4 Elements of an Annual Business Plan

October is a great month to do your annual business plan for next year. A couple of weeks ago, I met with some of our American Franchise Academy clients to guide them through three days of focused work, helping them prepare their business and financial planning for 2025. 

In this blog post, I’ll share the four elements you must include in your annual business plan. Consider these aspects the foundation for your organization’s journey toward success and profitability in the coming year!

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Element #1: People

Your people are an essential and crucial element for your success. That’s why, first of all, you need to do a people plan where you forecast how many people you’ll need to hire in 2025 based on your historical turnover rates and the number of new stores you’re planning to open or acquire next year.

If you plan ahead of time your people’s needs for every month for next year, you will prevent the chaos of not having the proper staffing or the leadership bench that you need to lead your stores, especially when you are in a growth mode. Based on your requirements, do a recruiting budget where you consider the amount of money that you’ll spend to attract and hire the people.

Keep learning: How to develop a leadership bench

Element #2: Sales projections

Another thing you should consider when working on your annual business plan is your sales projections. To do so, you must understand where you have been this year and consider any event that happened or is currently happening in your country and the world (e.g., federal or local elections, supply chain issues, strikes, etc.).

• Based on where you are now and what is happening, where do you think your revenue or sales will be next year? And what will you do to achieve that? 

To answer the last question, you will have to create a marketing plan with the activities and actions you’ll implement in 2025, based on those that have worked in the past, as well as what your marketing budget will be to accompany that planning and achieve your goals.

To answer the last question, you need to develop a marketing plan for 2025. Focus on the activities and strategies that have been successful in the past. Establishing a marketing budget that will support your plans and help you reach your objectives is also important.

By the way, all of this has to be done for every one of your units. So, if you’re a multi-unit franchisee, you must analyze each unit separately.

Don’t miss: 6 Infallible Tips to Increase Sales in Your Franchise

Element #3: Finances

The third element you have to cover when you’re doing your business planning for next year is the financial plan. To do it, you have to do an entire profit and loss statement (P&L) by unit for every month of the year. In there, you’ll extrapolate what happened this year and your projections for 2025. And, as you look at each store and each month, you have to analyze your 2024 P&Ls to determine:

• What were the costs that you may or may not have next year?
• What is the seasonality of your business?
• What should you expect in the first, second, third, and fourth quarters?

Once you have these numbers, you must adjust them to be as realistic as possible.

Ideally, you have to be able to consolidate all that into an overall number for your business. That will tell you the amount of money you should have in the bank at the end of the year. If you’re happy with the number, then you’re good to go. Otherwise, you will have to go back and revise your sales, costs, and anything that could potentially change that number. 

This is not wishful thinking; just putting it in the plan won’t give you the profit you want. Your business plan is what you are committed to accomplishing next year, and you need to decide what you will do differently to cause a real change. Otherwise, this will not be a plan; it would be a wish. 

Franchise MiniTip: A Strategic Way to Analyze Your Financial Statements

Element #4: Growth & capital needs

Your annual business plan must also consider the growth you want in 2025, as well as the capital needs you will need to turn those aspirations into reality.

Analyze objectively when the units might open or when your planned acquisitions may happen, and incorporate those projections in your annual plan so you’re clear on the capital you will need and when you will need it.

And remember: the capital needs start happening probably six months before the actual store opening, between franchise fees, lease deposits, and leasehold improvement. To secure all that capital, you must create a monthly plan for each unit you intend to open or acquire.

Ideally, compiling these projections in a single document that is easy to reference and share with your capital sources would be best. This will help you clearly explain how much money you need, when you need it, and why you need it.

• Accessing that capital will be much easier because you have your capital, financial, people, and sales plans in place. 

In case you missed it: Access to Capital with No Personal Guarantees. An interview with Chris Medley

These four elements will build the roadmap for accomplishing your goals in 2025. An annual business plan will guide you on what to do and allow you to see how off you are. But that is not enough.

Once January arrives, revise and do the final touches so you’re ready by the second week of the year. But it doesn’t stop there. Your job as a franchisee and business owner is to constantly compare what is happening with what you projected in the plan. You must look at it daily and weekly to ensure your business is on track to achieve your goals. And if something is off, it is crucial that you act so that everything you planned happens month after month after month.

An annual business plan will help you grow your business. But it will also ensure you get the take-home money you want and have the expected return on investment. The year is not over, but you should have it ready by Thanksgiving, so you still have some time left. Get into action and develop your business financial planning for next year!  

Reflections:

• How many units are you planning to open in 2025?
• Do you have a leadership bench ready to take over those openings?
• If you couldn’t reach your sales goal last year, what can you do differently in 2025 to achieve your goals?
• What sources do you have to support your growth plan?

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