning the AOP with the company’s strategic vision, involving key stakeholders in the planning process, and continuously reviewing and updating the plan.

Recap of Key Points The Annual Operating Plan (AOP) is a fundamental tool in business management, serving as a compass guiding organizations towards their financial and operational goals. Through this article, we have explored the essence of AOPs, their differentiation from budgets, the tools needed for their development, and the step-by-step process for creating a comprehensive AOP.

The Value of an AOP We’ve seen that AOPs are not just financial documents but strategic plans that align resources with company goals. Their importance spans across businesses of all sizes and industries, helping in strategic planning, resource allocation, and decision-making. We also discussed the challenges in AOP development and the necessity of keeping these plans dynamic and adaptable to changing business environments.

Tailoring AOPs to Various Business Needs Whether it’s a small startup or a large corporation, the AOP needs to be customized to fit the unique requirements of the business. Adapting the AOP to market trends and incorporating technological advancements ensures its effectiveness and relevance.

Learning from Real-World Implementations Real-life examples provided insights into how AOPs are applied in different sectors, offering valuable lessons and best practices. These case studies underline the importance of clear objectives, regular monitoring, and adaptability in planning.

Final Thoughts An effective AOP is crucial for business success. It provides a clear roadmap for the year ahead and sets the stage for achieving set milestones. By understanding and properly implementing an AOP, businesses can navigate the complexities of the market, make informed decisions, and steer towards growth and stability.

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Budget vs. annual operating plan (aop): understanding the key differences, august 29, 2023.

Your budget and annual operating plan are two important tools facilitating financial planning. They help your finance leaders manage your organization’s operations and ensure its sound financial health. While the ultimate purpose of both these tools is the same, there are subtle differences between a budget and an annual operating plan you should be aware of.

What Is A Budget?

In simple words, a budget is a record of the estimated revenue and expenses of your organization over a specific period. It gives you information about the resources your organization must spend. Depending on your requirements and preferences, you can prepare a budget on a weekly, monthly, quarterly, half-yearly, or annual basis.

What Is An Annual Operating Plan?

An annual operating plan (AOP) is a more comprehensive tool than a budget. It is a detailed plan that shows how your organization’s resources will be used during a year. An AOP gives you and your team a clear sense of direction in terms of using your resources to attain your organizational objectives.

Budget Vs. Annual Operating Plan: A Comparison

Now that we know what a budget and an AOP are, let us have a look at the key differences between the two:

Map Vs. Itinerary

The best way to understand the difference between a budget and an annual operating plan is by thinking of the budget as a map and AOP as an itinerary. While a map outlines the route to be taken and points to the milestones along the way, an itinerary is a more detailed record of all the activities to be done and schedules to be followed along the way.

Similarly, while a budget gives you an outline of the resources you have at your disposal and how they can be utilized, an annual operating plan provides you with the details regarding the strategies to use, methodologies to follow, and tools to use to utilize your resources.

Another major difference between the two tools lies in what they focus on. While the focus of a budget is purely on the financial aspect of your organization, an AOP focuses on the operational aspects of your teams (including financial management).

The utility of a budget lies in controlling an organization’s expenses, boosting bottom-line savings, and increasing/maintaining steady revenue. On the other hand, an annual operational plan is used for decision-making in terms of the resources at hand while ensuring that the goals of an organization are met.

Involvement

While a budget is prepared by the finance department of an organization and approved by senior management, the scope of involvement in the case of an AOP is wider. An annual operational plan often involves inputs from a wide range of employees, department heads, and other stakeholders.

Prepare And Analyze Comprehensive Financial Plans With VIZIO

Whether you want to prepare a budget, an annual operational plan, or both, VIZIO Consulting helps you set up modern software solutions to streamline organizational planning. Going a step beyond conventional financial planning and analysis (FP&A), our team of tech experts helps you implement planning and analytics solutions that extend to all departments operating within your organization.

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How to create an operating plan: Examples with template

In today’s business environment, clear and consistent communication enables your team to have a shared understanding of the status and direction of your product. To this end, an operating plan collects your strategic objectives in one place, allowing everyone to grasp what they need to do, and how the product will remain successful.

In this article you will learn what a product operating plan is, how it can help you achieve your objectives, and best practices for effectively implementing one within your project team.

What is an operating plan and why is it important for product managers?

A product operating plan is a document that outlines the strategic actions your team will take to achieve a specific goal. Most operating plans only cover a period of one to two years and serve a crucial role in the product development process . You can expect your operating plan to include budgets, resource allocation, timelines, and key performance indicators (KPIs).

The operating plan moves away from the big picture vantage point of vision and strategy, towards a more granular and tactical plan for the execution of product strategy.

The operating plan helps product managers assess the impact of changing business priorities and customer needs on the product roadmap . Product managers can use the operating plan as a tool to factor in and communicate changes across the organization, allowing the product development process to remain agile.

What goes into an operating plan?

An operating plan seeks to outline your product strategy to guide decisions and deliver on your stated goals. The operating plan comprises of the following:

• Product goals and objectives — Define the product goals and objectives based on your product vision. Objectives should have clear deadlines and measurable outcomes that align with the business strategy
• Milestone based plan — Create a milestone oriented plan to map your goals and objectives that can be tracked and measured against target
• Structure of team, budget, resource, and timeline — Design your team, resources for the project, and budget allocation in order to work on the scope of the project and adhere to the milestones
• Product metrics to measure progress — Identify and create the product metrics which can be used to measure the success of the product once it goes live to customers
• Status check and interactive corrections — Iterate to customer requirements and watch for opportunities to make changes to the product

How to develop an effective operating plan

To better understand what goes into an effective operating plan we will breakdown each step and discuss best practices for approaching the following:

Identifying the product goals and objectives

Aligning with the strategy and vision of the product, selecting and tracking the product metrics.

