SaaS Conversations Podcast: Annual Planning in SaaS
Using Benchmarks to Drive Better Decision-Making
Annual planning is one of the most high-stakes processes for SaaS finance teams. While the mechanics may feel familiar – set targets, allocate budgets, validate assumptions – the real challenge lies in aligning financial decisions with strategic priorities in an environment that’s constantly shifting.
How do you pressure-test your assumptions? What role should external benchmarks play? And how can Finance better partner with other departments to build a smarter, more resilient plan?
In a new episode of SaaS Conversations, Tori Danforth, Senior Director of FP&A at Relativity, shares how her team approaches annual planning at scale. From integrating long-range strategic goals to setting departmental targets and navigating trade-offs, Tori offers a detailed look into how benchmarking with external data strengthens both the planning process and cross-functional alignment.
We cover:
- How to connect long-range strategy to annual financial planning
- The role of finance business partners in driving bottom-up alignment
- Using benchmark data to inform investment decisions and trade-offs
- Key metrics and frameworks for plan validation
- Evolving planning processes while maintaining flexibility and trust
- Practical approaches to embedding external data into internal workflows
For finance and operations leaders navigating today’s environment, this conversation offers actionable insights on how to use benchmarking to build better plans and ultimately achieve better outcomes.
Transcript:
Introduction (host): Welcome to SaaS Conversations, a podcast from OPEXEngine by Bain & Company where we explore the strategies behind operational excellence in SaaS. Today, we’re joined by Tori Danforth, Senior Director of FP&A at Relativity. Relativity is a global legal technology company that makes software to help users tackle legal data challenges of any type and on any scale. Trusted by law firms, corporations, the public sector, and legal service providers worldwide, its AI-powered cloud platform, RelativityOne, manages large volumes of data and quickly identifies key issues during litigation, investigations, regulatory requests, and data breach response. With over 300,000 users globally, Relativity operates at serious scale, and today we’re digging into how their finance team approaches annual planning. From validating assumptions to setting targets and driving cross-functional alignment, we’ll explore the critical role that benchmarking plays in building a smarter, more resilient plan.
Katherine Zhang: Can you start by giving us a quick overview of your role at Relativity and what annual planning typically looks like for your FP&A team?
Tori Danforth: My first couple of years at Relativity, I ran the Corporate FP&A team, and as of this year, I transitioned over to running our Strategic Finance and Business Partner teams. The Finance Business Partners are what you would think of as traditional business support – they’re in the trenches every day with their corresponding teams, forecasting and scenario modeling for their specific needs. The Strategic team is like the overlay across all of Finance: they’ll cover broader cross-functional or company-wide strategic models, like our long range plan as well as investment modeling, such as new product introductions, M&A, etc.
I would say that our financial planning process is actually pretty standard: we’ll start with higher level growth and profitability targets that get trickled down into more detailed sales targets and department budget targets. Then we’ll have a few rounds of tactical bottoms-up budgeting with the respective business teams to validate those assumptions and refine our targets. We also do annual budget reviews with the executive team, where each of our leaders presents their plans to each other to ensure cross-functional alignment. Then, we get Board approval.
Katherine Zhang: I know you say that Relativity’s planning process is pretty standard, but given Relativity's scale and diverse customer base, how do you approach building an annual plan that aligns with both strategic goals and operational realities?
Tori Danforth: For us, the finance annual plan is actually a step that’s embedded in a broader company process: it usually starts with a long-range plan created in partnership with the business, which then feeds our priority initiatives (some companies call them OKRs). Then we’ll take those priorities, along with the growth targets from our LRP to set the financial envelope we have for the next year. So that’s how we fit into the strategic side.
After targets are set, we then do a bottoms-up version of the plan with the business – which happens in parallel with the business’ individual operational planning. This is the stage where we highlight any gaps or identify conflicting priorities. Those get discussed and resolved either during the bottoms up phase, or in our executive level budget reviews, to ensure we lock a plan that meets our needs and sets us up for success in execution.
For us, this process actually takes months – almost half a year. Our long range planning starts in the May-June time frame, and our capstone event – the budget reviews with executives – usually happens early to mid-November. Obviously, we’re not 100% dedicated to it for six full months, but it’s important to us to take our time and to get it right.
I do want to add: I can’t emphasize enough how important it is to ensure your financial planning process isn’t run separately from your strategic one. I’ve seen it done in past roles, and it tends to cause unhealthy tension between Finance and the business when that happens, especially in instances where people perceive that the financial envelope is disconnected from strategic expectations. But if your entire organization is aligned upfront, they’ll know before you ever send them a target that it was created with their priorities in mind.
