Why Annual Planning Fails in SaaS (And What High-Growth Companies Do Instead)
Most corporate annual plans are forgotten by March. Here's how to build strategies that survive contact with reality.
Corporate annual planning is like a New Year’s resolution: ambitious, inspiring, and almost certainly forgotten by March. Each Q4, companies gather their brightest minds to craft an annual plan. By Easter, most of those plans are obsolete. Why do we keep doing it? For whom is it intended? And why do we keep using the same techniques?
Brace yourself; the planning time is soon here again.
The Annual Planning Charade
Don’t get me wrong—I believe long-term planning makes absolute sense. Getting a helicopter view and revisiting the strategy at least once a year helps in understanding how the business is doing and if there is a need for a new course. What is often the problem is the motivation for the planning, which also affects how the planning is executed.
In growth companies, the expectations are usually set top-down by the investors. This is especially true for private equity-backed and public companies. Using the board as the proxy, the investors set the growth targets often from their subjective viewpoint, i.e., for this company in their portfolio, they need to see X% growth for next year. Market conditions are no excuse.
To match the growth targets, the executive team goes to work and tries to fill the targets with initiatives. The executives and directors almost always have optimism bias, as they want to make the numbers look good and overestimate what’s possible, driven by ambition (and compensation).
In addition, the long-term planning is used by the leadership to create an illusion of control. By planning multiple months in advance and adding an initiative tracking system, the board and executives build the appearance of control. Whatever happens in the coming months, we have an early detection system and can correct the course no matter what.
Now imagine if you plan a car trip through a busy city without checking the roadworks, traffic, and weather conditions. A route through the city may look like a solid plan on the map, but it doesn’t prepare you for the unexpected, which always happens. Similarly, a long-term roadmap never occurs as planned.
The Hidden Costs of Planning Theater
What is the result of this theatre?
The obvious first cost is the time needed for building detailed, long-term plans. For the management team, this is part of their job description, but typically planning also involves consulting the most senior engineers and architects to do estimation. This takes away significant time from actual development work, and even when doing estimates for weeks, the estimates are usually not that accurate.
From past experience, staff know that plans inevitably fail, which erodes trust and morale within the teams. This definitely does not increase the motivation to do good estimations but rather to do something to get back to more productive work.
Lastly, the leadership often prioritises short-term initiatives to make an impact in the beginning of the year to increase the initiative’s impact for the whole year. While this does make sense for annual revenue planning, it builds a lot of stress and rushed decisions, which can be in conflict with long-term sustainability and innovation.
I recently witnessed this cycle firsthand at a corporation where annual plans failed consistently every year. By May—just five months in—it was already clear the plan wouldn't hit its targets. This created a predictable pattern: leadership scrambling to explain the gaps while staff became increasingly cynical about the entire process. The disconnect between boardroom optimism and ground-level reality eroded trust on both sides. When people know the plan will fail before summer arrives, why should they invest their best thinking in making it succeed?
When Planning Actually Works
As was stated at the outset, annual planning is not a bad process; on the contrary, it is a positive one. When done correctly, it helps the team stay focused and provides a useful framework for discussing priorities and choosing the course for the upcoming year.
Additionally, the planning process is a great way to bring alignment between different functions. The process forces teams to align on priorities and goals at least once a year. I prefer the alignment to happen on an ongoing basis, but unfortunately, in many organisations, that is not happening.
When planning is done properly, the outcome should be a document that tells a realistic vision and potential, which builds confidence with the investors.
Three Ways to Plan for Reality
How to build the better plans that tell a realistic story?
The first thing is to embrace uncertainty rather than hide it. For certain 12-month plans never hit the target, so how to manage this ambiguity? One common method is to adjust the plan over time with rolling forecasts or quarterly replanning. This improves meeting short-term goals but doesn't address long-term planning problems.
A better way to deal with uncertainty is to move away from rigid targets to milestones. For example, rather than giving a target of bringing in €1m MRR for the new feature, validate the product-market fit of the new feature with 10 successful pilots. This gives the team flexibility to adjust the approach based on what they are learning and does not drive them to deals that make no sense long-term.
Finally, maybe the most difficult one is to be honest towards the investors. Investors strongly prefer to see plans and returns that are predictable, but in the tech industry, uncertainty is inevitable, and everyone involved should accept that.
Preparing for Planning Season
The next planning season returns right after the summer break. In most companies, when you return to the office from the beach, you will find the 2026 planning templates in your inbox before your holiday credit card invoice. So, get ready for it now, and think of a new way of approaching it and how you and your team can actually benefit from the process. Ask yourself, are we planning to predict the future, or are we planning to navigate uncertainty?
A theatre has its place, but it’s time to stop pretending that annual plans are crystal balls. Focus on building resilient strategies that can adapt to whatever the year throws at your team against you.
Like plotting a route through a busy city, a great plan isn't one that never changes—it's one that helps you navigate whatever obstacles appear along the way.
Can relate!
Yeah, the execs want certainty but the best you can do is create best case scenarios with wiggle room. I lean on the conservative estimate side because I’d rather underpromise and overdeliver but sometimes others don’t like that approach.
I think loose projections with monthly and quarterly reviews is the way to go.