The product goals derive from the product vision and strategy. To define these you should:

• Break your vision into executable tasks (include the ‘what’ and not the ‘how’)
• Ensure consistency with the product vision
• Make you have a way to measure success

In order to align with the product strategy and vision, one should:

• Infuse the product strategy and vision into all the steps of the product life cycle
• Align the product vision with customer and business needs, as well as the values and principles of the company
• Check alignment and correct any deviations with the vision

Identifying and tracking the right metrics is key to the success of any product and therefore the product team. Below are the steps to identify and track the right product metrics:

• Identify the goal of your business and business strategy
• Ask the right questions to help determine which goals would help track the success of your product against the business goals
• Assign metrics as acquisition, engagement, retention, revenue, or referral
• Create a platform to visualize and track the metrics

Implementing and monitoring an operating plan

A product operating plan provides you with an instrument to ensure your product will deliver on the stated vision, strategy, and goals. However, the success of your operating plan depends upon your ability to manage and monitor it throughout the course of the product lifecycle. Proper management of the operating plan includes:

Tracking success

Adjusting and/or pivoting course, keeping stakeholders aligned.

You can measure the success of a product operating plan by developing product metrics which allow you to quantify and track the progress of the plan. Also, having a visual representation of the metrics allows you to make better interpretations and display your progress visually.

Product metrics let you determine whether a product operates to plan or not. When your team performs as planned, there’s no need for further adjustment.

However, when the team misses, or finds themselves falling short of the agreed upon target, you need to take corrective action and pivot course.

Here, corrective action could come from aligning or augmenting resources, changing the budget allocation, or moving around the tasks based on the dependencies in the plan.

Because the operating plan has many moving parts and stakeholders involved, you need to ensure that you have the buy-in from all the stakeholders involved.

The best practices for ensuring stakeholder buy-in include:

• Communication — Constant and consistent communication with all stakeholders will allow all everyone to be on board and aligned with the operating plan
• Transparency — Being transparent with all stakeholders in terms of progress updates and any challenges/roadblocks that crop up during the course of executing the operating plan will ensure all stakeholders are are able to provide their full support
• Status updates — Providing status updates to leadership and obtaining regular status communication from other stakeholder teams will ensure everyone remains aware of the state of your product

Common challenges and how to overcome them

As with anything, challenges will arise while working with a product operating plan. Rather than allowing these to grow into a bigger problem, you should work to mitigate following issues before they impact the health of your product:

Lack of authority

Communication challenges, visibility restraints.

Similar to the product manager role, the product operations or operating plan team has to work without direct authority, or people management responsibilities. You should be aware of this while trying to push the team towards your deliverables and use the operating plan as an influencing tool.

Communication is key to maintaining the flow of delivery across the product lifecycle. Insufficient communication or communication gaps can result in teams and stakeholders missing out on necessary changes or tasks. These knowledge gaps could result in misalignment, which impacts the product delivery timelines, as well as the scope.

Since the product operations team is a level above the product management, the product operations team may have limited visibility of the roadmap, customer needs, or the technical architecture/design information.

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Operating plan example

Below is an example of an operating plan that provides an illustration of what the process might look like for you. The operating plan focuses on two main steps:

Product vision and strategy

Product operating plan components.

To provide a mobile based shopping experience for a retail grocery store shopper (in addition to in store shopping which is currently available)

Product goal(s):

• Complete an end-to-end customer journey on a mobile app (viewing inventory by categories, adding to cart or wish list, checkout, and completing payment)
• Seamless experience in terms of navigation on the site, as well as understanding the pricing and assortment to the mobile platform users
• Additional benefits of the mobile shopping experience in terms of reordering items, mobile based return/refund for eligible items
• Discuss the scope of work needed to deliver complete functionality in terms of the mobile shopping experience to the mobile platform users
• Create the plan for delivering the identified scope (e.g., to have the first version of the mobile grocery shopping platform released to customer within the next six months)
• Identify the data engineering needs to provide a seamless mobile platform experience for grocery shopping (e.g., identify what categories of products will be available for user selection in the first version of mobile application and how many concurrent users can shop on the platform)
• Determine the structure of the team and resourcing needs to deliver to scope and planned timelines (e.g., scrum team would develop the mobile platform in terms of frontend and backend and user experience engineers)
• Identify the success metrics for the product (e.g., how many users were activated on the mobile platform, how many users could complete one successful workflow of the mobile grocery shopping experience, or the time taken to complete a checkout in store checkout)

Operating plan template

To help you get started on your own operating plan, use this template . The template includes all the key parameters that need to be tracked and mobilized in order to make the product operating plan successful.

The product operating plan is a key component of the product development and delivery lifecycle. Having a product operating plan allows you to outline the tactical steps and ensure successful product delivery and tracking of your product.

The product operating plan also fosters alignment with the vision, stakeholder buy-in, and sets the product and the product organization up for success.

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Annual Operating Plans: A Comprehensive Guide for CPG Success

Learn all about annual operating plans (AOP) and how they drive business decisions. Discover the key components and benefits of an AOP in this blog.

