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Want to save time on your next annual report? Learn how to use our Annual Report (Part 3) toolset to create an annual report that covers important topics like your company's value creation, team highlights, financial ratios, competitor analysis, full year timeline, strategic goals for next year and five-year financial projections, all of which you can download and customize to your needs.

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Outcome

Annual reports can be a powerful promotional tool for your company. They are a key marketing tool for investors, and often include illustrations, letters from a key chair or CEO, and always offer a financial overview. Because it is an outward external facing document, they also should be written as such. They often highlight achievements and goals for the future.

When investors read these documents, they are looking for an understanding of the company's core business, customers and industry, its financial data like a balance sheet, cash flow, or past quarter performance, as well as any risk factors associated with the company like impending regulation, legal cases, too much customer concentration, or industry-wide considerations like supply chain problems.

For example, check out the video above to find out why Warren Buffett reads annual reports.

Tool highlights

How we create value

Begin with your core vision, mission, values and team, as well as any key achievements and milestones from this year. Once that's all out of the way, you can focus on your core business, how it works, and how you create value.(Slide 7)

Instead of a paragraph block of text, you can break down how you create value across multiple elements of your business.

Show the creation of value across multiple stages, and highlight additional details and key metrics that support your statements in a visualization similar to a KPI dashboard, but applied to your value creation.

Last, list the end result of the creation process as the value created. This list of created value should not just be company-centric, but value created for other stakeholders like customers, shareholders, or societal benefits from the customer.

Elsewhere in this toolset, you can highlight ESG related factors with its own slide. These could be value created through upskilling employees, hiring diverse employees with fair wages, or any sustainability endeavors you've undertaken.

Team of the year

After you've introduced your business, you may want to highlight a specific segment or team for exceptional performance. A team of the year visualization helps draw investor attention to a specific team, more from a recognition standpoint than a reporting standpoint. (Slide 8)

Execs can use this slide to highlight stand-out accomplishments from a specific segment of the business, which can then be used to help set benchmarks, encourage employee motivation, and showcase motivated employees to external stakeholders like shareholders.

Financial ratios

Next up, the financials. No annual report is complete without an overview of finances. Even if they're at a glance or a high level, you need to break down your financial data so internal and external stakeholders can assess your performance. The most standard and comprehensive ways to report your financials is with a financial ratios report.(Slide 13)

These are your company's P/E Ratio, which is the ratio of a company's share price to the company's earnings per share; your return on assets, which is how profitable a company's assets are in generating revenue; debt to equity,which is the relative proportion of shareholders' equity and debt used to finance your company; return on equity, which is the profitability of a business in relation to the equity or assets minus liabilities; current ratio, which measures whether or not a firm has enough resources to meet its short-term obligations; and finally return on investment, which is the net profit and cost of investment that results from an investment of some resources.

In this visualization, you can use the box next to each category to input the relevant data. Then address these numbers and how they compare to previous years by plugging them in on the right hand side. Then, adjust the bar graphs to reflect the year-over-year change. If you can show consistency, you might attract the attention of Buffett:

This overview is indispensable to any annual report, as the one key determinant to a company's level of success is its financials.

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Competitor analysis - market share

Once the stakeholders involved know your financials, it's important to put those numbers in context, particularly in terms of your performance benchmarked against your competitors. A Market share visualization can be used as a competitive analysis to show where you stack up against a series of top rivals. (Slide 23)

While market share is important to any industry, it's particularly useful for those companies that plan to enter new markets. This visualization uses bar graphs to show how you match up to your competition in terms of market share across four key factors of competition. A little box on the side can hone in on qualitative or quantitative highlights at a glance. This helps provide additional context or helps readers digest the data represented in the graph.

Ever wondered why Warren Buffett says you may want to include a competitor analysis in your reports? Check out the video above. And while you're at it, as a reminder, don't forget to download and customize these slides to use for your own annual report.

12-month timeline

This 12 month timeline provides a month by month overview to key stakeholders on the top objectives and activities for each month. (Slide 32 and 33)

Execs can also provide a full 12 month gantt chart visualization that can be segmented to highlight key milestones, leadership objectives, operations-related endeavors, marketing activities and resource development.(Slide 34)

Strategic goals for next year

Now that you've covered the last fiscal year, it's time to touch on your plans for the future. While annual reports focus on the present and where the company is today, it's also helpful for stakeholders to highlight your expectations for following years.

Outline strategic goals for next year to share your objectives for the future, why these objectives are important to your company, and the key initiatives the company will undertake to achieve it.(Slide 29)

Simple graphics can be used to break up objectives into broad categories like financial objectives, process or operations-related endeavors, quality and standards initiatives or consumer-facing goals, just as a few examples. Each company's strategic goals will be broader or more specific depending on their industry, so customize these slides as you wish to best fit your company and industry.

Because annual reports are commonly shared externally, it's important for companies to use the appropriate public facing diplomacy. For instance, in the "what it means to us" section, you should phrase the benefits in a way that emphasizes its importance to external stakeholders.

Financial projection

Last, it's time to point to your future financial projections.

Use this KPI dashboard style visualization to highlight your key financial projections. Map out your anticipated revenue growth trajectory, net income, cash balance, and net free cash flow expectations.(Slide 30)

You can also chart your projections for up to five years in the future across key metrics like profitability, efficiency, leverage, return on assets, return on equity, liquidity, and break-even revenue.

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