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Why planning on Excel doesn’t cut it for Series A+ SaaS startups

As a SaaS business grows in complexity and size, using Excel for planning can affect growth with the hidden costs becoming too big to ignore.
Praveen Rajaretnam
Planning
February 4, 2022
12 min read
Table of contents
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Summary
If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail.

Even if a hammer is not the right tool for a situation, if it’s all we have, then we will try and fix everything with it. We rarely look for better alternatives. 

We tend to use the same tools to solve new problems which might need a new tool or a different approach.

It’s the same in the field of financial and revenue planning. Spreadsheets are a popular tool for business planning—especially for startups that don’t have many moving parts to keep track of. These are typically seed-stage or early Series-A companies with less than $10 million ARR. But, Excel and spreadsheets run into limitations for companies that have achieved product-market fit and are scaling up fast. 

1. Spreadsheets do not provide real-time visibility

Pulling in data from multiple business systems and updating them into spreadsheets is largely a manual data-entry process. 

The delay in getting this data, updating it on spreadsheets, validating and cross-checking their accuracy, and finally creating reports to glean insights means any newly revised plans are already out of date.

Impact
  • Creating plans based on outdated data means you are making inaccurate conclusions. 
  • Worse, you are potentially making inaccurate decisions based on those conclusions, which can negatively impact your business.

2. Spreadsheets are prone to human error

Wherever manual data entry is concerned, errors creep in. Common examples are missing data due to unintentional deletions, mistyped formulae and incorrect cell references. It’s difficult for business users to notice them given the size and complexity of the models created on Excel spreadsheets.

Impact
  • Even a tiny error can send forecasts haywire with severe consequences. An accountant at Fidelity Investments, one of the largest financial services corporations in the world, mistakenly omitted a minus sign while doing a tax calculation, turning a $1.3 billion loss into a $1.3 billion gain. It led to the withdrawal of the fund distribution that year.
  • As mentioned earlier, these errors could lead executives to pursue strategies that can hurt growth, which they wouldn’t have gone after otherwise.

3. Spreadsheets are difficult to collaborate on

Cross-functional planning is complex. And its complexity increases with an increasing number of stakeholders in the planning process. 

A significant amount of time is spent driving alignment. Take standardizing metric definitions such as Sales Qualified Lead (SQL) and their measurement rules for example. Another common area of disagreement is agreeing on assumptions that go into plans. 

Today, internal communication is managed on many tools such as emails, messaging platforms and file storage software like Google Drive. This makes it difficult for stakeholders to find the information (Excel files) they need. 

Impact

Several practical limitations come to the fore here. 

  • Version control: Tracking the correct version of a spreadsheet worked on by different people becomes hard as multiple copies exist. This could result in business users referring to the wrong spreadsheet.
  • Secure report distribution: It’s easy to miss adding stakeholders on important communications, which can cause project delays affecting deadlines. Worse, accidentally sharing plans and reports widely can cause legal repercussions for disclosing sensitive information.
  • Standardized templates: The lack of standardized templates results in each team “speaking their own language.” They have their own processes, preferred formats and methods to build out their departmental plans and forecasts. This requires additional effort to understand the spreadsheet and then apply the information causing further delays.

4. Spreadsheets are time-consuming

As cited above, creating and maintaining financial and revenue models on spreadsheets is time-intensive. From aggregating data across your business systems, consolidating them in spreadsheets, tracking and duplicating information between spreadsheets, and validating the data for accuracy means an inordinate amount of analyst’s time is spent away from strategy and on low impact tasks.

Impact
  • Companies are unable to invest time and resources in high-impact activities such as strategic analysis or evaluating more scenarios to mitigate risks or tap into opportunities.

The hidden costs of spreadsheet-based planning and forecasting

In dollar terms, these constraints and drawbacks add up and curtails business growth.

Continuous planning, rolling forecasts, and scenario planning are becoming increasingly important concepts for running a successful SaaS business. However, time and resource constraints of planning on Excel sheets prevents companies from increasing the frequency of planning cycles and limits the number of scenarios analyzed. This prevents companies from responding faster to changing conditions—say, an opportunity arising due to a competitor struggling or the risk of dealing with high levels of employee attrition.