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At the heart of business management and the strategic planning process lies your annual operating plan (AOP) - a crucial blueprint that guides you through the intricacies of achieving your financial goals year after year. 

Determining your organization’s goals, priorities, and resource allocation can be a daunting task. Without the proper roadmap and planning, you may struggle to align your efforts and make the right decisions. A strong AOP process is key to successful navigation.

Let’s dive into the key components that constitute an AOP and explore the process of setting strategic objectives and creating action plans that drive your organizational growth.

What is an annual operating plan (AOP) in finance?

AOP is a comprehensive plan that links an organization's financial objectives to the strategies and specific initiatives that will be employed to achieve those objectives. It serves as a blueprint for managing the financial resources and operations of a company or department within a larger organization.

How is AOP different from a budget?

The terms AOP and budget will occasionally get used interchangeably; however, these two terms are quite different. A budget is actually a key component of AOP Planning. The budget itself is a specific detail of how funds will be spent, focusing on ensuring that objectives are met in a financially responsible and efficient manner.

How is trade spend management linked to AOP?

Since trade promotions are typically the largest budget item (after cost of goods), trade has a particularly outsized role in the AOP planning process. Finance, revenue growth management (RGM) and sales teams all collaborate during AOP to generate the strategy and guidelines for trade spending. 

Consumer goods (CG) organizations, in particular, are always striving to get the most bang for their buck out of their trade spend, and AOP is a point in time when a particular focus is placed on post-event analytics and trade promotion optimization (TPO) .  

Who within a CPG company is involved in AOP?

The AOP process is typically led by finance, starting with the CFO who works with the executive team to create the topline targets for sales, revenue, and spending. On the trade side, finance, RGM, and sales collaborate as a cross-functional team to ensure that the AOP is aligned with the company’s vision, mission, values, and goals. 

That’s not all; the AOP should also balance the supply and demand of the products, meet customer expectations and satisfaction, and achieve revenue and profit growth for the year.

What is the role of finance in the AOP process?

Finance plays a vital role in the AOP process by offering valuable financial guidance, conducting thorough analysis, and providing comprehensive reporting. It assists in establishing revenue and profit targets, allocating resources and budgets, assessing the financial viability of plans, and continuously monitoring financial performance and changes throughout the 12-month period.

What is the role of RGM in the AOP process?

RGM is a strategic function aimed at maximizing a company's revenue and profitability through the utilization of data-driven insights and analytics. By leveraging these tools, RGM empowers businesses to make informed decisions regarding pricing, promotions, assortment, and trade investments. 

The primary objective of RGM is to optimize sales and marketing strategies, encompassing various aspects such as target markets, customer segments, channels, products, prices, promotions, and distribution strategies. RGM also plays a crucial role in evaluating the return on investment (ROI) for each plan, identifying best practices, and deriving valuable lessons for future optimization.

What is the role of field sales in the AOP process?

Sales plays a very important role in implementing the sales and marketing plan for the AOP process. They receive their portion of the company’s targets for sales and spend (Top Down) and create promotional strategies for their accounts (Bottom Up). They collaborate with their counterparts in finance and RGM to close any gaps between the top-down and bottom-up plans. They must also foster robust relationships with customers and retailers. 

The sales team facilitates effective communication and negotiation of the plan's terms and conditions, ensuring its compliance and successful execution. They also gather valuable feedback and insights on customer requirements and how to collaborate best to meet both company and customer goals. And sales actively adapts the plan in response to evolving market dynamics and customer feedback, ensuring its continued effectiveness.

What are the key steps in the AOP process?

The AOP process for CG companies typically involves several key steps. While the specific details may vary depending on the company's size, structure, and industry, there are some important actions:

• Review the current situation and performance of the company, including its strengths, weaknesses, opportunities, and threats (SWOT analysis).
• Define the strategic objectives and initiatives for the year, aligned with the company’s vision, mission, and values.
• Develop the sales and marketing plan, including the target markets, segments, customers, channels, products, prices, promotions, and distribution strategies.
• Develop the operations plan, including the production, inventory, procurement, logistics, quality, and service strategies.
• Develop the financial plan, including the income statement, balance sheet, cash flow statement, capital expenditure plan, and key performance indicators (KPIs).
• Spread the corporate targets for sales and spend through the product and geography hierarchy so that each component of marketing and sales understands their objectives.
• Align and communicate the AOP across the organization and get approval from the senior management and board of directors.
• Execute and monitor the AOP throughout the year and make adjustments as needed based on changing market conditions and customer feedback.

How can AOP Planning be improved with TPx software?

One difficult aspect of the AOP process is keeping everyone aligned on what the specific objectives are. Sales, revenue, profit, and spend are numbers that are not particularly static throughout the process. 

Having all of your members collaborate in a single system that tracks each person’s share of the numbers throughout this fluid process is a huge success factor. At CPGvision , our trade promotion execution (TPx) system features AOP functionality in one single system, enabling key players to remain focused on enhancing the plan instead of finding the numbers.

Get in touch with us today and find out how our CPGvision platform can streamline your AOP journey and help you achieve your objectives.

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How to build your annual operating plan in 8 steps

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, some CEOs run their organisations with only a sketch of what they are building.

This guide is aimed at CEOs of commercial and not-for-profit 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 frustrating and poor.

The good news is that annual planning is a craft which can be mastered. Here’s how to run a lower-stress process to produce an annual operating plan that:

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

This guide includes a set of operational templates and simple guides for managing the process and delivering the outputs. Once completed the management team should have an agreed action plan and results to which it will willingly commit itself.

