Returning to Growth with Agile Planning: A Finance-Led Approach

This article is a contributed piece by Darrell Cox, CFO of Vena Solutions. The views expressed are solely those of the author and do not reflect the position of this site.

Uncertain, challenging, and turbulent—these words have become part of the daily vocabulary of finance and planning professionals as they describe the era we live in.

Although the current environment is indeed unique, throughout my career I have learned that greater certainty can be achieved even in difficult and turbulent times, provided the right processes are in place. Whenever the market experiences a major shock, as CFOs we re-examine every aspect of the operating environment, seeking ways to respond and return to growth. We try to anticipate future trends and distill best practices so that we can pivot flexibly and continue to develop when necessary.

To navigate these changes, it is essential to break down data silos and establish an agile business planning approach that integrates finance and operations from the outset.

Looking Ahead: Preparing for the Next Budget Cycle

Since the COVID-19 pandemic brought businesses to a standstill, many companies havefiled for bankruptcy or liquidation. I expect financial challenges to persist into the next budget cycle. To thrive, companies must adjust their course and move forward with confidence.

When the pandemic hit, Vena's top priority was to shift focus—from developing growth strategies to ensuring we had sufficient cash reserves to weather this prolonged period of change. We adopted an integrated, bottom-up planning approach and executed it quarterly through a rolling forecast process.

To make the necessary decisions, we revised our multi-year financial plan to see through the economic downturn. We ran multiple scenarios and began reallocating resources, starting with the sales department. Lower growth expectations meant reduced compensation for the sales team.

We could have reasonably implemented furloughs or layoffs; given the variable component of sales compensation, this would have automatically generated cash savings. But such measures would not align with our values. We wanted to emerge from the pandemic with a motivated, energetic, and experienced team. Therefore, we chose to lower sales quotas. This way, despite reduced business activity, salespeople's take-home pay could be maintained.

Undoubtedly, taking this approach meant we faced higher customer acquisition costs per unit during this period, but in the long run, this decision made complete sense for us.

Scenario Planning: Multi-Dimensional Stress Testing

Based on the new multi-year plan, we rebuilt a fully integrated, bottom-up, and agile 12-month plan and tested it against multiple scenarios. Some of the assumptions we examined included: What if annual sales and cash inflows were 20% lower than the operating plan? What if they were 50% or 80% lower? What impact would that have on the remainder of the year? When might business recover and extend into the next year and the year after?

We selected a medium-case scenario that we considered prudent while also balancing long-term growth goals. Using this plan as a framework, we gradually refined details to determine the best path forward. Everyone was involved in this process.

Running such a complete process maximizes overall team engagement, ensuring that everyone feels ownership of the forecast numbers and fully senses the responsibility to achieve them.

Admittedly, this is time-consuming. But if your organization is investing in business automation tools and planning technology, this process becomes easier. Vena Solutions regularly conducts rolling planning processes, which helps us stay ahead in terms of growth and cash, and allowed us to act quickly when the pandemic hit.

Focusing on Core Metrics: Data-Driven Adjustments

Throughout the pandemic, our finance team has kept a close eye on core metrics to determine whether adjustments to our course are needed.

Like any SaaS company, we closely monitor customer acquisition cost, churn rate, customer lifetime value, and other core annual recurring revenue metrics. These metrics help us assess whether we are building a quality company for the future. GAAP financial data alone is insufficient to support our decisions; it does not get to the heart of what we truly aim to achieve.

Churn rate is a prime example. It measures how long customers are expected to stay with us. Users may churn because their own business fails, or they may switch to another vendor due to a poor experience with our service.

We closely monitor the reasons for customer churn. Losing customers due to uncontrollable factors, such as their own business failure, is certainly unfortunate; but if the cause is a customer service issue and we see a trend of customers leaving for that reason, we seriously consider increasing investment in our product or customer support.

By measuring against leading indicators, we can often spot problems before they spread. Our automation tools give us access to key real-time data at all times.

Returning to Growth: The Core Role of Agile Planning

Agile business planning, led by finance and closely aligned with overall company goals, will be a key component in returning to normal operations. It will enable leaders to pivot quickly, identify issues early, and make appropriate adjustments. Any plan can go wrong at some point, so you must anticipate change and adapt to keep moving forward.

One of the best examples of agile planning is Netflix. In its early days, Netflix focused on renting physical DVDs rather than selling them. As the external environment evolved, Netflix decisively pivoted, abandoning its original business model in favor of a subscription-based streaming service. If Netflix had not made this shift, it would likely have followed in Blockbuster's footsteps.

Pivoting can be an excellent business strategy, but to increase the odds of success, you must optimize your plan from start to finish. To help my team do this, I established processes for monitoring early warning signals and measuring our performance against the plan. Each week, we hold what we call a "go-to-market meeting" to assess performance. We review a series of dashboards containing these leading indicators and discuss response actions in real time.

If potential leads rise or fall, we can estimate corresponding changes in sales, giving us time to adjust our course. We are able to maintain a high level of activity in the sales funnel.

The new question now is: How long can we sustain this level of activity? Will the timeline for conversion lengthen or change? The results of our observations and projections will influence whether and when we add resources to our marketing and sales teams.

I also invite stakeholders, including the board of directors, to participate in discussions, listen to their input, and allow ample time for dialogue.

As a growth-stage SaaS company, burning cash is the norm for us because we are essentially a combination of software and finance. We lease software to customers, and building and improving the product and acquiring customers all require costs, while customers pay over time.

In a situation like COVID-19, we do not know how much growth will occur or what the future financing environment will look like. How do we maintain long-term growth momentum while avoiding a short-term cash crunch? Our board has had in-depth discussions on this issue and other key planning matters.

Conclusion: The Narrative and Planning of Financial Leaders

I often describe my role as the "chief storyteller," because I am responsible for telling management and the board a compelling story about Vena: where we are, where we are going, and where we should be. All of this relies on finance-led agile business planning to make informed and confident decisions and to prepare for future growth.