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Financial Planning

Operational Planning Guide for SaaS Companies (With Examples)

Published on March 4, 2024
Joe Garafalo

Founder and COO

This guide breaks down the operational planning process, outlines common pitfalls to avoid, and shows you how Mosaic can support a more streamlined planning process.

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When building plans for your SaaS company, it’s easy enough for finance to come up with strategic business goals — a revenue increase of 25%, a phased roll-out of new product features in Q3 and Q4, or a 1% reduction in customer churn each month. The hard part? Determining whether or not these company goals are realistic.

Does your org have the capacity to achieve the goals it has set? If not, will it be able to expand its capacity fast enough, all while ensuring new expenses don’t overrun revenue growth and shorten your cash runway to dangerous levels?

Answering questions like these is the purpose of operational planning and the bread and butter of your org’s short- and long-term strategy. Operational planning revolves around building financial models that track progress toward your goals, helping you create strategies that get you from A to Z in the most efficient way possible.

While efficiency and tight resource allocation are key to strategic finance, the best operational business plans leave room for flexibility, allowing the org to respond to crises or changes in the SaaS landscape while still remaining on track toward those goals.

Table of Contents

What Is Operational Planning?

Operational planning is the process of setting budgets and goals on a departmental level within your company. It transforms your annual strategic plan into a week-by-week, day-by-day roadmap for specific departments like sales, marketing, and customer success to follow.

Since operational planning works at the departmental level, it’s best to use a bottom-up approach. As opposed to a top-down approach, a bottom-up approach involves working with departmental heads, asking them questions about workflows or specific line items and how they contribute to the success of the operational plan.

This benefits the company in two ways: first, finance can optimize resource allocation based on leaders’ unique knowledge of their departmental workflows. Second, by involving everyone in the planning process, it increases buy-in and commitment. You have a collaborative game plan where team members understand how their daily activities are contributing to strategic objectives.

Operational Planning vs. Strategic Planning

The most obvious difference between operational and strategic planning is scale, with strategic planning considering the big picture, and operational planning more focused on the day-to-day.

A strategic plan includes your overarching, annual goals — they’re your long-term vision, the goals the whole company is working towards. Operational plans, on the other hand, are specifically built for individual departments. They’re the division of those long-term annual goals into smaller, achievable milestones that highlight the relevant stakeholders and detail things like resource requirements and timeframe.

So, operational and strategic planning are two sides of the same “operational finance” coin. The challenge is building realistic operational plans to understand what’s actually achievable within a fiscal year. When finance can build a deep understanding of departmental workflows, they can construct strategic and operational plans with the perfect rhythm, and that’s when your org really starts to see results.

Learn more about strategic budgeting:

Operational Planning Examples

So, what does an operational plan look like? Let’s say a SaaS company aims to increase revenue by 20% over the course of one year.

To build your operational plan, you’ll need to determine what each relevant department will have to do — and how many resources they’ll need — to achieve this. How many conversions will the sales team need to make each month? What are staffing requirements? What about marketing initiatives? Which channels will be prioritized based on the amount of new customers required?

Another example of operational planning would be to retain customer loyalty by adding new product features. How many engineers will you need?

The best way to answer business operations questions like these is with robust, data-driven financial models. To get a clear sense of why, let’s break it down and look at the key elements of a successful operational planning process.

5 Key Components of Effective Operational Planning

Key components of operational planning include:

  • Defining realistic goals
  • Allocating resources to those goals
  • Building out an achievable timeline
  • Collaboration
  • Flexibility

The first three involve the construction of the plan, while inter-departmental collaboration helps secure the necessary details as well as company-wide buy-in. Flexibility, the final component, allows finance leaders to alter the plan if the assumptions it was built on change.

1. Clear, Realistic Goals

The first thing you’ll need for your operational plan is a clear, strategic, number-based goal. Common goals for SaaS companies include reducing customer churn, increasing revenue, or increasing market share.

Get an exact number and, as mentioned, use financial models to determine if it’s realistic. For example, let’s say the strategic goal your company decides on is to increase revenue by 20%. Why 20%, not 25% or 30%?