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

The guide contains seven business templates;

• Annual planning process template
• Strategic offsite planning template
• Facilitation plan template
• Dialogue vs debate template
• SWOT analysis template
• Competitor overview matrix template
• Operating plan presentation template

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Free Annual Plan Templates: Excel, Microsoft Word, PowerPoint, and Google Slides

By Kate Eby | January 17, 2024

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We’ve collected the top annual plan templates in Excel, Microsoft Word, PowerPoint, and Google Slides. Use the templates to build a 12-month strategy that streamlines the annual planning process based on the company’s vision for goal-setting. 

Included on this page, you’ll find an  annual plan slide template , a  yearly planning template with Gantt chart , an  annual planning template with a calendar , and more. You’ll also learn about the  differences between an annual and a strategic plan , as well as  how to create an annual plan .

Annual Plan Templates vs. Strategic Plan

An annual plan and a strategic plan serve different purposes for building and organizing a growth strategy. A strategic plan focuses on a company’s direction and long-term goals. The annual plan defines actionable steps to achieve yearly goals. 

Review the matrix below to understand the differences between an annual plan template and a strategic plan template.

Simple Annual Plan Template

Download a Simple Annual Plan Template for

Excel | Microsoft Word

Ease your way into annual planning with this simple template that organizes any company’s annual goals, objectives, timelines, and budget. Complete the  Overview, Strategies, and  Global Priorities sections to build a foundation for goal-setting. Then use the table to list objectives, timelines, owners, budgets, and statuses. Reuse this template year after year to save time and to streamline the annual planning process.

Annual Plan Slide Template

Download an Annual Plan Slide Template for 

PowerPoint | Google Slides  

Use this annual plan template to outline and present a high-level one-year plan to stakeholders. Objectives are organized by quarters, so it’s easy to follow their timelines. Add more slides, including the company’s marketing plan, sales plan, or strategic plan to create a comprehensive presentation of the company’s overarching goals.

Yearly Planning Excel Template with Gantt Chart

Download the Yearly Planning Template with Gantt Chart in Excel  

Use this yearly planning template with a Gantt chart to list annual objectives. This template is similar to the simple annual plan, but adds a Gantt chart to provide a visual representation of each deliverable’s timeline. Enter the start date and due date for each objective. The template will automatically populate the dates into a Gantt chart making it easy to track each objective’s progress and ensure the plan stays on course.

Annual Planning Template with Calendar

Download an Annual Planning Template with Calendar 

Excel | Microsoft Word  

Track important deadlines with this annual planning calendar template. This template has all the features of the simple annual plan template but adds a calendar. The calendar format provides space to enter details under any day of the year. Promote timeline transparency and guarantee deliverables meet their due dates by sharing this template with your team.

How to Create an Annual Plan

Create an annual plan by first reviewing the previous year’s wins and losses to determine where to focus the upcoming year’s efforts. Brainstorm annual goals, list the actions to achieve them, and assign the action steps to team members. 

Start drafting an annual plan in Q4 to prepare for the upcoming year. Follow the steps below to create an effective annual plan that drives revenue and growth to any business.   

• Review the Previous Year Meet with stakeholders and review the previous year’s plan and successes. Identify areas that need improvement. This review process will help determine where to focus efforts next year. You can skip this step if it’s the company’s first time creating an annual plan.
• Download an Annual Plan Template Download the simple annual plan template. Using a template will help ensure you don’t miss any vital sections of the plan.
• Enter the Company’s Vision Statement The vision statement describes the company’s long-term aspirations, so keep it at the forefront of the decision-making and goal-setting processes.  
• Brainstorm Annual Goals Collaborate with stakeholders and determine what you want to achieve in the upcoming year. Use last year’s wins and losses to set realistic goals that align with the company’s vision statement.
• List Objectives List the action steps required to meet the goals. Categorize them into sections, such as marketing, financial, customer experience, product, etc. 
• Set Timelines Set a start date and end date for each objective. Annual plans are often broken down into quarters, but it’s not uncommon to set monthly and weekly timelines. 
• Determine a Budget Determine a budget based on financial projections. This step helps allocate resources teams or departments will have available to them, which will make planning more realistic.
• Identify Metrics Decide what metrics to use for tracking and monitoring results. The data these provide is important for measuring if objectives are being met.
• Assign Responsibility Assign a team, department, or individual to each deliverable to ensure nothing is missed.  
• Share with Team Members Share the annual plan with team members to create alignment and build motivation around working toward specific goals.

Elements in an Annual Plan

Elements in an annual plan include everything necessary to outline a comprehensive plan for growing any company. Here is a list of elements found in a general annual plan:     

• Budget: The funds allocated to each goal or objective.
• KPIs:  The tools and metrics used to measure the success of the objectives.
• Objectives: Objectives are the action steps to achieve the goals.
• Owner: The owner is the team, department, or individual responsible for completing an objective.
• SMART Goals:  This represents a type of goal-setting where each should be specific, measurable, achievable, relevant, and time-bound. Learn more about  setting SMART goals .
• Strategies:  List the marketing strategies, operational strategies, and sales strategies to provide a comprehensive framework that drives coordinated efforts.
• Timeline:  The length of time dedicated to each deliverable. Deliverable timelines are typically quarters, but they can also be monthly or weekly.
• Values and Mission Statement: These document the foundation for decision making and goal setting.

Different Types Of Annual Plans

Different types of annual plans support specific areas such as budgeting, marketing, operations, and more. Choose an annual plan from the list below that best fits your company’s needs and growth strategy.

