4 Tips to Get Your Financial Planning Underway
It’s Time to Build the 2023 Plan… Where to Start?
In our last post, we shared our thoughts on the importance of developing a well-thought-out financial operating plan and the need to start that process now. For many, the planning process can be a bit daunting and unwieldy. No doubt planning requires work; however, it can be energizing and manageable when done well. Today, let’s focus on where to start – no, it isn’t in the details.
- Set Your Objectives
The place to start is setting your objectives for the planning horizon. This step is about defining the direction your business is heading:
• What are your revenue goals?
• Is your goal to be profitable, and if so, by what margin?
• What challenges do you see?
• Do you have new competitors?
• Do you plan to introduce new products or enter new markets?
• Do you foresee significant changes in your supply chain or how you manufacture your products or deploy your services?
The key here is to focus on the future and set goals so that you can develop plans to meet your objectives and respond to potential challenges and changes.
- Plan Ahead
For this part of the process, you want to think beyond the immediate year and extend your sights to 1-3 years. While the operating plan or budget generally focuses on the fiscal year, no year exists in a vacuum, and you often need to make decisions in one year to deliver on your goals in the next. For example, let’s say you plan to grow sales by 20% in 2023 and another 40% in 2024. To achieve the 2024 growth, you may need to invest in sales and marketing in 2023. Understanding and identifying this allows you to ensure your 2023 plans incorporate these assumptions.
- It Takes a Team
Involving the leadership team in developing goals and objectives is essential. The result of this process is a shared set of targets that will align the resources and efforts of the team over the coming months and years. Ensuring the team has the opportunity to weigh in on the various goals, share their perspectives, and voice their concerns is critical to obtaining the needed alignment.
- Make It Achievable
Finally, work to make your objectives achievable. Stretch goals are good if they are viewed as attainable with hard work. Nothing de-motivates a team and sets your plans up to fail faster than unrealistic and unachievable goals. Unfortunately, many of us have had the misfortune of working in organizations that set unrealistic targets. The resulting plans are ignored, and the organization loses the opportunity to unify and work toward a collective goal. Don’t let that happen to you.
Once you set your goals, objectives, and targets, you are ready to move forward with more detailed planning. The next step is to identify where you are currently against your stated outcomes and what you need to do to move from where you are to where you want to be. We will discuss this and the rest of the planning process in our upcoming posts.
Need Help with Your 2023 Financial Planning & Budgeting?
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