Because, using your financial model, you’ve determined that revenue won’t grow fast enough to make up for the money you’d need to pay for the increase in headcount required to hit a 25% increase in revenue. 20% is your sweet spot — your strategic goal that’ll guide your operational plans.

2. Proper Allocation of Resources

Once you’ve decided on a goal, it’s time to build a strategic budget.

Especially in the early stages, most SaaS companies don’t have a huge amount of resources. In an environment where employees have to wear many hats, a well-designed operational plan is built with an understanding of how specific resource allocation correlates with specific results.

In other words, the best operational plans are driver-based. A driver-based plan ties your business drivers to specific key performance indicators (KPIs). For example, the key driver for revenue growth is the number of sales reps, while for customer acquisition, it’s marketing spend.

Keep in mind, it’s not always necessary to increase your budget from last year. Use historical data only insofar as it contributes to your strategic goals. For instance, if historical data shows a specific marketing channel, say social media, brought in 10% of new customers, you may want to increase funding on social media to bring in 5% more new customers, to match with the number of new sales reps you’re bringing on board over the next year.

3. Timeline

Next, you’ll need to think about how each component of your operational plan will be spaced out over time. This is where you divide it into short-term goals for each department.

Continuing with the revenue example, this means modeling out how long it’ll take to grow your topline by a specific percentage. How do you do that? Since the key driver for revenue is your number of sales reps, you’ll need to consider related metrics like headcount and sales capacity planning.

Plugging these values into your financial model helps your org plan out its hiring cadence and understand how fast you can realistically grow revenue. Furthermore, this information will feed back into your operating budget.

Tools like Mosaic’s Topline Planner help you get a more exact timeline as to sales rep ramp rate, so you know how long you’ll need for that driver-based KPI — revenue growth — to hit full stride when you make a hire.

According to CJ Gustafson, CFO of PartsTech, missing the sales rep ramp rate can “totally kill your plan.” Get it right from the beginning so that you don’t have to readjust your timeframe and push back your strategic goals.

When you do headcount planning using a tool like Mosaic, you can see the effects of hiring new sales reps. You can also stagger start dates to see the effects on revenue over time.

So, let’s say hypothetically, you determine you need to add 4 new heads every quarter to meet the revenue target of 20% over a year. That’s an operational goal for HR. Using your model and based on ARR, you determine that sales reps need to secure 15 new customers each month — an operational goal for the sales department.

4. Collaboration

Buy-in is crucial for your operational plans to succeed. That means everyone needs to be “speaking the same language,” understanding how their actions are contributing to the overarching, strategic goals.

A tool like Mosaic empowers finance to act as a central hub, showing departments how they’re tracking against specific KPIs in a way that’s understandable. With customizable metrics and dashboards, everybody “gets” what they need to be doing and why they’re doing it.

5. Flexibility

So you’ve ensured your operational goal is clear and attainable, have set out an exact timeline, and have ensured buy-in and collaboration across the org.

Congrats! Your operating plan is complete. But that’s just the first step. You’ll still need to refresh it month to month by reforecasting. The idea is to continuously monitor progress so that, if necessary, you can reallocate resources. This way, whatever factors pop up will be reflected in your model, and you can readjust accordingly.

Successful Operational Planning With Mosaic

Galley, a series A startup, helps food organizations prioritize purchases and inventory based on recipes. Towards the beginning of 2022, they were successful in raising over $14 million.

But sailing wasn’t always so smooth for Galley.

Granted, they did get things started right by leveraging flexible, driver-based planning and connecting short- and long-term goals to operational metrics.

The only problem? Their driver-based planning relied on spreadsheets. Things got very complicated, very quickly.

In order to keep on top of things, Galley ended up having to pay an outside firm to create and update their spreadsheets and dashboards.

Fortunately, they quickly realized paying someone to have an outsourced model was unnecessary and began searching for a new solution. When Jason Peretz, Galley’s chief business officer, saw a Mosaic demo, he thought, “That’s what we need!” Mosaic would allow Galley to build their own financial models and dashboards by integrating directly with their systems — no more outsourced, spreadsheet-based models.