Free Annual Sales Report Templates

Use an  annual sales report template to track yearly sales activities and trends.

Free Annual Business Budget Templates

Use an  annual business budget template to evaluate business expenditures vs. revenue over a one-year period.

Free Operational Plan Templates

Use an  operational plan template to lay out specific actions and resources needed to reach certain milestones.

Annual Report Template

Use this  annual report template to document the company’s yearly accomplishments, impact stories, financial data, and donor list.

Annual Marketing Report

Use this  annual marketing report template to document the total projects delivered, KPIs, and marketing financial overview.

Create Your Annual Plan in Smartsheet and Get Gantt Chart and Calendar Views

Empower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

Discover why over 90% of Fortune 100 companies trust Smartsheet to get work done.

Budget vs Annual Operating Plan (AOP): Understanding the key differences

Asif Masani

A budget and an annual operating plan (AOP) are both financial tools used by organizations to manage their performance.

It's important to note that a budget and an operating plan are not the same thing, but they are closely related.

What is a Budget?

A budget is a financial tool that shows the resources an organization has available to spend.

What is an Annual Operating Plan?

An operating plan is a more comprehensive plan that shows how the organization intends to use those resources to achieve its goals.

Budget vs Annual Operating Plan

The budget provides the financial foundation for the operating plan, and the operating plan provides the context for how the budget will be used.

Think of budget as a map

It outlines the financial resources (money) an organization has available. And how they will be used to reach their destination (goals).

A map shows the roads and routes to take to reach a destination. Similarly, a budget shows the financial resources and expenditures needed to reach the organization's goals.

Think of the Annual Operating Plan as an itinerary

Think of an annual operating plan as an itinerary for a trip. The itinerary outlines the destination (goals), the activities (strategies) that will be done at each destination, and the time frame for each activity (initiatives).

An itinerary provides the context for the trip and helps ensure that the resources (money) are being used effectively to achieve the goals.

A budget focuses on the financial resources, while an operating plan focuses on the goals, strategies, and initiatives.

Together, they help ensure that the organization's resources are being used effectively to achieve its goals.

Financial plan vs comprehensive plan

A budget is a plan that shows how an organization will spend its money over a certain period of time, usually a year.

An AOP, on the other hand, is a comprehensive plan that outlines an organization's objectives, strategies, and initiatives for the upcoming year.

Level of detail

Budgets are more detailed and provide detailed information on how money is being spent and how much is being spent.

An AOP is high-level but more comprehensive and provides a broader view of the organization's objectives and strategies.

A budget focuses on the financial aspect of an organization, whereas an operating plan focuses on the operational aspect .

Time horizon

A budget is typically prepared for a single year, while an operating plan may cover a multi-year period.

A budget is used to control spending and ensure that resources are being used effectively. An operating plan is used to guide decision-making and ensure that the organization's objectives are being met.

Involvement

A budget is usually prepared by the finance department and approved by senior management.

An operating plan may involve input from a wider range of stakeholders, including department heads and employees.

A budget is used to monitor and control spending, while an operating plan is used to monitor progress towards organizational objectives.

How do budgets and operating plans work together?

By integrating the budget and the operating plan , organizations ensure that:

• It has the resources it needs to successfully execute its strategy.
• Its resources are being used effectively to achieve its goals.

An operating plan and a budget are closely related and should be integrated to ensure that the organization's resources are effectively used to achieve its goals.

A budget without an operating plan is like a roadmap without a destination, and an operating plan without a budget is like a destination (goal) without a road map (budget) to support it.

For example:

An organization's operating plan calls for the expansion into a new market; the budget will allocate the necessary resources (e.g. capital expenditures, marketing expenses, and personnel expenses) to support that expansion.

In conclusion, budgets and operating plans are two important financial tools that work together to help organizations effectively manage their finances and achieve their goals.

By using both tools in conjunction, organizations can ensure that their resources are being used effectively to achieve their objectives.

Written by:

Asif Masani has 12 years of experience across banking, pharma, and EdTech. He leads APAC FP&A at Coursera. He is author of "All About FP&A" & on a mission to help 1M professionals master FP&A skills.

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Cultivate a culture of care at your company, a guide to creating an annual operating plan for 2024, 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.

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Why is AOP in Finance Important

In the financial world, the Annual Operating Plan (AOP) is crucial. It's the roadmap for a company's financial journey. AOP sets clear goals. It aligns resources with these goals. This alignment is key. It ensures focused efforts and efficient resource use.

AOP also aids in performance tracking. It offers benchmarks. These benchmarks are vital. They help in measuring progress and identifying areas needing improvement. Therefore, AOP is not just a plan. It's a tool for continuous growth.

Moreover, AOP fosters team unity. It brings everyone on the same page. This unity is essential for success. It ensures that all departments work towards common objectives. In essence, AOP is the backbone of strategic financial planning.

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.

Annual Operating Plan Best Practices

Creating an effective Annual Operating Plan (AOP) is an art. Here are some best practices:

- Start with Clear Objectives : Define clear, achievable goals. These goals should align with your company's vision.

- Involve Key Stakeholders : Collaboration is key. Involve different departments. This ensures a well-rounded and realistic plan.

- Focus on Data : Base your plan on solid data. This approach ensures accuracy and relevance.

- Be Flexible : The business world is dynamic. Your AOP should be adaptable to changes.

- Regular Reviews : Don't set and forget. Regularly review and adjust your AOP as needed.

