It's that time again: the end of another fiscal year. Time to assess this year's successes and start the annual business planning process for the next 12 months.

What does that mean? It means it's time to write your business plan. (Article updated Sept. 2021.)

Whether you're a sole proprietor, a small business owner, or a multimillion-dollar enterprise, you need a business plan.

Why? Because it sets the course for the upcoming year. It defines strengths (and what worked) and weaknesses (and what didn't work). It identifies priorities for the coming year and serves as a guide for your business.

An annual business plan can be hundreds of pages or just a few. Whatever the volume, however, it needs to contain at least the following five elements. Here's a high-level overview of each.

1. Situation Analysis

A situation analysis defines the current situation, and it must be an objective assessment. It's not a marketing pitch for your clients; rather, it's an honest description of where you are today.

Look at revenues from the past three years. How do they compare with those of your closest competitors?

Take a hard look at your strengths and weaknesses. As you evaluate the opportunities in the marketplace, do a SWOT (strengths, weaknesses, opportunities, and threats) analysis to see how you measure up internally. Look at what is unique about your product or service compared with those of your major competitors.

Analyze the main environmental factors that affect your business. At a minimum, take a look at the economic climate in the industry in which you plan to do business in the coming year.

Is it in growth mode, or has it been adversely affected by the current economic conditions? Are there regulatory issues that may affect your ability to grow your business? Those are factors that are beyond your control, but they have a direct and immediate effect on where you should spend your time and dollars in the coming year.

2. The Market

Do an in-depth assessment of your competition and their marketing strategy. Who are your toughest competitors? What are they doing to entice customers to buy their products or services? Are they doing something that you aren't?

Think out of the box, and look more broadly at your competition. For example, if you provide snack vending machines for local businesses, your competitors are other snack-vending-machine suppliers. But, you're also competing against nearby convenience stores and fast-food restaurants, company cafeterias, and brown-bag lunches.