Annual Planning for Small Teams: A Simple Step-by-Step Process

Annual planning has a reputation for being something big companies do in hotel ballrooms. For a small business, it can be much simpler: a few focused working sessions that leave you with a short plan, a handful of priorities, and a calendar of check-ins.

The goal is not a perfect forecast of the year. It is a shared answer to three questions: what did we learn last year, what matters most next year, and what are we going to stop doing to make room for it?

This guide lays out a five-step process that a team of three to thirty people can run in a few weeks without outside help. Adjust the timing to your season; many businesses plan in their slowest month rather than in December.

What the process should produce

Be clear about the outputs before you start. The Lean Enterprise Institute describes strategy deployment as a management process built around a plan that is "typically annual" and developed "with precise goals, actions, timelines, responsibilities, and measures." For a small business, that translates into five things:

• A one-page strategic plan (see our guide The One-Page Strategic Plan: What to Put on It and Why).
• Three to five priorities for the year, each with an owner and a measure.
• A short list of things you will stop or not start.
• Specific priorities for the first quarter.
• Dates for monthly and quarterly reviews, already on everyone's calendar.

If a step does not contribute to one of those outputs, skip it.

Step 1: Look back honestly

Two or three weeks before the main planning session, gather the facts. Pull the year's numbers: revenue by product or service, gross margin, cash position, customer counts, and anything you track on capacity or quality. List last year's priorities and mark each one done, partly done, or not done.

Then ask each person on the team to answer a few questions in writing before the session: What went better than expected? What went worse? What did customers complain about or praise? What took far more time than it should have?

Collecting answers in writing first gives quieter team members an equal voice and keeps the meeting from being shaped by whoever speaks first.

Step 2: Start with what to stop

Before adding anything new, decide what to remove. In a 2003 USA Today column, Jim Collins described making a "stop doing" list part of his annual resolutions, calling it "a mechanism for disciplined thought about how to allocate the most precious of all resources: time." He also wrote that when his research team studied companies that went from mediocrity to excellence, they were struck by how many of the big decisions "were not what to do, but what to stop doing."

For a small team, candidates often include unprofitable products, customers who consume a disproportionate amount of time, reports nobody reads, and projects that have been "almost done" for months. Agree on at least one meaningful thing to stop before moving on.

Step 3: Name the challenge and choose priorities

With the facts on the table, try to state the single most important challenge or opportunity for the coming year in a sentence or two. Then brainstorm priorities that would address it.

Most teams generate far more good ideas than they can deliver. Google's re:Work guide to objectives and key results recommends picking "just three to five objectives," because more "can lead to over-extended teams and a diffusion of effort." The same guide suggests a test for whether a list is really just business as usual: stack-rank current work and new requests by value versus effort, then "drop low-priority efforts and reassign resources to the top" goals.

Write each priority as an outcome that an observer could check, not an activity. "Launch online booking and move at least half of appointments to it" is checkable. "Work on online booking" is not.

Step 4: Test the draft with the team

A plan written by the owner alone often fails on capacity: it assumes time that the people doing the work do not have. Lean organizations address this with a back-and-forth the Lean Enterprise Institute calls "catchball," a dialogue between leaders and teams "about the resources and time both available and needed to achieve the targets." The stated objective is to match resources with projects "so that only projects that are desirable, important, and achievable are authorized."

In a small business, catchball can be simple. Share the draft priorities, then ask each person: What would you need to make this happen? What would you have to stop doing? What is missing? Revise the draft based on what you hear. If the answers show you cannot staff five priorities, cut to three.

Step 5: Set the first quarter and the review calendar

A year is too long to manage directly. Break each annual priority into what must be true by the end of the first quarter. Google's re:Work guide describes setting both annual and quarterly goals and holding a company-wide meeting at the start of the year where the prior period's results are shared alongside the new goals for the year and the upcoming quarter.

At the same time, check the plan against your budget and cash. A priority with no money or time attached is a wish. If a priority needs a hire, an equipment purchase or marketing spend, write down when and how much, and confirm it fits your financial plan.

Finally, a plan can be well made and still fail if nobody looks at it again. Before the session ends, put a monthly check-in and a quarterly reset on the calendar for the whole year, and name who will prepare the numbers for each one.

Those reviews are your version of the "check" and "act" stages in the plan-do-check-act cycle, which the Lean Enterprise Institute describes as evaluating results against the target and then either standardizing the change or beginning the cycle again.

A sample timeline (hypothetical)

Imagine a twelve-person print shop planning in January, its slow month:

1. Week 1: The bookkeeper prepares year-end numbers; everyone submits written look-back answers.
2. Week 2: A half-day session to review facts, agree on a stop-doing list and draft priorities.
3. Week 3: The owner shares the draft; each team lead responds on capacity and needs.
4. Week 4: A two-hour session to finalize three priorities, first-quarter targets and the review calendar.

That is roughly one working day of meetings spread across a month, which most small teams can manage.

Key takeaways

• Decide the outputs first: a one-page plan, three to five priorities, a stop list, first-quarter targets and a review calendar.
• Look back with facts and written input before you look forward.
• Choose what to stop before choosing what to add.
• Test the draft with the people doing the work so priorities match real capacity.
• Break annual priorities into first-quarter targets and schedule reviews before the session ends.

Sources

• Lean Enterprise Institute, Lexicon: Strategy Deployment
• Lean Enterprise Institute, Lexicon: Plan, Do, Check, Act (PDCA)
• Jim Collins, Best New Year's Resolution? A 'Stop Doing' List, USA Today (December 30, 2003)
• Google re:Work, Set goals with OKRs (originally published 2016)