Do you replace our accountant or controller?

No. Your accountant handles your books, tax and financial statements. We build the planning model with your finance lead, connecting strategy to the budget, and any accounting or tax question goes back to your accountant.

What is a driver-based budget?

It builds revenue and cost from the activities that cause them, such as contracts, jobs, average ticket and close rates, rather than adding a percentage to last year. When a driver changes, everyone can see what happens to the totals.

When should we start?

Roughly eight weeks before your fiscal year begins. That leaves time for managers to submit their drivers, for a cash test and for owner and board review.

What software do you use?

Usually a well-structured spreadsheet that your team can maintain after we leave. If you already use planning software, we build in it instead.

Annual Operating Plan and Budget Built From Strategy

An annual operating plan is year one of the strategy expressed as months, dollars and people. It includes a monthly budget built from drivers, a hiring calendar, and a short list of funded initiatives with owners. Its purpose is simple: when a manager opens the budget, they should see the strategic plan in it.

What it is and who it is for

It is the bridge between a direction and a payroll. Without it, most companies build next year's budget by taking this year's actuals and adding a percentage, which quietly funds the past instead of the plan.

It suits:

companies that have a strategic plan, ours or their own, but whose budget was built separately;
owners who approve a budget each year without being sure what it commits them to;
leadership teams where each manager guards a cost line and nobody owns the total;
boards that want to see how the year's spending connects to the priorities they approved.

What is included

You receive a working model and the documents that explain it. The core pieces are listed below.

Revenue build. Revenue by line of business and by month, built from drivers such as number of contracts, jobs per technician, average invoice and close rate.
Gross margin by line. Direct labour, materials and subcontract costs per line, so a growth priority that destroys margin shows up before it is funded.
Overhead plan. Fixed and semi-fixed costs, with each strategic initiative shown as its own line rather than buried in "general".
Hiring calendar. Each new role with its start month, fully loaded cost and the priority it serves.
Cash test. A month-by-month check that the plan can be funded, including seasonal lows.
Initiative list. Five to ten funded initiatives, each with an owner, a budget, a start month and a success measure.

The model connects directly to your KPI scorecard, so the targets in the scorecard are the same numbers as in the budget.

Timeline

A first operating plan typically takes five to eight weeks, working back from the start of your fiscal year. Later years take less time because the model already exists.

Eight weeks out: confirm year-one targets from the three-year strategic plan.
Seven to six weeks out: each manager submits drivers for their area.
Five weeks out: first full draft of revenue, margin and overhead.
Four weeks out: cash test and hiring calendar; leadership review.
Three to two weeks out: final adjustments, owner approval and board review where applicable.
First month of the year: scorecard targets loaded and the first monthly comparison scheduled.

Our guide to building an operating plan walks through each step in more detail.

How results are measured

The operating plan works if the monthly variance conversation becomes routine and useful. We judge it on three tests.

Traceability. Every major cost increase can be linked to a named priority.
Variance clarity. When a month is off budget, the drivers show why within a few minutes, rather than after a week of digging.
Reforecast discipline. At each quarterly review the full-year forecast is updated, while the original budget stays fixed as the reference point.

A worked example

Here is the kind of arithmetic the model makes visible. Suppose a company's year-one target is $9.2 million, up from $8 million, and gross margin is 38%. The extra $1.2 million of revenue produces about $456,000 of gross profit. If the plan funds two new roles at a fully loaded $95,000 each, plus $60,000 for a new scheduling system, the incremental cost is $250,000, leaving about $206,000 of additional operating profit if revenue arrives on schedule.

Now the timing question. If both hires start in month two but new revenue builds slowly and only reaches full pace in month seven, the first half of the year carries the cost before the gross profit. The cash test shows whether that dip is affordable, and the scenario planning work shows what happens if revenue arrives three months late.

Mistakes to avoid

Budgets go wrong in familiar ways. These five cause most of the trouble.

Last year plus a percentage. It funds habits, not priorities.
Annual numbers only. A budget without months can't be compared with reality until it is too late.
Hiding initiatives inside general overhead. If a priority has no line, nobody can see whether it is funded.
Confusing the budget with the forecast. The budget is the commitment; the forecast is the current best estimate. Keep both.
Ignoring seasonality. Many Canadian businesses have strong and weak seasons. A flat monthly budget produces false alarms in one season and false comfort in the other.

The operating plan is usually scoped as a project; see pricing. If you'd like to talk it through, call, text or email. We meet online by video and in person.

Annual operating plan and budget