 

After making the switch, Galley has a clear, continuously updated view of how they’re tracking against KPIs. This allows them to stay in line with their operational goals simply by logging into the platform.

Common Pitfalls of Operational Planning and How To Avoid Them

Operational planning is no simple task. Even at a small- or medium-sized org, finance leaders have to align different departments, different mindsets, and a range of resources all on one common goal. And that leaves room for plenty of pitfalls. Awareness is the first step to avoiding them.

Lack of Alignment

First things first — your operational plans won’t get you anywhere if they don’t align with your strategic plans. Seems obvious, right? But it’s not necessarily as easy as it sounds.
Use financial models to test your operational plans. See if, when you model them out, your forecasts line up with your long-term plans.

Lack of alignment can also refer to a lack of buy-in from individual departments. To get them on board, it’s best to provide easy access to relevant KPIs through a tool like Mosaic. Involve departmental heads in planning, too.

Lack of Flexibility

Predicting a year out isn’t easy. While your strategic goals may remain largely the same, your pathway to those goals — that is, your operational plan — may need to change. To keep yourself from getting tied to outdated budgets, leverage agile financial planning processes such as driver-based planning and rolling forecasts so that you can shift if needed.

Lack of Transparency

Buy-in is important for the success of your operational plan. They’re bottom-up, departmentally-based plans, after all. With a tool like Mosaic, complicated metrics and KPIs that were formerly confined to finance become a guidepost for the entire company. Team members can see how their daily actions are contributing to those goals with clear, beautiful dashboards that display complex information in an easy-to-understand way.

Lack of Clear Visibility

Especially as an early-stage SaaS company, every resource counts. Disconnected spreadsheets are not going to give you a clear, real-time view. You need a platform that integrates your working capital, cash flow from operating activities, ERP, and CRM data, to name just a few, in order to get data to key stakeholders right when they need it.

Instead of relying on templates, it’s also best to build your own financial models. That’s because free templates available on Google can be hard-coded with assumptions — assumptions that don’t reflect your unique org.

Getting Too Ambitious

We get it — startups want to grow fast. But, to save yourself a lot of pain in the future, you need to make sure that growth is sustainable.

Use financial models to see what’s realistic and what isn’t. Understand headcount costs and sales rep ramp rate to achieve the right balance between your largest expense and revenue, always keeping your cash runway in view.

Use sensitivity analysis to understand which of your business levers are most critical, then model best and worst-case scenarios.

Using Tools That Can’t Scale

When your goal is to grow, it doesn’t make sense to rely on spreadsheets in Excel. As you secure more and more customers, the amount of user and transaction data will outpace spreadsheet capacity. They’re also very prone to human error, which builds flaws into your financial models.

For operational success — not to mention your own sanity — it’s better to use tools that have built-in integrations so you can automatically consolidate data from your org’s enterprise software and financial statements.

Future-Proofing Your Operational Plan With Mosaic

For SaaS companies, a year is a long time — arguably much longer than it is for other types of companies. That’s because, in the SaaS world, things move very fast, and quite a lot can change, even quarter to quarter. Sources of funding can dry up, competition can increase, or your target audience may shift. Without the ability to pivot, your best-laid annual operating plans could be laid to waste.

That’s why it’s important to build flexibility into them right from the get-go. With an agile, resilient approach to financial modeling, Mosaic was designed with SaaS companies in mind. By combining driver-based planning with rolling forecasts, you get a moving picture of the future of your business. With 150 out-of-the-box SaaS metrics, staying on track with your operational goals has never been easier.

Your goal is to future-proof your plan so that, even if the market shifts, your day-to-day, week-to-week action plans can still remain on target towards your long-term, strategic goals, and you can bring your startup to the next level. Request a demo to see Mosaic in action.

Operational Planning FAQs

How does operational planning differ from strategic planning for SaaS companies?

The difference between strategic planning and operational planning is one of scale. Strategic planning involves building high-level, long-term goals for the company. Operational plans detail the work each department will put in month-to-month, week-to-week, or even day-to-day to help make those high-level, strategic goals a reality.

What are some common challenges in operational planning for SaaS businesses?

How can Mosaic help in operational planning for SaaS companies?

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