These practices ensure that your AOP is not just a document. It's a dynamic guide that drives your business forward.

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. Use a practical mind map tool to map out all the correlations between the collaborative ideas. 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. If you're a SaaS company, consider integrating SaaS Spend Management software that can help you immensely in budget monitoring.

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.

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Why Startups Need To Go Beyond Annual Operating Plans

Startups are unique. They operate in fast-paced, often unpredictable environments. Therefore, relying solely on Annual Operating Plans (AOP) isn't enough. Startups need agility. They need plans that can adapt quickly.

Beyond AOP, startups should embrace continuous planning. This approach allows for frequent adjustments. It's responsive to market changes. This responsiveness is crucial for startups.

Also, startups should focus on innovation. A rigid AOP might limit this. Flexibility in planning fosters creativity. It allows startups to seize unexpected opportunities.

In summary, while AOPs are important, startups thrive on adaptability and innovation. These qualities ensure they stay ahead in a competitive landscape.

How is AOP Different from a Budget?

AOP and a budget are often confused, but they're different. The Annual Operating Plan (AOP) is about strategy. It's a comprehensive plan. It outlines the company's goals and how to achieve them. AOP is broad. It covers various aspects of operations.

A budget, on the other hand, is about numbers. It's a financial document. It details income and expenditure. The budget is a part of AOP. It supports the AOP by providing financial limits.

In essence, AOP is the game plan. The budget is the financial boundary within that plan. Both are crucial, but they serve different purposes in a company's financial strategy.

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.

Ping us on Twitter .

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.

Q. How does a startup or SME without previous AOP experience begin the process effectively?

A. Startups should focus on clear, achievable goals. They can seek mentorship or use online resources for guidance. Therefore, even without prior experience, a structured approach can help in creating a practical AOP.

Q. What are the common challenges businesses face when implementing their AOP, and how can they overcome them?

A. Businesses often struggle with resource allocation and adhering to timelines. Regular team meetings and flexible planning can mitigate these issues. Therefore, keeping communication open and plans adaptable is crucial.

Q. How can businesses measure the success of their AOP accurately and make adjustments for future planning?

A. By setting quantifiable benchmarks and regularly reviewing progress, businesses can measure AOP success. Adjustments should be data-driven, taking into account performance metrics and feedback. Therefore, continuous evaluation and adaptation are essential for future planning.

17.3 Types of Plans

• Identify different types of plans and control systems employed by organizations.

From an activity perspective, organizations are relatively complex systems, as they are involved in numerous activities. Many of these activities require management’s attention from both a planning and controlling perspective. Managers therefore create different types of plans to guide operations and to monitor and control organizational activities. In this section, we introduce several commonly used plans. The major categories are hierarchical, frequency-of-use (repetitiveness), time-frame, organizational scope, and contingency. Table 17.1 provides a closer look at many types of plans that fall in each of these categories.

Hierarchical Plans

Organizations can be viewed as a three-layer cake, with its three levels of organizational needs. Each of the three levels—institutional, administrative, and technical core—is associated with a particular type of plan. As revealed in Table 17.1 , the three types of hierarchical plans are strategic, administrative, and operating (technical core). The three hierarchical plans are interdependent, as they support the fulfillment of the three organizational needs. In the organization’s hierarchy, the technical core plans day-to-day operations.

Strategic Plans

Strategic management is that part of the management process concerned with the overall integration of an organization’s internal divisions while simultaneously integrating the organization with its external environment. Strategic management formulates and implements tactics that try to match an organization as closely as possible to its task environment for the purpose of meeting its objectives.

Strategic plans address the organization’s institutional-level needs. Strategic plans outline a long-term vision for the organization. They specify the organization’s reason for being, its strategic objectives, and its operational strategies—the action statements that specify how the organization’s strategic goals are to be achieved.

Part of strategic planning involves creating the organization’s mission, a statement that specifies an organization’s reason for being and answers the question “What business(es) should we undertake?” The mission and the strategic plan are major guiding documents for activities that the organization pursues. Strategic plans have several defining characteristics: They are long-term and position an organization within its task environment; they are pervasive and cover many organizational activities; they integrate, guide, and control activities for the immediate and the long term; and they establish boundaries for managerial decision-making.

Operating plans provide direction and action statements for activities in the organization’s technical core. Administrative plans work to integrate institutional-level plans with the operating plans and tie together all of the plans created for the organization’s technical core.

Frequency-of-Use Plans

Another category of plans is frequency-of-use plans. Some plans are used repeatedly; others are used for a single purpose. Standing plans , such as rules, policies, and procedures, are designed to cover issues that managers face repeatedly. For example, managers may be concerned about tardiness, a problem that may occur often in the entire work force. These managers might decide to develop a standing policy to be implemented automatically each time an employee is late for work. The procedure invoked under such a standing plan is called a standard operating procedure (SOP).

Single-use plans are developed for unique situations or problems and are usually replaced after one use. Managers generally use three types of single-use plans: programs, projects, and budgets. See Table 17.1 for a brief description of standing and single-use plans.

Time-Frame Plans

The organization’s need to address the future is captured by its time-frame plans. This need to address the future through planning is reflected in short-, medium-, and long-range plans. Given the uniqueness of industries and the different time orientations of societies—study Hofstede’s differentiation of cultures around the world in terms of their orientation toward the future—the times captured by short, medium, and long range vary tremendously across organizations of the world. Konosuke Matsushita’s 250-year plan, which he developed for the company that bears his name, is not exactly typical of the long-range plans of U.S. companies!

