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Annual Planning Done Right

Updated: Nov 1, 2023

Business meeting

Operating a business in today’s highly fluid environment couldn’t be more challenging. Between wage inflation, material scarcity, demographic shifting, interest rates, monetary inflation, A.I., among a thousand other variables and life demands, planning for success can be exhausting. In conducting annual planning for myself, my companies, and my clients, the process can be far simpler than we make it. Many systems can be applied to an effective annual planning session, but I try to stick to 4 basic discussions to provide clarity for the team and for decision-making.

Analysis (What happened and where are we now?)

Unknowns (What could happen and what don’t we know?)

Goals (What do we want to accomplish and why?)

Traction (What does it look like on a granular level?)


This is a function of 3 main areas of a business:

  • How did the company perform overall?

  • What were the key (services or product) drivers of profit?

  • What did we accomplish over the course of the last 12 months?

The company analysis needs to be conducted like an audit. Analysis should take some time to investigate the key drivers of the business and what are the laggards keeping it down. The goal is to conduct this analysis throughout Q4 and for it to be ready for discussion at the annual meeting. A complete report is preferred, but not required to have a meaningful discussion at an annual meeting. If this is your first time having an annual meeting, start with a financial analysis, a product/service analysis, and a market analysis. The analysis will provide an understanding of where you’ve been and where you need to go to remain competitive.


Through your initial analysis, you will uncover unknown unknowns. The goal is to convert them to known unknowns so that the company can make informed decisions when markets, industries, or conditions change. Listing your unknowns is critical to building a business based on metrics not “vibes.” Vibes are important if you have a wealth of industry experience as subject matter experts are great at recognizing patterns and suggesting scenarios to be aware of, but vibes need to be backed up by actual data and understanding the difference between correlation and causation.

Uncovering unknown unknowns can be conducted by asking simple questions about your situation. Start with finding a subject matter expert and apply questioning logic that allows them to provide first-hand experience. Questions such as:

  • What do you wish you’d known when you were starting out?

  • What did you learn in the process of doing XYZ that surprised you?

  • What assumptions did you originally have about ABC that proved to be inaccurate?

Another way to uncover Unknown Unknowns is to ask questions of your industry.

  • What is everyone else doing?

  • What is the market leader doing?

  • What is the “way it’s always been done?”

Your goal is to come to your business with a fresh perspective. Sometimes knowing too much about your business keeps you from innovating.

Known Unknowns: Known unknowns refer to things we know exist, but we do not have all the information. The Japanese have a saying: “Genchi Genbutsu.” It means “Go and See” and it’s the backbone of Toyota's innovation. Toyota believes in first-hand experiences to learn so when they have questions, they travel all over the world to seek the answers. Uncovering Known Unknowns can be a deliberate journey (I’m not going to cover the concept of overfitting analysis in this article, but here is a great book that explains the dangers of the concept in statistical analysis) or more of a fact-finding journey of exploration (think Howard Schultz traveling to Italy and learning the art of fine coffee).

The goal is to learn more so you can answer your questions. Itemize your known unknowns and start building a plan of action to make them known knowns.


Most companies will put growth (revenue) and efficiency (profit) at the top of their list of goals. But goals don’t always have to be monetary. Goals as a product of goal setting should reflect what was discovered through financial analysis and understanding what information is needed to make sound strategic decisions. For example, through analysis and unknowns, a company realizes its model is starting to decline a goal could be discovering adjacent functions to pivot the company to for long-term sustainability. A great case study for this is Netflix. Netflix dominated the mail-order DVD segment, but Reed Hastings realized that the proliferation of broadband internet would ultimately kill their core service. So, Netflix killed it first and pivoted to streaming before anyone else did. Was it a growth goal? No. Was it a profit goal? No. It was an innovation goal and probably wouldn’t have been made if they hadn’t questioned their own processes, industry, and model.

Goal Examples:

  • % Growth (made using market, industry, and forecasting variables)

  • Market Share

  • Key Client Acquisition Target

  • % profit increase

  • Labor Efficiency Ratio

  • COGS reduction by %

  • # of product launches

  • # of awards won

Goals can be anything the company wants them to be. My recommendation is to make sure they are SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) and they are built using historical data.


Now that we have our goals, what is it going to look like? This is where a leadership team needs to be very granular with goals and envision what will be needed to achieve them. I recommend doing the following exercise to fully understand what a goal will take.

  • Write 1 goal on top of a whiteboard or yellow pad with your executive team.

  • Spend 2 minutes with your eyes closed thinking about what it will look like to achieve the goal

  • Spend 5 quiet minutes writing down everything it will take to achieve your goal

  • Have everyone in the room say what they feel will be needed. Each person reads off what they have written without interruption while someone else writes on a whiteboard or on a notepad.

  • After everyone has finished, someone reads off everything that was said, and a discussion is facilitated about what needs to happen. Kill anything that doesn’t seem necessary, keep what is agreed to be needed, and combine what is similar.

  • Once everyone has agreed on what the goal looks like to complete, document it on something that is referenceable, assign elements of the goal to the person responsible, and start building processes and to-dos to get it done.

The traction process needs to be repeated for each goal that is set. The exercise will help you visualize what needs to be completed, what completed means, and who will be responsible for completing the goal.

Although annual planning is not a perfect science, it is absolutely necessary to build off of previous successes. Being a deliberate company will help you make better decisions, be confident with direction, and build a company you want to work for.

Good luck with your 2024 planning.

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