Building the Annual Operating Plan (AOP) has traditionally been seen as a finance activity. But in my experience it is most effective as a partnership between Go To Market, Product, HR, and Finance. It is truly an opportunity for the company to come together. Annual planning is the process of developing a plan — complete with goals, objectives, and milestones — for the year ahead. Some companies will put together a long range plan (LRP) or a 3 year strategic vision. Think of the annual plan as the first domino of that rolling strategic plan.

Let's break out one way of putting an annual planning process together. Below are the phases and suggested timelines.

Phases

1. Product Roadmap alignment
2. 1. T-shirt sizing product bets
2. TAM/SAM/SOM (Total Addressable Market / Share of Addressable Market / Share of Obtainable Market)
3. Segmentation
4. Marketing planning
5. 1. Historical analysis
   2. Define target audiences
   3. Programmatic marketing forecast
   4. Event planning and budgeting
   5. Headcount planning
5. Sales planning
6. 1. Account ownership rules
   2. Headcount allocation
   3. Territory Formation and Sales Team Assignment
   4. Initial Revenue Target Cascade
   5. Target Setting
   6. Sales Rep Readiness
   7. CRM Segmentation Cutover
6. CS planning
7. 1. Customer ownership rules
   2. Touch segmentation
   3. Headcount allocation

In today’s article we’ll focus on sales planning and next week I have a guest writer focusing on territory design and management. I prefer to think of annual planning as a heavily important cross-functional project. Below is a sequential view of an annual planning process which you may follow.

Planning can start as early as May but I’ve often come across an August start. The earliest I have ever seen was April. In that organization we had a Launch Readiness phase. The Launch Readiness phase prepared the organization for the Annual Planning cycle. Revenue Operations may develop the following to ensure a smooth planning cycle:

• Announcement of core planning tools
• Development and publication of important resources such as the Annual Planing calendar
• The Annual Planning data flow and architecture
• The Dispute Resolution Process
• And training content resources (i.e, office hours, Wikis)

Key strategic decisions happen during this phase, such as segmentation policy and discussion of changes to existing accounts

Account ownership rules

Account ownership rules are foundational to the sales process and directly influence the assignment of accounts to sales reps. This phase involves setting the guidelines for who owns which accounts, ensuring clarity and fairness. It includes defining the criteria for ownership (e.g., industry, geography, revenue potential), managing account transitions, and resolving disputes. Clear account ownership rules help minimize conflict, ensure a balanced workload, and maintain strong customer relationships.

Regions

Global businesses will generally break down teams geographically in addition to having segments. Common geographic territories may look like this:

1. Americas
2. 1. NAM (North America)
   2. LATAM (Latin America)
2. EMEA (Europe / Middle East / Africa)
3. 1. DACH (Germany, Austria, Switzerland)
   2. Iberia (Portugal, Spain)
   3. France
   4. SEEMEA (South East Europe, Middle East Africa)
   5. BeNeLux (Belgium, Netherlands, Luxembourg)
   6. Scandinavia
3. APAC (Asia, Pacific)
4. 1. China
   2. Japan
   3. Korea
   4. SEA (South East Asia)
4. ANZ (Australia, New Zealand)

Where companies are headquartered

Having a simple rule of thumb such as the corporate headquarters is the “global account owner” and domestic locations as a “regional account owner” is one construct. This works for larger, global multi-national corporations. Smaller companies don’t have to worry about these issues. According to our segmentation rules above we may have the following combinations for an account:

• ENT-ANZ-AUS-FINS-008

This territory would be for an enterprise account in Australia (therefore falling into ANZ). As you can surmise, Australia is broken out into at least 8 accounts. The territory this account is assigned to is 008. FINS is shorthand for finance & insurance.

Here’s another example:

• SUP-NAM-WEST-010

SUP is shorthand for Startup. The territory falls into the West territory within the North America region and is assigned to territory number 10. For startups you may omit the industry if you’d like. Totally up to you.

