The 7 Steps of Annual Planning

⏲ 10 min read

What is annual planning? What are the benefits of a good annual planning process?

Annual planning is the process to create a strategic plan for the coming year - in early to mid-Q4, you want to start to plan out your strategic goals, milestones, and tactics for the next year. You’ll primarily be planning activities in the year to come, but you also want to tie in and revisit your 3 and 10-year goals for the company.

It updates all your goals and details how you’ll reach them - it will outline your goals, the strategies you’ll use to approach those goals, and the milestones and tactical steps to execute your strategies. By the end, you will have aligned your people and resources to strategies to hit your goals.

Planning Process

How long does the process take?

Start gathering data for planning in early October - at that point, you have all the Q3 actuals to make for three quarters of current year results. Use this period to gather customer, financial, and usage data, conduct research, and do a retrospective on the current year. Beyond October, your opportunity is limited by Thanksgiving (in the US) and the Holidays in December.

Prep takes weeks, then annual planning can happen in a 2-3 day session - gathering data and researching thoroughly takes a few weeks—then, you can get everyone together for 2-3 days of planning sessions in November or December. Your meeting cadence doesn’t need to be complicated. You could schedule a retrospective in November and then do a couple days of really focusing on the plan for next year in December.

Who is involved in annual planning, and what is each participant’s role?

Assign someone (usually a COO or CoS) to facilitate the annual planning process - it could be your COO, Chief of Staff, or a Functional Leader who project manages the annual planning process. They should clearly articulate the timeline, who will be involved at which stages, and communicate progress against it. They can do it in G-Suite with Slides and Google Sheets. A Chief of Staff can take on the role of running the process from end to end, while the COO may be focused on the operations teams-specific planning.

The CEO should drive the initiative behind the annual plan - it’s their job to understand what the high-level vision and goals for the coming year are and what broad direction they want to take the company.
The Heads of Finance, People, Product, and Sales will build out key components of the plan - the CFO will own the budget and financial plan and the head of people will own the headcount plan.
Leadership teams and team leads will contribute to their function’s plans - they’ll review the performance of their function in the retrospective, and contribute to planning for their individual function in the coming year. C-Suite leaders are always involved in the decision-making and planning sessions.
There’s benefit to involving managers - even if they’re just looking at how their function’s plan rolls up to the overall company plan. This creates ownership and engagement from managers as they see how their role relates to the company’s plan for the year.

What are the steps to the annual planning process?

Tip: Consider your performance to plan from all angles:

How did customer feedback compare to expectations? (This is an important one—the point of your business is to be successful in the eyes of customers; start here and go down to the processes and pillars that support executing for the customers)

Did you hit your key milestones from the year before?
Did you hit the key goals, strategies, and outcomes by team?
Did you hit revenue numbers
Did your headcount grow as expected?

There are three layers of building a top-down plan:

Start with the overarching company goals first - what are the one to two things you want to look back on at the end of the year and say you did it? Those are the big goals you’ll share with your team and rally everyone around with an internal marketing plan.

Consider the strategies you need to enable your pursuit of those goals - what organizational strategies or investments do you need to make to enable you to pursue your goals?

Then, come up with the tactical steps to support the strategies - what are the people and monetary requirements pursuant to your strategy? .

The CEO should synthesize with the CoS/COO and have a draft in December - then you can spend an annual planning session refining the plan, prioritizing investments, and getting buy-in from the C-Suite. You’ll walk out of it with a plan that everyone agrees to and feels ownership over.

As long as you have a clear goal and strategy, you can assuage denied budget requests - inevitably, you’ll have to deliver a difficult message to some functional leaders about their place in the budget prioritization, If you have clear goals and strategy, that makes that message more palatable because they’ll at least be familiar with the logic behind the decisions.

Output

What Materials or plans will come out of the annual planning process?

Milestones/revenue plans:

Create an executive-driven milestone plan – these lay out the milestones for the entire business. The CEO needs to own and drive the business plan.
Then, ask for a plan from each leader/manager in the business – each of your leaders will run the milestone planning for their function. Some companies then roll them up into one using a planning tool like Accelo.

Talent plan:

This is driven by your overall financial plan – that will tell you what your budget for headcount is and where you need to hire. Look top-down at what you can afford and bottom-up at what headcount areas you need to prioritize.
Be sensitive when prioritizing – people might be disappointed that their budget is not prioritized. Refer to goals and ensure everyone has a clear understanding that it’s a business.

