The CFO’s guide to revenue planning that doesn’t fall apart by Q3

What is a revenue plan?

A revenue plan strategizes how a business will generate income over a set period (usually a fiscal year). Don’t confuse a revenue plan with a forecast though, the two are very different. While a forecast tells you what might happen, a revenue plan tells you how you’ll make it happen.

It’s the plan that connects your company's growth goals with the details or steps of how you'll make it happen. It's a way to link things like your product, pricing, marketing, and sales, etc., all with the main goal of bringing in consistent and increasing income.

A solid revenue plan answers three key questions:

• Where is revenue coming from? (New business, expansions, renewals, pricing changes, etc.)
• What resources are required to hit the target? (Headcount, tools, programs, etc.)
• What risks are we betting against and are they worth it?

A good revenue plan makes sure everyone is aligned. But a truly great one creates accountability, transparency, and real-time visibility into how the business is performing against the plan, not just around it.

This blog will walk you through what good revenue planning involves, when to start and how to put one together that works.

Topics covered:

• How revenue planning works
• Metrics and KPIs
• When to start revenue planning
• How to create an effective revenue plan
• Common challenges
• FAQs

How revenue planning works

The revenue planning process pulls inputs from across the business, not just finance. This is because revenue doesn’t exist in a vacuum. It’s the result of multiple interconnected decisions and assumptions made by various teams.

Here’s a simple breakdown of what’s involved in revenue planning:

1. Setting your targets 

The best place to start is with a number that’ll be your main target. But where does this number come from? Well, realistic targets should be grounded in historical data, market realities, product capacity, and available resources. 

2. Segmentation and source breakdown

Where your revenue comes from matters. Obtaining new business isn't the same as keeping current customers happy or selling them more things. Each renewal, upsell, and cross-sell has a different motion, timeline, and risk profile. Effective revenue plans break these out clearly and lay out specific plans for each.

3. GTM and headcount alignment

If you want more revenue, but don’t want to bother lining up your go-to-market (GTM) strategy and team size, you’re headed for disappointment. You need the right people in the right roles with the right tools. We’re talking about including everyone from sales to marketing, customer success and product teams, etc. – they all need to be in sync.

4. Funnel and conversion assumptions

What are your expected conversion rates? Sales cycles? Average deal sizes? Every assumption should be pressure-tested because your revenue plan is only as strong as the math behind it. So, don’t be afraid to challenge these assumptions.

5. Expense planning

Spoiler alert: revenue doesn’t come for free. Making money costs money, which is a saying you’ve probably heard enough by now. But it still rings true because when it comes to revenue planning, you’ll need to figure out how much you're investing in:

• Your team
• The technology you use
• Training
• Marketing efforts

If finance and ops aren’t looped in here, expect friction (and missed forecasts) later. 

6. Risk assessment and scenario modeling

What happens if a big customer segment doesn't do as well as you hoped? What if you can't hire people fast enough? What if more customers leave than you planned?

Smart revenue plans build in some wiggle room by modeling best-case, base-case, and worst-case scenarios. This is to make sure you’re not caught off guard if things don’t go according to plan.   

Scenario planning: Navigate uncertainty with confidence

Learn about the key benefits of scenario planning and how it can be integrated into strategic and financial planning cycles.

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KPIs and metrics to track

There are a number of possible metrics you might want to track to help you manage your revenue plan. While the exact mix will depend on your revenue plan definition (what streams you’re including, how goals are structured, and what your business model looks like), here are the most commonly used ones.:

