Your Definitive Guide to Annual Planning - Part 2: Tops Down Target Setting (with Templates)

Helping you build your annual budget

Annual planning season is approaching.

So I’ve written the most comprehensive and tactical guide in the history of Mostly Metrics.

Here’s what we’ll cover for paid readers this month:

• Part I: Baselines Required to Start (LAST WEEK!)

• Part II: Tops Down Target Setting (with Templates) (TODAY!)

• Part III: Bottoms Up Budgeting (NEXT WEEK!)

• Part IV: How to Pitch an Annual Budget to your Board

This month long series is available to our paid readers, who support my work. You probably went to the beach or fishing this past weekend. I wrote about annual planning (and I did it with LOVE… for YOU!).

Join today and get access to all the other playbooks we’ve written, like this one on Sales Rep Comp, or this one on Preparing for Board Meetings.

Who picks the first number? The age old standoff.

The budgeting cycle starts with the CEO and CFO, who discuss high level revenue, productivity, and profitability targets to frame up the mission. This is the “Tops Down” Target setting we’ll dig into today.

And then it extends to leaders from the Sales, Marketing, Customer Success, Product, Engineering, Finance and People. That’s the “Bottoms Up Budgeting” we’ll discuss next week.

And finally, it gets rolled up and approved by your Board (which is probably why you are embarking on this annual planning process in the first place). That’s what we’ll discuss to wrap up the series.

All three of these come with templates you can leverage to get the job done.

TL;DR:

Audiences:

1. CEO and CFO (tops down)

2. Department leaders (bottoms up)

3. Board (approval)

Targets:

1. Revenue: How much you make

2. Productivity: Your ratio of people to revenue

3. Profitability (or burn): How much you make, or lose

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Tops Down Target Setting

Here’s the deck I use with my CEO to complete the tops down process.

1. 2025 Required Decisions

2. What Worked, What Didn’t Work in 2024

3. Headwinds / Tailwinds in 2025

4. Global Priorities for 2025

5. Discussion Points for Planning

6. Initial Tops Down Guardrails

We fill it in each year before going out to the department leaders to build the Bottoms Up.

The first step is laying out all the required decisions you expect to come out of this process. You should continually come back to this simple slide throughout the budgeting process to make sure you are driving to conclusive answers. While it’s a high level list, if you don’t make these decisions, people in the org won’t be equipped to do their jobs and hit the organization’s targets. Running these requirements to ground are table stakes.

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Now, before we get too far, you gotta look backward before you sprint forward. Even if it’s painful, every good budgeting process should include a post mortem on the prior year.

Simply put, What Worked and What Didn’t Work in the prior year.

Many of these items can be cherry picked from the past year’s board decks. I’ve written out some dummy examples to help you put pen to paper.

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Any sane operator realizes that no fiscal year happens in a vacuum - you need to be cognizant of the playing field. List out the Headwinds and Tailwinds you anticipate facing.

Nice. Now with both the proper historical and future context, you can lay out the priorities for next year.

These priorities should permeate through each department. What I like to do is have the CEO write out the global priorities and then have each department lead write a priority for their function that corresponds, 1 to 1, with each of the CEO’s priorities.

For example:

(Paid readers get access to our complete annual planning series, and the templates we’ve crafted for you to successfully build your own budget.)