Budget:

First, take last year’s performance and estimate revenue growth – you can do some rough estimates that you’ll end up growing by x%. If you’re raising capital, incorporate any influxes of capital. That will give you a simple top-down forecast for your revenue plan.
Then, take last year’s costs and account for new spend – when forecasting cost, you need to project the increase in known costs you’ll take on via investments throughout the year.

How do you communicate your plans to different audiences?

Communication is crucial and needs to happen in multiple steps – it’s important to lock the plan in in December so that you have the time to communicate it out to all of the necessary parties:

First, communicate the plan to the board and executive team – get the right approvals and buy-ins that you need from your executive leadership before rolling it out to the broader team.
Then, roll out the plan in an all-hands meeting in January – you could preview the high-level strategy at the end of December before the Holidays, and then deep dive and share more in the all-hands meeting.

Try to make the roll-out exciting – if you can provide a narrative around your annual plan and strategy, that helps it resonate with employees. Include customer feedback and anchor in the company purpose, bring in your values and the voice of the customer to make the rollout an internal marketing campaign for the annual plan. Some companies invest in professionally made videos to show at the all-hands where they feature customers, employees and drive excitement and buy-in for the next phase of growth.

Cultivate ownership of the plan among individual contributors – you want everyone to own the plan, understand it, and see how they play a part in getting to the goal. Some companies don’t invest enough in that and then their employees lose heart when things don’t go to plan. If you’re not good at articulating the vision, the failures feel heavier for employees.

Articulate important target metrics and downstream effects of the plan – tactical function-specific considerations like metrics or sales quotas have to be communicated so that each function and individual can know what their work is geared toward.

Execution

What frameworks can help you with goal setting during annual planning?

Which framework you use matters less than using one – they’re pretty duplicative and largely articulate many of the same goal-setting principles covered in this guide. Options to consider include:

Traction EOS
Scaling Up
OKRs
V2MOM

How do you track execution towards the goals in your annual plan? What meetings or communication cadences should you incorporate?

You need to set the rhythm of the business for the whole company – you need to devise meeting cadences for all the relevant stakeholders in the organization. When you’re doing Annual Planning, identify the different groups of stakeholders that need to know the plan. Oftentimes it’s the board, executive team, managers, and individual contributors.

Create the optimal meeting cadence for each stakeholder group – set the meeting cadence and reporting structure for each level of employees and leaders to monitor and adjust to the plan, ensure progress, and align on the goals. Think of it as concentric circles: External reporting requirements drive it, and usually reporting to the board. So if you need to meet with the board every quarter, there’s likely to be monthly executive meetings. The executive team needs to be prepared for that with weekly leadership meetings. From there, figure out what meetings need to happen monthly, weekly, and daily across lower rungs of your organization.

Track and measure success against the plan – use the plan as your guide to track success throughout the year. It sets out the activities and goals for the year and allows you to measure your progress vs. expectations.

How should you revisit and adjust your plan throughout the year?

Evaluate your plan in the last two weeks of the second month of the quarter – at that point, you can start to look at it from a finance, sales goals, and talent perspective. You have the opportunity to lightly reforecast the quarter and you can make light adjustments for each coming quarter.

Overall

What are the most important things to get right?

Be realistic and consider past results – base your forecasts in actuals from past actuals. Your historic results are the most concrete baseline you have for projecting results into the future.

Get the right buy-in from the right stakeholders – to ensure that the plan is effective and acted upon. Everyone should feel like they have ownership and understand what their role is in the plan. You need the right people and the right buy-in.

Do quarterly reforecasts – iterate on the plan each quarter. This allows you to be nimble and adjust to shifting realities as you move throughout the year. You can’t be willfully blind to changes. Make sure you have a process in place to measure progress.

The goals need to be aligned with your vision or mission – you start with a long-term vision for your company, and use the annual plan and your activities for the year to make progress on your goals.

What are common pitfalls?

Delaying planning for too long – people don’t start early enough and then they freak out when it’s December and they don’t have anything to communicate into January. Start earlier and do it in bits and pieces. Q4 is so busy that you need a runway—if you’re a 50-person company, then cramming everything into two days won’t suffice.
Ignoring market conditions – don’t plan in a bubble. If there are changes to the market, you need to take them into account when you’re planning for the year.

This post was created in partnership with OneGuide as part of their resource library for high-growth PE and VC-backed companies. Learn more about OneGuide and access expertise on 100+ other topics at askoneguide.com.

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