• Monthly recurring revenue (MRR): Shows predictable monthly income, crucial for forecasting consistent revenue streams.
• Annual recurring revenue (ARR): Tracks predictable yearly income, providing a bigger picture view of stable revenue growth.
• Customer acquisition cost (CAC): Reveals the expense of gaining a new customer, essential for ensuring profitable growth strategies.
• Average Revenue Per User (ARPU): Provides the average income generated per customer, important for identifying opportunities to increase revenue from the existing base.
• Customer Lifetime Value (LTV): Tracks the total revenue expected from a single customer over their relationship, vital for understanding long-term profitability and justifying acquisition costs.
• Retention and churn rates: Monitors how well you keep customers and the rate at which they leave, critical for understanding revenue leakage and the sustainability of growth.
• Sales velocity: Quantifies how quickly leads move through the sales pipeline and generate revenue, key for forecasting sales performance and identifying bottlenecks.
• Win rate: Demonstrates the percentage of sales opportunities that close successfully, essential for realistic sales forecasting and assessing sales effectiveness.
• Gross margin: Determines the profitability of your core product or service after deducting direct costs, crucial for understanding the financial viability of your revenue streams.
• Net promoter score (NPS): Measures customer loyalty and advocacy, a leading indicator of the potential for referrals and long-term retention, indirectly impacting future revenue.
• Ramp time for new hires: Estimates how long it takes new sales or customer-facing hires to become fully productive, important for forecasting the impact of new team members on revenue generation.
• Expansion revenue rate: Tracks the revenue growth from existing customers through upsells and cross-sells, crucial for understanding the potential to increase revenue from your current customer base.

How to create a budget allocation plan for a company

Budget allocation is the process of dividing your company’s financial resources between departments. As you can imagine, it can be a tricky process to get right. Everyone wants a bigger piece of the pie, and you can’t always please everyone.

Finance AllianceSabrinthia Donnelly

The best time to start revenue planning

Short answer: sooner than you think. 

Most teams begin three to six months before the new fiscal year kicks off. Waiting until the quarter ends to sketch out next year’s revenue plan is a fast track to reactive decisions and shaky assumptions. 

But remember, revenue planning isn’t a one-and-done thing. It’s an ongoing process. You’ll know it’s time to revisit your revenue plan when you spot these types of signals: 

• Sales velocity is tanking or spiking
• Churn is creeping up
• Hiring is behind (or ahead) of pace
• A new market or product is coming online
• Leadership is making big bets without updated models

Smart CFOs treat the revenue plan like a living document - anchored annually, reviewed quarterly, and adjusted as needed.

How to create an effective revenue plan

An effective revenue plan is a cross-functional effort grounded in data, aligned with strategy, and flexible enough to change when needed. Here’s how to create one:

1. Start with the end goal

What’s the revenue number? Let’s say your company wants to reach $50M in ARR next year. Now, you need to reverse-engineer that number and break it down by source.

For example, $30M from renewals, $12M from new business, and $8M from upsells. And here’s where math meets strategy. Say your average new logo (aka a brand-new customer) brings in $60K in annual contract value (ACV). That means you’ll need 200 new deals to hit your $12M new business goal. Simple division, sure, but now you’re not just throwing out targets. You’re building from actual, testable assumptions. 

2. Pressure-test your assumptions

Finance and GTM need to get aligned on things like average deal size, win rates, ramp time, and churn. Every input should be backed by historical data or a clear rationale. Looking at historical data to spot trends and patterns in your company’s revenue streams is a very important step.

Once you’ve done this, take time to segment the data by key segments like customer type, industry, or acquisition channel. This will give you a much clearer picture of what's driving your revenue and where the biggest opportunities (and risks) lie.

3. Build the model, not just the forecast

Your revenue plan should be dynamic. So, begin by identifying your key revenue levers: What actions or factors have the biggest impact on your revenue (e.g., marketing spend, sales hiring, pricing)?

Then, try to estimate how much moving each lever could change your results. For example, if deal velocity improves by 10%, what's the potential uplift? Scenario modeling isn't optional, it's essential for understanding these possibilities.

4. Understand the market 

Revenue planning without market context is a fast track to bad bets. Study industry trends, shifts in customer behavior, competitive plays, and macroeconomic signals. Don’t just focus on your direct competitors. Sometimes, disruption comes from the blind spot, not the usual suspects. 

5. Realistic forecasts

To forecast effectively, ground your predictions in data. Leverage trend analysis, your current run rate, and a deep dive into your sales pipeline. However, don't settle on a single projection. Develop a range of scenarios: optimistic, pessimistic, and most probable. This built-in flexibility helps you to adapt swiftly when reality throws you a curveball.

