Pilot Guide: The Annual Planning Playbook

A formalized annual plan lays out the financial roadmap for the upcoming year based on learnings and outcomes from the current year. But more than that, the annual plan can be a rallying cry and a mechanism to force creativity. It's a powerful process that, when done right, will set you up with a plan that will inspire, set guardrails, and keep your growing company marching to the beat of the same drum. 

Pilot’s CFO Services team created the Annual Planning Playbook after identifying a need to define the annual planning process and break it into stages that have specific objectives, deliverables, and considerations to keep in mind. The goal of this playbook isn’t to provide an exact template, but to illustrate a framework for finding an annual planning process that works for your company.

In this playbook, you’ll find planning templates that we use with our own CFO Services clients, examples, fiscal considerations based on your stage, and more. Keep reading to see highlights from a few key sections of the playbook.

Annual Planning Principles

Financial planning is a critical aspect of any successful business and should be a company-wide effort that requires collaboration and commitment from everyone. The process should challenge the company to be creative and resourceful and ultimately arrive at an aggressive yet achievable plan.

One of the keys to successful financial planning is to set guardrails. It's just as critical to define what teams won't do as it is to determine what teams will do. This helps focus everyone's efforts and ensures that resources are allocated effectively.

Another important aspect of financial planning is to make sustainable decisions. Indexing on producing durable, long-term decisions through a multi-year lens is essential. This helps ensure the business is on track to achieve its long-term goals.

Uncertainty is inevitable, but it's not an excuse for inaction. It's crucial to acknowledge risks and provide mitigation plans. Risk is inherent in any business and doesn't relieve individuals or teams from accountability. Instead, it's important to flag risks and address them proactively.

Collaboration between the CFO and Finance team, department leaders, and the executive team is at the heart of successful financial planning. The CFO and Finance team translate executive targets into financial outcomes and budgets. Department leaders collaborate with Finance to align their initiatives with the financial budget, surfacing any material risks or opportunities that may arise. The executive team evaluates and approves items that align with company goals, updating budget targets as necessary.

Lean more about annual planning principles in the Annual Planning Playbook.

Scaling Your Planning Process

As a company scales, it’s natural that a growing number of areas previously owned by a few (Founder/CEO) are passed on to many (business leaders), making it more susceptible to conflicting department and corporate level interests - annual planning can help navigate these challenges.

As the company grows and expands, founders rely on department leads to manage to the predetermined budgets. This transition can naturally be difficult for some founders who are used to being involved in every aspect of their startup, but it is a necessary step in building a foundation to support the company’s growth.

The transition means that founders will be spending less time on executing on the budget and more time actually defining the company’s targets and goals. The onus of execution now falls on the individuals you hire to lead different departments.

Understanding the evolution of budget ownership is crucial to the growth of your startup. As your company grows, the roles of budget setting and ownership become more specialized, and it's essential to understand the Budget Ownership Waterfall. Hiring the right people for departmental leadership roles who can own and effectively coordinate their teams to manage their budgets is vital. 

Learn more about the Budget Ownership Waterfall in the Annual Planning Playbook.

Target Setting Methodology

In the context of annual planning, target-setting requires collaboration between various teams, including the CFO, finance team, department leaders, and executive team. But, in additional to  top-down guidance, targets have to be pressure-tested to ensure their viability.

Some key considerations while setting and pressure-testing targets to ensure that your business establishes a sound set of financial goals:

Revenue: This area of focus is primarily driven by marketing, sales, and post-sales teams. The overarching goal is to determine what we believe to be true to achieve the revenue targets set out in the annual plan.

• Pro Tip: Be cognizant of the metrics relevant to your sales channels. The mechanics of each sales channel are unique, so it's essential to validate tops-down targets with bottoms-up assumptions specific to each channel.

Get more actionable tips and insight into setting and translating targets into budgets in the Annual Planning Playbook.

If You Want Some Help

Annual planning itself can be a full-time job, so we’re here to help. Pilot’s fractional CFO team has helped companies run the entire annual planning process from ideation to execution. The team has helped companies free up to $200,000 of liquidity and extend runway by an additional 3 months through cost-saving strategies.Talk to an expert to get started.