While many consumers are focused on the hectic holiday shopping season, many CEOs are focused on the hectic annual planning season.

Each of my eight VC-backed boards are in the throes of this annual ritual – trying to gaze into the crystal ball to divine what next year’s results will look like and how to develop a plan to get there.

Having done this for a number of years, I’m struck by how similar best practices are across a range of companies – whether they’re consumer Internet companies (note how deftly I avoided the tired label "Web 2.0"), software companies, medical device or something in between.  Since many companies are wrestling with this process as we speak, I thought I’d share a few thoughts on what I’ve observed to be useful tips and techniques.

Set one and only one plan of record.  Many CEOs like to get "cute" by having a "board plan" and an "internal or stretch plan" which are different (with the internal/stretch plan being more aggressive).  In the end, this tends to confuse everyone more than it’s worth (yes, I used to do it, too, and I confused myself!).  The sales team will typically have a quota that in sum is greater than the plan of record, but there should be one and only one plan of record and it should never change throughout the year unless the board explicitly agrees to a replan, say midyear.  All performance during the year should thus be compared to the plan of record.

Set a 70% confidence plan.  When I was an officer at a public company (Open Market), we used to always set expectations with the public markets against a plan we were 90% confident we could beat.  In a venture-backed company, this is known as sand-bagging and it has a negative side effect, which is that you will tend to under-invest in future growth and infrastructure if you don’t set a plan that anticipates faster growth.  Another common mistake CEOs make is setting an unrealistically aggressive plan – the "if everything goes right" plan.  I’ve often had companies see revenue growth of 3x year over year, but feel like they’ve "lost" because they set an unrealistic growth plan for 5x.

Articulate your strategic goals on one page, then cascade.  The financial numbers tell only a part of the story in a plan of record.  The important plan elements in a growing, VC-backed company are the strategic objectives that will position the company for value creation 3-5 years down the road, not just what happens next quarter.  These should be articulated at a corporate level on one page so that the board can track them alongside the CEO, and then translated by each VP/department head into their own set of summary objectives.  Only by linking the objectives from top to bottom with the financial numbers can you be sure that the plan "holds together" and doesn’t have any conflicting assumptions or elements.

Make it count.  Assign CEO and executive team bonus dollars against achieving the financial and strategic objectives and measure them quarterly.  That way, it’s more than just words on a paper, but makes keeping score a part of everyone’s top-of-mind activity.  Some entrepreneurs find it funny to have $10-20K at stake against quarterly objectives when they’re really aiming for a $5-20 million equity payout, but by putting some real dollars against the shorter-term milestones, it helps everyone focus their energy and attention to the small steps along the path to the bigger success.

Discuss the "what if" scenarios with the board.  In almost every board planning meeting I’ve been in, someone inevitably asks the "what if" questions – "what if revenues are half what you think?" or "double?" or "what if revenues are zero?".  The last thing you want to do as a CEO is get caught flat-footed mid-year when things don’t go according to plan and the board hasn’t agreed to a set of actions.  "I just assumed you guys would bridge the company", is the last thing a board wants to hear 60 days before running out of cash!

What are some of the planning techniques you’re applying this year?