Getting Board Approval on Your 2026 Budget
The moment of truth. I remember the first time as the CFO I had to present an annual operating plan to my board for approval.
I’d long built the plans in the background, but had yet to be the official tour guide.
I was shakin’ in me boots.
Since then I’ve done the dance a few times, and I’ve come up with a foolproof way to convey the direction you’d like to steer the business, while explaining the significance from a metrics standpoint of what it would all mean.
Let me guide you through those materials:
What’s the story?
A picture P&L is worth a thousand words. Before you get to the proposed financial statement view, it’s imperative to hit them with the “so what”.
What’s the meaning behind the operating plan? Summarize the story up front.
Do not put this at the end as a summary. Ain’t nobody got time for that. Put this at the start to lead the witness.
One more step before getting to the actual P&L - tease out the metrics the board really cares about. They aren’t all accountants, so do the work for them and build a “tear away sheet” that speaks their language, which will incorporate SaaS metrics and non-gaap cuts.
I call it a “plan on a page” because if I had to send someone the budget on a single page, I’d send this.
Ok, enough of the foreplay. Let’s look at how you should lay out the proposed budget for approval:
Download the full set of slides below, including Key Operating Metrics, Headcount Phasing, and Target Operating Model slides, which we’ll cover next…
I like to lay out the budget quarterly, with an annual column for dollars and growth. It’s simple, and shows the quarterly milestones you’ll be measuring for each time the group meets.
Do not just show annual numbers - that’s not enough. And do not show monthly numbers - that’s too much.
You will probably send flash updates to the board which quotes monthly top line numbers, and you’ll probably even give them a financial package to track against, but the costs are something you are beholden to managing on a quarterly basis, so try to keep it that way. There’s just too much variability with hiring, prepayments, and collections in businesses under $100m to call your shot monthly on an external basis.
Some of the other metrics I’ll agree to report on each quarter include ARR, Customers, CAC Payback Period, and Cash Burn. As such, I like to show what they look like in respect to the budget.
The nice thing about this slide is I just update it each quarter for the board meeting. I’m essentially training the team on a format they are comfortable with. In fact, when I pull this slide up during the budget approval process, they’ve already seen it a handful of times and are just looking at the latest and greatest forecast that corresponds to the P&L they just saw.
Since headcount drives ~75% or more of costs in the operating plan, I think it’s only fair to show the board how each department’s headcount evolves on a quarterly basis.
It also keeps you honest as to where you are front loading costs and recruiting capacity. The first quarter of the year should heavily skew towards Sales hires to scale quota capacity. This slide also reveals the relative pacing of how you are layering on net new costs to the business.
I start with the forecasted ending headcount for the current year and use quarterly maxes in each department to bridge to the next year end.
And finally, to zoom back out, what does this year set us up to do?
You’ve gotta keep the longer term view in mind. I like to end with a picture of how this next year trends within our long term operating model.
As I mentioned, what’s nice about these templates is they can be updated on a quarterly basis as you progress through the year to reflect actuals + budget. In that sense, you’ve built a large chunk of your board packet already.
Now you just gotta go out there and hit the targets!
Wishing you an annual plan with reasonable Q4 seasonality assumptions,
CJ
