Crafting your financial roadmap: A step-by-step guide
Before we go through some of the challenges and considerations 2025 will bring, let’s start with the basics. Here are some high-level steps financial leaders are taking to ensure alignment across different functions and their board.
Start with the big picture
Begin your planning process by zooming out. Work with your CEO to craft a compelling narrative for your company's future. This isn't just about numbers; it's about painting a vivid picture of where you're headed and why it matters.
In fact, this bigger picture step of planning is so important that Caitlin Haberberger, former CFO at Mezmo, suggests “80 percent [of time] is [spent] up front and maybe 20 percent is on the actual budget.”
Once you’ve defined the strategic narrative, Brad Silicani, COO at Anrok and former Treasurer at Dropbox, recommends to align executives and investors at three levels of abstraction:
- Clear, measurable company-level goals for the coming year
- A three-year plan aligning revenue growth and profitability targets
- Target burn rates and cash balances to guide future fundraising needs
To start building your three-year roadmap, download our Excel financial projection template.
David Eckstein, CFO at Vanta, echoes the importance of starting with high-level goals and then filling in the detail: “Align around two to three north star metrics. These can include company growth rate, NRR, GRR, etc. The plan should center around how do we support those north star metrics responsibly.”
With the strategic direction in place, you can now present it to your board and executive team. Their initial buy-in at this stage is crucial for smooth sailing later.
Dive into the details
After you’ve aligned with executives and investors on the initial high-level direction, it's time to get granular. This is where the rubber meets the road, and where many companies falter. The key is to develop a bottom-up view that aligns with your top-down vision.
Start by rolling out your new ARR plan to your marketing and R&D teams. Work with each department to set initiatives that support your company-level strategies. This is also the time to tackle one of the most challenging aspects of planning: hiring.
Eckstein offers a word of caution here. "It's important to understand hiring manager needs and have them explain rationale for why each role is critical. I often get requests for 40 headcount in a certain org. When you challenge the org leader's assumptions, the headcount requests easily become a third of the size."
As you develop these plans, don't forget to build in a management buffer. This financial cushion can absorb unexpected expenses or allow for strategic pivots as the year unfolds.
Bridge vision and reality
Now comes the tricky part: reconciling your bottom-up plans with your top-level strategy. This isn't a one-and-done process. Expect to go through several iterations, challenging assumptions and adjusting targets along the way.
Something that finance teams often catch too late is unexpected cash outlays. Denise Bee, VP of Tax at Figma, flags how “including tax considerations in annual financial planning is crucial for avoiding unexpected tax issues that could affect future financial stability. In particular, these liabilities can impact cash outlays and treasury activities that often become board-level issues if not addressed proactively.”
As you work through this reconciliation, keep a keen eye on the realism of your revenue goals. It's easy to get caught up in optimism, especially when you're innovating in exciting areas like AI. But grounding your projections in market realities will serve you better in the long run.
Navigating the new normal: 4 key considerations for 2025
There are two sea change developments happening in tech, where there is a fundamental and radical shift in attitudes about where we are today and where the future is going. The first is the market landscape where technology valuations have been impacted by the end of the zero interest rate era. The second is the advent of the large foundation model, where machines have solved the Turing Test in our recent memory and we’re now living through the AI gold rush.
These seemingly opposing forces create unprecedented challenges in financial planning—both from self-imposed projections as well as greater uncertainty into costs and potential pockets of disruption. As you refine your plan, here are some considerations unique to 2025.
1. The AI factor: Define your place in the ecosystem
In 2025, every company is an AI company—or so it seems. But the reality is more nuanced. Your growth projections should reflect your true position in the AI ecosystem. Are you developing foundational models, building AI-powered products, or simply using AI to enhance operational efficiency?
Unless you have a deep technical moat or a significant distribution advantage, be cautious about projecting outsized growth. The AI gold rush has attracted fierce competition, and maintaining a competitive edge will require continuous innovation.
For some company growth stages, gross margin may be more important than projecting outsized growth. Theresa Gupta, Director of Finance & Operations at Sentry, suggests looking at cloud cost growth in relation to actual revenue growth as a metric to manage margin. Alex Estevez, former CFO at Atlassian, echoes the sentiment around measuring to manage: “Many companies are understandably focused on profitability these days, but a better path to unlocking shareholder value hides in unit economics and GTM efficiency.”
2. LLM economics: Expect a moving target
If you're in the business of building AI models, bake in exponential increases in compute needs as models get larger and higher salaries for scarce ML talent. On the flip side, if you're leveraging existing models through APIs, you might be in for some good news. We've seen API costs drop dramatically—OpenAI's GPT-4 32k model, for instance, saw a 67% price reduction from 2023 to 2024.
Whether we continue to see the same magnitude in reductions is uncertain, but it's reasonable to expect continued efficiencies. The price per token is one place where you might be able to assume flat or declining costs.
3. Churn: Set a realistic baseline in a cooling market
The tech sector has seen its share of turbulence in recent years, and this has implications for your churn projections. If you primarily serve other tech companies, you might need to adjust your baseline churn rates upward. Even historically stable customers might be reassessing their spending.
Carta's Q1 2024 data, showing a 60% year-over-year increase in customer bankruptcies, serves as a sobering reminder of the changing landscape. If you're looking to diversify beyond tech, factor in the time and resources needed to penetrate new markets.
4. The productivity paradox: Avoid unrealistic expectations
The widespread adoption of AI tools promises significant productivity gains. But translating these gains into financial projections is tricky. Should you plan for higher output with the same headcount, or the same output with a leaner team?
The answer will vary based on your specific use cases and how well your team has integrated these tools. Whatever approach you take, resist the temptation to project both higher productivity and lower costs—that's a recipe for overly optimistic planning.
Charting your course for 2025 and beyond
As we stand on the cusp of 2025, the only certainty is change. The most successful companies will be those that can balance ambitious vision with clear-eyed realism, leveraging new technologies while navigating economic headwinds.
Keep in mind that a critical last step for a successful execution of your financial plan is implementing a structured process for tracking progress and reporting throughout the year. Selina Guo, Head of Finance at Anrok, notes, "Regular reviews and an operating cadence allow company leaders to monitor performance, identify key variances, and make informed adjustments. This continuous feedback loop ensures that financial plans remain aligned with daily executions and can adapt to changing circumstances, enabling more agile and effective decision-making."
Your financial plan is more than just an exercise—it's a roadmap for your company's future. By following the strategies outlined here and staying attuned to the unique challenges of our time, you'll be well-equipped to guide your organization through the exciting journey ahead.