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In this blog post, we shed some light on how an established vision can drive success for your company. We’ll also share some CFO mission and vision statement examples and teach you how to create one of your own.

Finance AllianceSabrinthia Donnelly

6. Match resources to ambition

Big targets require smart investment. Reallocate headcount, marketing dollars, and incentives to match the segments or products with the biggest upside. If one product line consistently delivers high margins but is under-supported? Time to double down.

7. Build a tactical action plan

Now it’s execution time. How will you actually hit those revenue targets? This is where you map out the concrete steps: will you adjust pricing? Run specific marketing campaigns? Equip your sales team with new tools. Ramp up partnerships? For each revenue segment, create a simple playbook that clearly links your forecast.

8. Involve every stakeholder

Revenue is everyone’s responsibility. Finance, sales, marketing, CS, and product - all of them play a role in shaping the plan and executing it. So, get everyone in the loop now. This cross-functional teamwork at the beginning stops the "that's not my job" arguments later.

9. Identify and prepare for risk

Don't wait for trouble to strike – anticipate it. What are the potential risks to your revenue? A downturn in the economy? Hiring delays? A competitor's aggressive pricing?

For each identified risk, develop specific contingency plans. This proactive approach means you won't be scrambling if things go sideways. A robust plan understands its vulnerabilities and has solutions in place for each. 

10. Track what matters 

Once the revenue plan is in motion, keep your eyes on the right metrics: CAC, ARPU, pipeline coverage, retention, rep productivity - whatever reflects your model. Use those KPIs to flag what’s working, what’s drifting, and when it’s time to adjust. 

Crisis Management Plan vs Business Continuity Plan

Believe it or not, a crisis management plan is not the same as a business continuity plan. The two are similar in many ways, sure, but they have key differences that set them apart.

Finance AllianceSabrinthia Donnelly

Challenges you might encounter with your revenue plan

Even the best revenue plans can hit some bumps. Markets change, our initial guesses might be off, and sometimes teams aren't quite on the same page.

But don’t worry, it’s not about creating a perfect plan that avoids every single problem. It’s more important to build a revenue plan that’s solid enough to handle issues when they pop up.

So, here are some common challenges that you might face:  

1. Teams that aren’t aligned

We've all seen it: finance crunches the numbers, sales just nods along, marketing promises a flood of leads – and then, a few months later, everyone's pointing fingers about why things aren't working. 

The fix?

Get everyone together (even if it's virtually) right from the start. Revenue planning is a team effort and the associated departments all have a stake in hitting that revenue number.

2. Being way too optimistic with your assumptions

Looking on the bright side is great and it can be tempting to make the numbers look amazing. However, wishful thinking isn't a strategy and often leads to disappointment.

You’ll do much better if you base your revenue plan on actual data. Look at your past performance, and your real conversion rates, and play out different scenarios. 

3. Nobody knows who's responsible for what 

A solid revenue plan clearly says what needs to be done, who's doing it, and by when. Too many plans fail because nobody knows who's in charge of pulling which levers. 

Clearly assign ownership across all the relevant teams and set up regular check-ins to see how everyone's doing against their targets.

4. Having a plan that can't bend when things change

We're not living in a world where things stay the same. The economy can shift, customer habits can change, and competitors can make unexpected moves – all in the middle of the year.

If your plan is rigid, it's going to break. Build in that scenario planning we talked about. Look at your numbers every quarter and be ready to adjust. Being able to adapt quickly gives you a real advantage.

5. Not keeping an eye on the early warning signs

By the time you see you've missed your revenue targets on the official financial reports, it's often too late to do much about it. You need to watch for the early clues. How full is your sales pipeline? How quickly are deals moving? Are customers showing signs of leaving? How active are your salespeople?

Set up your dashboards to track what predicts your performance, not just what tells you what already happened.

6. Putting resources in the wrong places

You can't focus on everything at once. If you're not putting your money and effort into the things that will drive the most revenue, you'll end up wasting resources and missing your goals.

Regularly look at the return on investment for each product, sales channel, and marketing campaign. Shift your spending towards what's delivering results, not just what you've been doing for a long time.

FAQs: Revenue plans

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