Katherine Zhang: So in terms of building that alignment, how do you approach target setting across departments (e.g. Sales, R&D, G&A)?
Tori Danforth: We always start with our year 1 assumptions from our long range plan. It’s a pretty detailed view, so our LRP already gives us starting points by team (both for dollars and headcount). We also have our Finance Business Partners do a robust bottoms up review of our expenses where they estimate our run rate costs for the next year. Then we compare the two numbers and land on a target by team.
Katherine Zhang: And do benchmarks help shape those discussions?
Tori Danforth: Absolutely. Target setting can sometimes feel like a black box to our business counterparts, and benchmarks can provide more data to demystify the process. It’s especially helpful for us when the business is involved in the creation of the long range plan, which includes benchmarking in the first year and key milestone years.
Katherine Zhang: In today’s environment, when we have SaaS companies that are trying to really balance growth and efficiency – how does benchmarking help you think about trade-offs like headcount planning, sales productivity, or R&D investment?
Tori Danforth: We have actually built a trade-off process into our bottoms-up planning. There’s this tool we use that started as part of the blue ocean strategy framework called ERRC: Eliminate, Reduce, Raise, and Create. We’ve changed it a little to fit our purposes, but essentially our Finance Business Partners will work with the business to identify ways to fund their ‘raise’ or ‘create’ projects with things they can ‘eliminate’ or ‘reduce.’ And ideally, the net impact of each team’s ERRC is net zero to team budgets.
This process is where benchmarks can be really helpful for us, as it can set a starting point for our business partners for their ERRCs. If benchmarks show that marketing program spend is lower than our peers, for example, then we can discuss if we should create new, value-add activities in that spend category as part of our annual plan.
Katherine Zhang: Then once you have targets in the plan, how do external, validated benchmarks – like those from OPEXEngine – factor into your plan validation process?
Tori Danforth: There are two places where they play meaningful roles: in the LRP itself, we use them to compare where we are to where we want to go. And then in the target setting process they help us understand “what needs to be true for our next year’s plan to achieve our long-term goals?”
Katherine Zhang: Can you share an example of a time when benchmark data led to a meaningful adjustment in your plan?
Tori Danforth: One easy example to draw on is revenue growth and profitability margin and their impact on our Rule of 40 goals. So we ask ourselves questions like: What happens if we add a stretch target to our topline goal? How much do we need to add to hit our target sooner? Would we disproportionately need to invest in expenses to make that happen, and if yes, how much does that impact our profitability goals?
Another less easy example: expense as a % to revenue and how it can provide a guardrail for incremental investment decisions. For example, what does an investment in AI do to our R&D as a % to revenue? If it puts us over a benchmark, are we ok with that? If yes, how long until we get back on track? If no, are there other tradeoffs we need to make or efficiencies we need to push for if we don’t want to stray too far from a benchmark?
Katherine Zhang: When you’re doing this validating of your annual plan, what are some of the key metrics or indicators you rely on to know if your assumptions are sound?
Tori Danforth: Not to sound like a broken record, but comparing to our long-term or long range plan is always the starting point. We also do a lot of trend analysis (year over year, quarter over quarter, monthly trends over time, etc.). Basically, all the bridges and waterfall charts to validate each part of our plan from the topline to EBITDA and everything in between.
Other key metrics for us include: retention rates, churn, gross margin expansion, expense run rate trends, impact of new investments, expense ratios, headcount ratios, free cash flow, etc.
Katherine Zhang: Going back to the earlier point about alignment between different departments, do you find that having this outside data helps build alignment between finance and functional leaders?
Tori Danforth: In general, yes. Sometimes it can take a little work to get your business counterparts bought into the benchmarks. But once you’re all on the same page, it really helps to contextualize the targets we’ve set for them.
Katherine Zhang: In today’s market environment that’s constantly shifting – whether it’s macroeconomic uncertainty, changing buyer behavior, or evolving investor expectations – how do you navigate those shifting environments or expectations and stay grounded in your planning decisions?
Tori Danforth: It’s a great question. This is definitely a space that can feel more art than science, at times. You have to find the balance between seeing your strategies through while also allowing room for flexibility.
Something we do at Relativity that I really like, and a lot of credit goes to both our investors and our Strategy team for implementing this, is building out what we call “Strategic Pillars” – these are medium-term in nature and are core to our company’s goals and values. Then, our annual priority initiatives slot into those pillars to help us set shorter term goals aligned to our pillars. The annual goals can change each year (or not, depending on what you need), while the pillars stay the foundation underneath us.
Navigating uncertainty is actually a lot like that process: find the pillars or foundation that matter to you no matter what is happening in the world, and then set shorter-term goals that can change as the market environment does.