Short-, medium-, and long-range plans differ in more ways than the time they cover. Typically, the further a plan projects into the future, the more uncertainty planners encounter. As a consequence, long-range plans are usually less specific than shorter-range plans. Also, long-range plans are usually less formal, less detailed, and more flexible than short-range plans in order to accommodate such uncertainty. Long-range plans also tend to be more directional in nature.

Organizational Scope Plans

Plans vary in scope. Some plans focus on an entire organization. For example, the president of the University of Minnesota advanced a plan to make the university one of the top five educational institutions in the United States. This strategic plan focuses on the entire institution. Other plans are narrower in scope and concentrate on a subset of organizational activities or operating units, such as the food services unit of the university. For further insight into organizational scope plans, see Table 17.1 .

Contingency Plans

Organizations often engage in contingency planning (also referred to as scenario or “what if” planning). You will recall that the planning process is based on certain premises about what is likely to happen in an organization’s environment. Contingency plans are created to deal with what might happen if these assumptions turn out to be wrong. Contingency planning is thus the development of alternative courses of action to be implemented if events disrupt a planned course of action. A contingency plan allows management to act immediately if an unplanned occurrence, such as a strike, boycott, natural disaster, or major economic shift, renders existing plans inoperable or inappropriate. For example, airlines develop contingency plans to deal with terrorism and air tragedies. Most contingency plans are never implemented, but when needed, they are of crucial importance.

Concept Check

• Define and describe the different types of plans defined in Table 17.1 and how organizations use them.

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Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Access for free at https://openstax.org/books/principles-management/pages/1-introduction

• Authors: David S. Bright, Anastasia H. Cortes
• Publisher/website: OpenStax
• Book title: Principles of Management
• Publication date: Mar 20, 2019
• Location: Houston, Texas
• Book URL: https://openstax.org/books/principles-management/pages/1-introduction
• Section URL: https://openstax.org/books/principles-management/pages/17-3-types-of-plans

© Jan 9, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.

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• IRS releases annual update to strategic operating plan

Future plans for the agency’s transformation and improvements for taxpayers since passage of the “Inflation Reduction Act of 2022”

Future plans for the agency’s transformation and improvements for taxpayers

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The IRS today released an annual update to its strategic operating plan, outlining future plans for the agency’s transformation and highlighting improvements for taxpayers since passage of the “Inflation Reduction Act of 2022” (IRA).

In addition, the IRS released an accompanying annual update supplement that focuses on changes underway and planned for fiscal Years 2024 and 2025 across taxpayer service, tax compliance, and technology modernization. 

As explained in a related IRS release— IR-2024-130  (May 2, 2024)—the strategic operating plan update refines last April’s initial plan (read TaxNewsFlash ). The update provides an outline of the major projects and outcomes IRS expects to deliver over the next 12 to 18 months, including progress on the simple notice initiative, enforcement activities, and efforts to modernize foundational technology and improve IRS employee tools to help taxpayers. The update also includes additional details on spending and staffing. 

The update also notes that the IRS anticipates increasing audits on the wealthiest taxpayers, large corporations and large, complex partnerships by sizable percentages for tax year 2026.

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.

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• The Workstream
• Project management
• Process Flow Chart

Process flow chart: what it is & how to create one

Browse topics.

Keeping your business organized can be a tall order — especially as it grows. Process flow charts are one way to organize business processes by visualizing the steps of a process or workflow . As you dive deeper into the individual steps of a process, you can discover opportunities to improve teamwork and productivity.

Visualizing processes with a flowchart can help you organize important details and improve your operations. As you develop your process flow chart, you can discover non-value-added processes and optimize your workflow.

In this guide, we’ll discuss what a process flow chart is and how you can create one for your business. Keep reading to learn more.

What is a process flow chart?

Process flow charts are a way of visually organizing your workflow. They use different shapes connected by lines, each representing an individual step.

A process flow chart aids in project management by helping you outline and visualize your workflows. An example could be a chart showing how you process and fulfill customer orders from the moment an order is placed to delivery.

Importance of process flow charts

Visualizing your workflow allows you to understand your project scope better so you can plan your project based on your goals and deadlines.

Having a clear visual representation of your processes helps improve teamwork and keep everyone on the same page. This way, everyone can understand your business processes from start to finish and the role they play in those processes.

Creating a flow process chart can improve productivity by weeding out non-value-added activities. You have ample room to grow and improve if you’re not wasting precious time on unnecessary steps.

Types of flow charts

There are several types of flow charts, each serving a different purpose. You can learn more about some of the different flow charts below:

• Basic flow chart: Simple flow charts are ideal for visualizing basic steps without many complexities or details.
• System flow chart: System flow charts show how every part of a system interacts with the other parts.
• Workflow diagram: Workflow diagrams visualize steps or processes required to complete a project, which can help you minimize waste.
• Data flow chart: Data flow charts show how data moves throughout your system and other connected systems.
• Decision flow chart: These flow charts play a vital role in the decision-making process , answering simple questions to arrive at a final decision.
• Swimlane flow chart: Swimlane flow charts allow you to visualize who’s responsible for each part of a process or project, whether that’s an individual or a group.

Components of a process flow chart

Process flow charts have a few key symbols used to contextualize the information in the chart. Different symbols are used for different steps within a process flow chart with connecting lines in between.

Different shapes and symbols—including diamonds and rectangles—are used for each process or step, with lines connecting the symbols. Different types of lines denote the beginning and end of the flow chart, and directional arrows indicate the flow direction of the chart.

