A mini guide to Annual Planning
Since it’s Q4 I thought it made sense to walk through a process that’s on everyone’s mind as we head into the new year.
I’m talking about Annual Planning. For those acronym obsessed organizations you probably call it AP. I’ll refer to it as such going forward.
So what’s up with AP and why is it important? The purpose of AP is to align the team and everyone within the organization around a handful of priorities that once completed, will move the company closer to achieving its intermediate and short term objectives.
The intermediate timeline being three to five years.
The short term as a one year window.
During my time at Intel we ran concurrent processes called SRP and LRP. SRP stood for short range planning. And just as its name suggests, it’s a continuous planning motion where the business is examined on a rolling basis. That’s a pretty tough slog for many organizations. For this post we’re just going to cover a version of a typical SRP, or as you may call it… Annual Planning.
AP can start as early as August and run through the end of December or sometimes carries through January. It typically ends with a fireworks type of event called Sales Kickoff (SKO) with each leader and rep knowing their goals, targets, and know-how for the following year.
LRP, which I won’t cover today, stands for long range planning. This is an executive exercise examining all of the different businesses within the business. The one difference here is that the planning horizon is three to five years out. This delves into futurecasting and greater unknowns. It’s an aspirational exercise that challenges the business of what it can become. Tackle those BHAGS… or rather the Big Hairy Audacious Goals.
So let’s talk more about that shorter window. One year out. The next year. It’s the end of 2021, so I’m talking about what will 2022 look like.
AP is no fun. You have your day job. I have my day job. And now we’re talking about layering on a whole other workstream on top of your already stressful day to day. Sorry, but not sorry. Great companies are so because they execute, e-x-e-c-u-t-e, EXECUTE.
AP is an opportunity to work hand in hand with our peers in product, marketing, sales, and finance. Each of these teams needs to define how their planning cycle is going to plug into the greater operating plan.
There are two motions that work in concert to intentionally create friction, not conflict. A good type of friction is born from healthy tension. It allows the business to examine what worked, what didn’t, external threats and reaffirm the opportunity. Finance starts with a well informed top down growth target. From there, the marketing and sales teams develop a bottoms up view of the business. The tops down can be driven by a number of criteria. Some are objective, while some are subjective. Objective growth targets could be grounhded in the overall growth of the market. Perhaps the pie you’re competing for is expanding. Why not match one-for-one the growth rate of whatever external research partner you’re leveraging. Gartner or Forrester for example. Perhaps your product or service is the upstart, cannibalizing share from incumbents. Maybe that share erosion rate is the rate you want to use. Whatever you use, there is rigor backing the approach.
So let’s break down planning into nine digestible parts.
Setting the topline (new or renewal)
Defining your universe of accounts
Segmentation
Coverage
Capacity
Capability
Quota
Comp Plans
Kickoff
There’s a lot more to it, but hey this is a blog and a cursory starter for the uninitiated.
So topline growth is generally out of the hands of the Go To Market teams. But you can bet that v2 or v3 of topline is going to be well informed by the first few runs of a bottoms up. One of the key deliverables shaping the narrative is going to be a GTM Operating Model. Similar to the three statement financial models, the GTM Operating Model is a linear model cascading top to bottom from pipeline generation to closed business, new or renewal. Baked into this is a bottoms up QA check matching the size and maturity of the organization to execute the pipeline generation ratios, close ratios, and everything in between.
Now that we have the ballpark revenue targets, we need to start developing our universe of accounts. This is where having an outstanding focus on data quality is important. If you’re selling to the enterprise, well it’s easier to identify potential customers. There are far fewer companies with 5,000+ employees than less. If you’re selling into the SMB, your customer-account model may be very different. Sole proprietors may be within your ideal customer profile. It’s just not realistic to have a comprehensive account universe loaded into your CRM. Do the best you can but don’t break the bank with high calorie expenditure to do so. Be reasonable. My advice here is to start early and establish your Master Data Management strategy. Do you update your accounts quarterly? Well that seems disruptive in my opinion. Perhaps bi-annually is more reasonable. It’s less disruptive, but not so rigid that your inflexibility causes heartburn.
Next up is segmentation. This is the exercise where you’re grouping the universe of accounts into categories with shared characteristics. It stands to reason that pooling accounts will lead to the shortest path to meeting prospects and customers where they are.
Some common methods to segment is any combination of geography, size, industry, product readiness / maturity, and technographics.
From there we layer on the coverage model. What does the inbound vs outbound vs partner mix look like? What roles are needed? Full cycle reps versus an increased specialization model? SDRs to develop qualified pipeline with spot-on personas / ICP. An important mechanism that cannot be overstated is the formation of territories. There are many ways to cut territories and it warrants its own episode. The outcome of a territory cut is that you’ll have a set of accounts within a patch. The likely and best reason for doing this is deep relationships between prospect/customer and rep. As much as I’d like to think sales and marketing is a quote-unquote numbers game, it’s a human experience and relationship driven profession we’re all involved in.
The 5th item is to develop capacity to meet the needs of the business. This is the fun exercise of asking for programmatic spend and/or headcount. How many people need to be hired? What level of expertise? When do they need to be brought in? How do we ramp them? If there are new roles, how do we sufficiently prepare them without necessarily having had this role in-house before? This is definitely an episode all by itself. One thing to note here is that in that operating model we talked about way back in the episode, is that there are ratios to be considered between roles. For example, is it reasonable to have a team of 20 report to 1 person? Probably not depending on the role. Particularly sales reps, at 20 to 1 you’re looking at little to no individual attention. If you look online, you’ll see a wide range of responses. In my experience, enterprise sales orgs would do well to have 6 to 8, while transactional sales motions via inside sales can get away with a higher span of control up to 10.
Sixth. Quota. As a RevOps practitioner I can tell you that no matter what number you dish out. Not everyone is going to be happy. That’s okay. This isn’t a happiness business. If RevOps operated under a banner of pleasing everyone, we would dismally fail our charter. Quota should be no less than the targets. Call it a “thank you Captain Obvious” moment. But then there’s the discussion of overassign. Why do we overassign? Not everyone does it but the thinking goes it’s an insurance policy to hedge against the normal distribution of performance. Now I am probably going out on a limb here, but not everyone in your sales org is going to achieve target. If you’re in the 99.99999% of companies where that’s true, then overassign is a buffer or an insurance policy against telling your board you’re going to fall way behind on target.
Dovetailing after quota is to develop comp plans for the field. Comp plans is again, another episode all to itself. And even that would shortchange the myriad of ways comp can be shaped. Every business is going to have a multitude of different plans for good reasons. Difference in roles, geographies, segments, product offerings, level are going to lead to an arsenal of plans. My quick advice on the topic would be to keep it simple, be transparent, be receptive to feedback,
Lastly, the coup de gras. The kickoff is the Super Bowl of events for the team. It’s a rallying cry to celebrate the wins, learn from the losses, and gather everyone together in one place. The goal is to set the pace for the new year. Business goals have been defined and distributed. Each attendee should walk away know what they are responsible for and are rightfully equipped to execute in the new year. That’s what the planning process is all about. Avoiding the haphazard stumbling into the new year.
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