What is your most important task in 2024? It’s how you prepare for the 2025 planning process and the number you negotiate for your teams.
One year I saw a company do a complete top-down planning exercise…..gave the board a $320 million revenue plan without doing a bottoms-up analysis. The company finished the year at ~$200 million.
The pain for the GTM team started in February when the company had to do its first “replan.” The capacity models were upside down, translating to reduced marketing budgets, pausing hiring, postponing raises, and canceling events.
By March, the business performance continued to tank and an additional “replan” was underway by April. Come May, layoffs were happening….job offers were being rescinded. You know how this story ends.
When you look at how companies complete the annual planning process, it typically goes like this.
To a certain extent, the top-down plan “number” is the “number” because it was prenegotiated (potentially years ago) by the board during the last round of funding. However, there are steps you can take TODAY to make sure you are positioned to have the best year possible in 2025.
Have you noticed that most of your expansion bookings come from a small percentage of the customer base? The reason, ICP customers behave differently than non-ICP customers because these are the segments where your company has the strongest product market fit.
Here are some real-life ICP revenue forensics from one of our clients:
Meanwhile, less than 30% of their closed wons opportunities were with ICP accounts. Imagine what would happen if 90% of newly acquired customers were ICP?
By tagging accounts with ICP identifiers, revenue leaders can back test customer cohorts to better understand pipeline performance (closed wons, sales cycle duration) as well as better forecast revenue behavior post-initial acquisition.
To help illustrate this concept let me ask you a question. Do your COVID customer cohorts (2020, 2021) behave differently than non COVID cohorts? Without looking at your data, I’m about 90% sure they do at your company! This level of understanding can have dramatic implications on the 2025 planning process.
My advice…..get used to it! The key at this stage is to document the assumptions that support the revenue target. I can promise you that many of the assumptions that support the target will evolve throughout the fiscal. Budgets will shift, head counts will change, shinny new strategic initiatives will pop up, and many of the prerequisite assumptions that were required for you to achieve your revenue target will vanish.
The problem, no one is tracking the change in assumptions, but everyone is watching the attainment scoreboard. Take the initiative to track these assumptions and find ways to periodically surface these changes on a regular basis.
As you kick off your weekly 2025 pipeline reviews, having a list of documented and agreed upon assumptions (as an opening slide, or in the appendix) is a great way to keep these reminders close to the operating plan.