Visualizing information with flow charts can play a crucial role in project planning , and it’s easy once you understand what the symbols represent.

Steps to create a process flow chart

Creating a process flow chart isn’t rocket science, but there are some basic guidelines you need to follow. Below is a step-by-step guide to help you create your next process flow chart.

Identify the process

Start by clearly defining the process or workflow you’re going to outline. Choosing which projects to visualize and optimize is critical to strategic planning . Once you have a good idea of what you want your flow chart to represent, you can start building it out.

Define boundaries

When it comes to process flow charts for businesses, you can always add more details or break a process down further by adding more steps. However, when creating a flow chart, you only want to include the necessary details.

Figure out the scope and boundaries of your flow chart before you start fleshing it out. That way, you’ll avoid wasting time adding information that complicates the main objective. Details are good, but you don’t want to go overboard.

Gather information

This is where knowledge sharing comes into play. Now, it’s time to collect detailed information about the steps, inputs, and outputs contributing to the process. Ensure you track the process from start to finish to avoid missing crucial steps.

Identify the sequence of steps

Now that you know the steps involved in the process you’re outlining, you can put them in the correct sequence to start organizing your flow chart. Your flow chart should move in one consistent direction from beginning to end, with each step bringing you closer to completing the process.

Draw the flow chart

With process flow charts, the individual steps only tell part of the story—you need to connect them to tell the whole story. Complete your flow chart by using symbols and connectors to connect individual steps and create an accurate visual representation of the process from start to finish.

Review and revise

Once you’ve organized and drawn everything out, review your flow chart to ensure it’s accurate, complete, and clear. If there are any issues, you can revise your flow chart.

Reviewing and revising is a never-ending battle. Even after completing a flow chart, you must review and update it regularly to ensure accuracy. Make sure to reflect any changes in your flow charts as they occur.

Uses of process flow charts

A good process flow chart can provide several benefits for businesses. Here are some of the common uses of process flow charts:

• Process improvement: Visualizing processes helps you understand how to optimize them, saving you time and money.
• Training and onboarding: When you clearly understand your training and onboarding process, you can streamline it and ensure everyone receives the same training.
• Communication: Flow charts can help you identify communication gaps in different project stages to keep everyone on the same page.
• Documentation: Using visuals helps everyone follow documentation best practices — from project documentation to team documentation.
• Compliance and quality assurance: Creating a step-by-step visual representation of a process helps you identify potential compliance or quality assurance issues before it’s too late.

Best practices for creating effective process flow charts

An effective flow chart can help you optimize business processes and improve productivity and project collaboration . Here are some guidelines to follow to ensure you’re doing it right.

Keep your process flow chart simple. Focus on adding key steps and information only.

Using consistent symbols and connecting lines adds clarity to your process flow charts, making it easier to collaborate with your team and boost productivity. You can even involve stakeholders in the process.

Once your flow chart is complete, there’s still work to do. Updating and maintaining flow charts helps you keep a constant visualization of the processes that your business relies on.

Create process flow charts with Confluence Whiteboards

Process flow charts can offer several benefits for businesses, improving productivity and teamwork while eliminating unnecessary steps. With Confluence Whiteboards, you can visualize and turn ideas into tasks.

Confluence brings everyone together in a connected workspace to move projects forward. Teams can create, edit, and share project plans in a connected workspace so everyone is on the same page.

Confluence flow chart templates make it easy to create effective flow charts quickly, plus you can convert stickies into Jira issues with a few clicks.

Use Confluence Whiteboards to visualize your workflow and optimize your business with process flow charts.

Process flow chart: Frequently Asked Questions

What is an example of a process flow chart.

A great process flow chart example is product delivery. You can use a process flow chart to visualize the delivery of a product from the moment the customer contacts you to the moment you finish the job. The first step may be the customer contacting you (or vice versa), eventually leading to the point where you fulfill the order, and the customer receives an email letting them know their order arrived.

You can use process flow charts for almost anything, including manufacturing, service delivery, product delivery, and project management processes.

What tools can you use to create process flow charts?

Confluence allows you to create process flow charts that visualize your business processes accurately. Confluence is easy to use, and you can start with a flow chart template so you don’t have to do all the work. Once you’ve chosen a template, you can add individual steps and symbols to clarify the chart. Confluence also integrates seamlessly with Jira and various third-party tools.

How often should process flow charts be updated?

If you modify a workflow or process outlined in a flow chart, update the chart accordingly. Flow charts don’t provide much value if they’re inaccurate, and you probably add or remove steps from various processes and workflows more than you think. You should regularly review and update your process flow charts to ensure they continuously add value to your business.

You may also like

Project poster template.

A collaborative one-pager that keeps your project team and stakeholders aligned.

Project Plan Template

Define, scope, and plan milestones for your next project.

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Leap in operating income for UOB’s retail banking

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Saturday, 11 May 2024

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Russia's yandex reports q1 revenue rise as market awaits spin-off news, paramount emerges as major shareholder in ewi.

The bank said its operating income jumped by 19.3% on-year, crossing the RM4bil mark for the first time.

PETALING JAYA: United Overseas Bank (M) Bhd (UOB Malaysia) has posted a record high RM4.6bil total operating income and pre-tax profit of RM1.9bil for its financial year ended 2023.

According to a statement, the bank said its operating income jumped by 19.3% on-year, crossing the RM4bil mark for the first time, while pre-tax profit surged by 44.4%.

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