Dispute Resolution Tools

What happens if a business is headquartered in Brazil but decisions are made in North America? This is where you can create a few tools to help you. Here are a few examples:

1. Revenue splits
2. Team culture
3. Reassignment

Revenue splits are simple in concept and difficult to execute. For example, let’s say that a company is headquartered in one territory but decisions are made in another territory. One thought is to have the reps work out an agreed upon revenue split. This works if you have a standard setup such as a 50/50. The issue comes if the deal clearly has one rep pulling significantly more weight than the next rep.

This is where team culture can make a big difference. Giving a little on one account may come back to you in one form or fashion with another ruling in your favor down the road. My suggestion is to keep it simple with a standard revenue split and to have business justifications in written form to both team managers to work out. If it’s an existing customer then the value of the account transfers over as quota as well. If it’s a promising customer (which you can define) then it could transfer over with quota as well. A simple mechanic would be to have a dollarized account score attributed to that account. Therefore if an account moves over so does the quota.

Taxonomy can provide flexibility

Noted above were several ideas for concatenating several concepts together to organize accounts:

• Segment (Enterprise, Mid Market, SMB, Startup)
• • Often determined by revenue OR employee size
  • I personally think these are decent proxies for buying committee complexity
• Region (Americas, etc.)
• Industry (I’ve usually used some sort of mapping to industry data; say from a source like ZoomInfo)

Headcount allocation

Headcount allocation involves determining the optimal number of sales and support personnel needed to achieve revenue targets. This phase includes analyzing historical performance, forecasting demand, and considering market conditions to allocate resources effectively. The goal is to ensure that each territory and market segment is adequately staffed, avoiding both under-resourcing (which can lead to missed opportunities) and over-resourcing (which can increase costs). Strategic headcount allocation is crucial for maximizing efficiency and achieving growth objectives.

RevOps, in partnership with Finance, take inputs (i.e., segmentation data, year end headcount (HC) exit, and estimate of next plan year HC) to create HC targets that are cascaded to the teams.

Compared to marketing, sales has fewer levers to pull. Namely:

• Channel (direct vs indirect)
• Segment (Enterprise, Mid Market, SMB)
• Role type (SDR, Account Executive, Account Management)

The answer I commonly come across is that to increase sales then headcount must be added. That’s not always the answer.

But if you needed a quick-and-dirty way to calculate the headcount (give or take a factor of X%) then try something like the following set of steps:

1. First, determine how much revenue to close next year. There is always a top down goal. The bottoms up of what can be achieved is RevOps and GTM leadership need to use to calibrate and check unrealistic expectations.
2. Second, calculate a reasonable attainable quota for your Account Executives. Quota multiples tend to be in the 4x range. That is base + on target variable multiplied by 4. Some companies can stretch to 5x or 6x with significant tailwinds and incredible brand name recognition along with enterprise deal sizes.
3. Third, apply an attainment factor. Not all reps pan out. And they will take at least a tiny amount to ramp. Assume anywhere between a 65% to 75% attainment assumption. 70% is the most often quoted number I come across.
4. Fourth, add overlays. For every 8 sales reps add 1 manager. For every 20-25 sellers add 1 sales operations. For every 3 sales reps add 1 SDR and 1 Solution Consultant. Your ratios may vary but you can see costs add up quickly by just “adding sales reps”.

At a finance driven organization headcount may often be dictated by boxing in SG&A (sales, general, and administration) headcount ratios.

Territory Formation and Sales Team Assignment

In this phase, territories are defined, and sales teams are assigned to cover them. Territory formation involves segmenting the market based on geography, industry, customer size, or other relevant factors. Once territories are established, sales reps are assigned based on their strengths, experience, and existing relationships. The aim is to create balanced territories that maximize coverage while preventing overlap or gaps. Effective territory planning ensures that every potential customer has a dedicated point of contact and that sales teams are positioned to succeed.