Annual Planning: How to Make It Work Without Losing Focus

Summer is over, and it’s time for football, pumpkin spice, and one necessary evil: annual planning! If the thought of this last one makes you break out in a cold sweat, don’t worry—you’re not alone. At Virgo Strategic, we’ve been through more planning processes than we care to admit, and we know how quickly they can become a frustrating time drain.

Too often, annual planning is done in silos, misaligned with the company’s vision and strategy, and abandoned before the ink on the budget is even dry. Spoiler alert: this is a colossal waste of everyone’s time.

A good plan, however, is more than just a box-ticking exercise. It’s your roadmap, the thing that aligns everyone from the CEO down to the newest intern, ensuring that resources are used wisely, goals are clear, and every team member knows exactly how they’re contributing to the company’s success. So, what separates a good plan from a bad one? The best annual plans share two critical elements:

1. They’re Fully Integrated

Integration means aligning all parts of the organization toward a common set of goals. A plan that’s not integrated is like trying to put together a puzzle without seeing the picture on the box. Everyone might be working hard on their pieces, but without a clear view of how it all fits together, the results are disjointed and frustrating. An integrated plan ensures that every department and team is moving in sync, with clear communication and shared objectives. This avoids the dreaded silos and fosters collaboration.

But integration isn’t just about getting departments on the same page; it’s also about connecting your strategy with your financials. Too often, companies treat these as separate exercises, with strategic planning happening in one silo and financial modeling in another. This is a recipe for misalignment. Instead, your strategic goals and financial models should be directly connected. When your strategy and financials are integrated, you create a cohesive plan that not only outlines what you want to achieve but also how you’re going to allocate resources for it. This ensures that your plan is both ambitious and grounded in reality.

2. They Work Backward from a Clear End Point

Whether your ultimate goal is to sell the company, prepare for an IPO, or hit another significant milestone, starting with the end in mind is crucial. This approach ensures that your plan isn’t just about surviving the next 12 months, but positioning the company for long-term success. While this ultimate goal might not need to be broadcast outside the leadership team, it plays a critical role in shaping the strategic vision communicated to the wider organization. By working backward from this clear end point, teams can craft specific, actionable goals for the year that align with the company’s broader strategy.

Getting Started: Clearly Define Roles & Responsibilities

Even with the two essential elements of a good plan—integration and a clear end point—it’s destined to fail without clearly defined roles and responsibilities. One of the most common culprits behind a poor planning process is surprisingly straightforward: no one knows who’s doing what or when.

Think about it: What are the specific deliverables for each stakeholder? Who do they report to? Who’s in charge of setting deadlines? Who’s making sure everyone stays on track? And, ultimately, who gets to make the final decision? When these questions are left hanging, you’re in for chaos and frustration.

To start, it’s important to define the following:

• Leadership Team: This group sets the strategic vision for the year. They define the direction and ensure that everyone in the organization understands their roles and responsibilities in executing the plan. The leadership team can consist of the CEO and their direct reports or other executive-level members, depending on what makes the most sense for the company.

• Plan Owners: These are the key individuals responsible for each part of the plan. They gather all the necessary context and communicate it to leadership. Identifying these owners can vary depending on the size and stage of your company, but your organizational structure should make it relatively easy to pinpoint who they are.

• Annual Planning Lead: FP&A teams often take the reins here, sometimes teaming up with strategy or operations. They’re deeply familiar with the company’s financial landscape and operational details, making them well-equipped to ensure plans are both realistic and aligned with strategic goals. However, there can be a downside—taking on the planning process can pull them away from their regular responsibilities, which might distract them from providing accurate forecasting and keeping leadership informed of any risks to meeting targets. This is why bringing in consultants can be beneficial. It allows your FP&A team to more effectively participate in the planning process when they’re not leading it, ensuring they can contribute without being spread too thin. Plus, outside experts bring a wealth of knowledge—they know best practices, have seen the best board decks, and can help streamline the entire process for optimal results.

Annual Planning Timeline (~2 months):

1. Leadership: Setting the Vision (1-2 weeks)

The planning process kicks off with leadership working backward from the long-term end point to define the near-term strategic vision and objectives. This is where leadership sets the big picture for the year, whether it’s defining revenue targets, identifying key growth markets, or prioritizing product development initiatives. At Virgo, we like to call this outlining "what must be true"—identifying the key conditions and milestones that need to be achieved for the strategy to succeed. By focusing on these critical areas, leadership provides the clarity and direction needed for teams to develop their annual plans, ensuring that all efforts are strategically aligned and contribute effectively toward the company’s overarching goals.

2. Mapping Out Known Constraints (1 week)

Before diving into the details, it’s crucial to map out the known constraints so plan owners focus on what’s realistic and achievable, reducing the back-and-forth in later stages when numbers need to be refined. Think of this step as defining the edges of the box. By identifying things like budget limitations, headcount caps, or regulatory requirements, you give your teams a clearer picture of the playing field.  With these boundaries in place, the planning process becomes more focused, and the final plan is more stable and credible.

3. Team Involvement: Building the Bottom-Up Plans (2-4 weeks)

With the strategic vision and constraints in place, teams are tasked with building the detailed plans that will execute that vision. This bottom-up approach is essential because those closest to the work have the best insights into what’s feasible and what needs adjustment. Involving teams in the planning process not only taps into their expertise but also ensures they’re fully bought into the plan. This level of involvement is crucial for making the plan actionable and realistic.

4. Rolling Up and Refining the Plan (2 weeks)

The best plans aren’t made in one go; they’re developed through thoughtful iteration and careful review. After teams draft their plans, it’s back to leadership for review. Leadership then offers their insights, ensuring everything aligns with the company’s overall strategy. But it doesn’t stop there—pass it back down to the teams for tweaks and refinements.

Sometimes this back-and-forth only happens once, while other times it may take a few more rounds, depending on the number of changes that need to be made. In a well-run process, where everyone is aligned on objectives, budget constraints, and key priorities before building their bottom-up plans, this back-and-forth is typically minimized. The result is a plan that’s not just good on paper, but truly effective in practice—strategically sound, operationally feasible, and ready to be executed.

Final Thoughts

Effective annual planning requires focus and expertise, and is a capability that needs to be built and developed over time.  When done well, the process results in strategic focus and operational alignment. However, when companies miss the mark, planning feels disjointed and distracting—even painful.

One way to de-risk your planning sessions is to work with an external partner like Virgo Strategic. Drawing on our broad experience supporting early-to-growth stage startups, we leverage best practices and tailored process design to fully merge your strategy with your financial goals while working backwards from a clear target. With our guidance, your internal teams will smooth their capacity and avoid operational distractions, while still building the exposure and skills necessary for future planning sessions. What once felt like an overwhelming task can transform into a strategic advantage for your company. Happy planning!