Katherine Zhang: Taking a bit of a step back here, as a finance leader, how do you think about evolving a planning process?
Tori Danforth: I think it’s critical to have a strong perspective on what are table stakes vs. nice-to-haves in your processes. Then, you focus first on the table stakes and add the nice-to-haves in later phases. And it’s definitely important to accept that phased approaches are often necessary. Don’t bite off more than you can chew in that first bite.
It’s also important to accept that trade-offs are almost always made in the middle of your evolution process. We often have limited resources and either need to prioritize or make choices that aren’t optimal in the shorter term.
For example, when I first started at Relativity, there was a cross-functional desire to automate our workforce planning process. However, there were fundamental enhancements we needed to our financial planning system that were core to our everyday forecasting processes that had to happen first. We got our workforce planning tool built in the end, and later than everyone – myself included – wanted. But I think we ended up in a much better spot by waiting, because we learned a lot in that early phase that we would have probably gotten wrong if we’d rushed to implement a new tool too quickly.
Katherine Zhang: Outside of the annual planning cycle, do you use benchmarks and outside data throughout the year to evaluate performance or do scenario analysis?
Tori Danforth: It depends a lot on what our current year priorities are. A few examples of times where we use benchmarks outside of planning can include:
- If we are actively working with teams we know are out of benchmark, we’ll scenario model to help them identify options, such as initiatives to invest in tooling or to expand into new locations.
- Another example would be: If we are asked to run scenarios as part of early-stage strategic planning, we’ll often model out how a key metric could be impacted by a set of decisions over a one, two, three-plus year period.
In past roles, I’ve also used them for things like M&A due diligence, where we compare the acquisition against benchmarks based on its industry, size, and other key factors. While I haven’t seen benchmarks used in the decision-making process per se, it does help to know what you’re buying, for better or worse. And if you know in advance that post-acquisition, your own performance against benchmarks may change, you can set your own short and medium-term plans accordingly.
Katherine Zhang: What advice would you give to other FP&A leaders who are looking to incorporate benchmarking into their annual planning processes?
Tori Danforth: My advice is the same whether it’s specific to annual planning or just the general use of benchmarks: don’t be afraid of them! Finance teams tend to be wary of introducing data that could lead to contention with their business partners. Also, it’s all too easy to fall into the “my company is different” trap, and if you or your business counterparts aren’t bought into the benchmarks, you’ll lose them as an audience.
So the first step, obviously, is to get your benchmarks from a source you trust. What we love about OPEXEngine is not just the amount of data provided, but the ability to customize our peer groups. So if we want to see how we compare to Vertical SaaS peers with revenue growth rates similar to ours? Done. You want to look at companies with specific EBITDA margins? Definitely possible. It’s great because it helps eliminate arguments the business may try to use about the relevance of the benchmarks you’re showing them.
The second step would be to take the time to compare your business teams to their corresponding benchmarks with the business. Understand why they have different headcount ratios; dig into the root cause of the variances of your spend to benchmarks. Have your business counterparts be a part of the process early and often. It will make using benchmarks as part of your annual plan feel like a natural extension of your regular conversations with them.
Even if, after all that digging, you come to the conclusion that a specific benchmark doesn’t apply to you, that’s actually a win. Knowledge is power. You can set your own goals and guardrails with your business team for efficiencies or growth patterns knowing why you’re different.
As an added bonus, you’ll have that information for any external parties that may be questioning why your S&M spend is so low or your G&A costs are so high. We’ve had many productive conversations with our investors about how and where we differ from their other portfolio companies, and we were able to show our math, so to speak, because of the work we did understanding our performance against benchmarks.
Katherine Zhang: Let’s end with this question: if you could change one thing about how most SaaS companies approach planning, what would it be?
Tori Danforth: Great question. I’ve seen a few companies that have made the transition from small and scrappy to a larger size but still maintained their “start up/small company” mentality well into their later stages. This can materialize in many ways, and it’s not always a bad thing, but one perspective where it can be a disadvantage is when you keep the “grow as fast as possible” mindset, where companies continue to make investment decisions – especially during annual planning – without as much consideration for how those decisions could impact longer-term profitability. Then, when you get to a point where you need to focus on being more profitable, you tend to find yourself with less options.
This is why it’s so important to have a long-range plan that sets the goal points and the guardrails for the intermediate years. You also need to make sure your annual plan fits inside those guardrails. Luckily, benchmarking can help immensely with both.
Katherine Zhang: Great. Thank you for spending the time with us today, Tori.
Tori Danforth: Excellent. Thank you so much for having me.
