Annual planning is crucial to setting the direction and maintaining control of your startup. 

If you’ve already had contact with bankers, investors, or even advisors, you understand the importance of a proper business plan. It highlights your company’s ability to operate independently and draws your business’s roadmap for success.

But what’s the best approach for creating a meaningful plan? A worthwhile annual plan is split into two major categories — product and financials. 

The two enjoy a symbiotic relationship in which the product plan fuels the company’s operational needs (building your team, marketing, sales plans, etc.), funded by your finances. If done correctly, the product then supports your finances for further growth and profit.

Here’s how to get started.

Break Down Your Annual Product Plan

Great products begin with a well-defined vision and a business model describing the consumer and market factors driving the product’s success. 

While building a profitable product with product/market fit is difficult, many SaaS founders thrive on building great tools. There’s little chance of discovering product-market fit without a thorough understanding of who the product is for and which pains it addresses.  

That means you likely already have an internal or public product roadmap

Fast, Medium, and Slow

Divide your roadmap into three stages: developing it quickly, average speed, and a slower dev timeline. The development speed will show the inputs necessary to bring your product to market.

Further, this differentiation will help you augment the plan as you go, preparing you for potential hiccups.

Attach a Headcount to Each Timeline

Assume that you can meet the slowest timeline with your current staff. 

But to move quickly, you’ll need many more developers. Of course, for an average development speed, the correct headcount is probably somewhere between the two extreme scenarios. 

Forgetting about marketing, sales, and support staff is a big mistake startups often make. They use their seed/series A funds to build a massive dev team without thinking about how they’ll attract customers or even serve the ones they’ve got.

You’ll need sales channels to get customers. If you’re not creating them, you need to hire someone who will make them available.

Finally, building a successful business requires more than just a great product. There’s also an infrastructure necessary for delivery and building a customer base:

  • Marketing material
  • Customer support material
  • Customer success agents
  • People to conduct demos
  • People to document your knowledge base 
  • Launch campaigns

Create Your Annual Financial Plan

Remember, each of these elements has a number. People cost money, designers for your marketing material won’t work for free, and organic reach on social media has drastically tapered off in the past few years.

But you can use those elements to create metrics that matter. 

An annual financial plan enables you to assess your current financial condition while summarizing your firm’s financials and growth projections. The plan assists you in setting reasonable expectations for your company’s success and prepares you to handle a crisis or rapid growth. 

Also, a solid plan has the added benefit of reducing your risk and making you more appealing to investors.

Find Your Driver-Based Metrics

Because they represent the primary determinants of business success, driver-based planning metrics are an essential part of financial modeling. 

But business financials don’t exist in isolation and are directly related to an organization’s primary business and value drivers. Create your own set of KPIs that are relevant to your organization.

Driver-based planning allows you to link these operational KPIs with the organization’s financial plan. 

For example:

  • The size of your development staff influences how quickly you create new features/products
  • Return on ad spend, and number of new deals (for sales reps) are great metrics for evaluating your sales and marketing performance
  • Avg ticket time, i.e., better cared for customers stay longer
  • Churn (number of users leaving each month) indicates overall customer satisfaction with your value proposition

Ready for a Driver-Based Accounting Partner?

A driver-based annual plan can help ensure the right direction for your startup. Ensuring your financial metrics are linked with your operational drivers makes the plan more feasible and easier to track. 

But getting started on your own isn’t easy. Here’s where Founder’s CPA excels. Our startup accounting experts can ensure you’re on the right track with all aspects of your business’s finances, including planning and taxes.

If you’re ready to set up a driver-based business plan with a partner who understands startups, contact Founder’s CPA for a free consultation with our startup accounting experts.

Curt Mastio
Post by Curt Mastio
May 30, 2024 10:40:27 AM
Curt Mastio started Founder’s CPA in 2017 and currently serves as the Managing Partner of the firm. After obtaining both his Bachelor’s and Master’s degrees in accounting from the University of Illinois in Urbana-Champaign Curt started his career in Big Four public accounting. Shortly thereafter Curt served as the Chief Financial Officer of Storage Squad began his stint as an Adjunct Instructor at Northwestern University’s Farley Center for Entrepreneurship and has been teaching Accounting & Finance to undergraduate students for 6+ years. In his current role Curt oversees strategy, operations, and business development at Founder’s CPA. Further, Curt has experience working directly with 200+ startups and small businesses providing accounting, tax, and outsourced CFO services. His industry expertise lies in the SaaS, Blockchain, Marketplace, and Fintech industries. He has served as a key advisor working directly with startups that range from pre-revenue to companies generating over $30 million dollars a year in revenue. Lastly, he serves a key role working directly with the firm’s clients that have collectively raised over $200 million in venture capital funding to date. Curt is also an active advisor, mentor, and investor in the startup ecosystem. He has facilitated numerous workshops, webinars, and presentations to incubators and other startup-centric organizations. He is also an active mentor for Techstars in both Chicago and Iowa. Outside of his daily professional duties Curt is actively involved with Beat the Streets Chicago and was a founding member of its Young Professionals Board. His efforts in both leadership and community involvement were recognized when he was awarded the Illinois CPA Society’s Outstanding Young Professional Leadership Award in 2020. He was also a panelist at their annual conference in 2022 where he spoke about his experiences starting and operating a public accounting firm. He maintains an active Certified Public Accountant designation that he obtained in 2014. Outside of work, Curt can be found spending time with his friends & family including his dog Rufus. His hobbies include golf, boating, cooking, reading, and attending sporting events & concerts.