Definition
An annual operating plan (AOP) means a detailed roadmap that outlines a company’s goals, budgets, initiatives, and resource allocations for the upcoming fiscal year. It translates high-level strategy into specific, actionable steps that departments and teams can execute throughout the year.
The AOP serves as a key reference point for leadership, helping track performance, manage risks, and ensure accountability across the organization.
What is included in an annual operating plan?
A typical annual operating plan includes:
- Revenue and expense forecasts
- Departmental budgets and cost centers
- Key performance indicators (KPIs)
- Staffing plans and headcount needs
- Project timelines and deliverables
- Capital expenditure (CapEx) and operational expenditure (OpEx) estimates
- Risk assessments and contingency planning
It may also include alignment with broader company goals such as ESG, compliance, or digital transformation priorities.
How to prepare an annual operating plan
Preparing an annual operating plan involves a cross-functional effort that includes finance, operations, HR, and executive leadership. Steps often include:
- Reviewing the previous year’s performance
- Aligning with the board-approved strategic plan
- Setting clear and measurable goals
- Collaborating with department heads on resource needs
- Estimating budgets and financial targets
- Finalizing the plan for board review or approval
Many organizations start planning in Q4 of the current fiscal year and finalize the AOP before the start of the new one.
How to make an annual operating plan effective
- Align it closely with the company’s long-term strategy
- Make KPIs visible and actionable
- Ensure each team understands their goals and responsibilities
- Build in regular checkpoints or reviews
- Use collaborative tools to update and track progress
An AOP isn’t just a financial document—it’s a management tool.
Quick summary
- An annual operating plan means a detailed, one-year roadmap for executing company strategy
- It includes budgets, KPIs, projects, and departmental goals
- Preparing an AOP involves collaboration between leadership and functional teams
- A strong plan helps align efforts, track performance, and adapt as needed
Related terms
- Board meeting
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