Impact
  • On the whole, your business ends up unable to predict revenue and business outcomes. 
  • Companies that fall short of their targets end up having to layoff people. It also affects their future fundraises as investors lose confidence and trust in the leadership. 
  • Companies that go over revenue targets could mean a missed opportunity to accelerate growth and immediate future risk of not being able to service onboarded customers.

The need for a faster planning and decision-making tool

Modern finance and revenue teams at SaaS companies need their data from core business systems to be constantly updated and refreshed to ensure more accurate decision-making. 

Access to near-real-time information from business applications is essential for monitoring business performance targets and quickly adjusting to changing conditions.

Teams also need a way to reduce formula errors and improve model maintainability. 

For example, replacing cell references with English-language formulas that need to be defined just once. The added advantage is that it also captures the relationship between metrics. This makes it easier to understand the impact of changes in business drivers on the target metrics. It also helps in simulating scenarios and conducting root cause analyses to understand slowdowns in growth or identify bottlenecks.

All of this requires a purpose-built tool that helps simplify the planning process. 

Choosing a financial and revenue planning platform for faster modeling

The flexibility and richness of functions offered in spreadsheets make them difficult to replace. But, as a SaaS business grows in complexity and size, continued use of Excel for planning can affect their growth rate, with the hidden costs becoming too large to ignore.

Drivetrain’s collaborative and connected planning solution gives SaaS businesses major cost and productivity gains. 

It adds value to your planning, budgeting and forecasting efforts by way of:

  • Automated data centralization: Drivetrain comes with over 200 pre-built integrations to business tools (ERP, CRM, HRIS, billing and invoicing systems) to ensure all necessary financial and business data are always up to date. We also provide additional methods to connect to your data sources (Google sheets, APIs, CSV uploads, and more). This gives you a single source of truth and ensures data reliability and consistency across your models.
  • Better collaboration: Drivetrain increases visibility into long-term business planning by breaking down silos and aligning teams on the definitions of various shared metrics and their measurement rules. This helps track business performance (actuals) against your plan targets and forecasts, enabling continuous planning and rolling forecasts. 
  • Faster error-free modeling: Drivetrain helps you enhance revenue by transitioning from reactive to proactive and predictive planning with new outcome-based business models. Since Drivetrain uses plain English-language formulas to capture metric relationships, you can run What-If scenarios in minutes to understand the impact of events and decisions, enabling you to identify and react to risks and opportunities.
  • Quicker, more confident decision-making: Built-in root-cause analysis tool help identify the bottlenecks to growth and scenario analysis tool helps assess the impact of your decisions before you make them.

With Drivetrain, planning is flexible, scalable, centralized, and inspires confident decision-making.

Learn more about how Drivetrain can help your organization scale your business growth. Reach out to us at learn@drivetrain.ai or schedule a free demonstration

Why planning on Excel doesn’t cut it for Series A+ SaaS startups

Praveen Rajaretnam
Planning
February 4, 2022
12 min read
If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail.

Even if a hammer is not the right tool for a situation, if it’s all we have, then we will try and fix everything with it. We rarely look for better alternatives. 

We tend to use the same tools to solve new problems which might need a new tool or a different approach.

It’s the same in the field of financial and revenue planning. Spreadsheets are a popular tool for business planning—especially for startups that don’t have many moving parts to keep track of. These are typically seed-stage or early Series-A companies with less than $10 million ARR. But, Excel and spreadsheets run into limitations for companies that have achieved product-market fit and are scaling up fast. 

1. Spreadsheets do not provide real-time visibility

Pulling in data from multiple business systems and updating them into spreadsheets is largely a manual data-entry process. 

The delay in getting this data, updating it on spreadsheets, validating and cross-checking their accuracy, and finally creating reports to glean insights means any newly revised plans are already out of date.

Impact
  • Creating plans based on outdated data means you are making inaccurate conclusions. 
  • Worse, you are potentially making inaccurate decisions based on those conclusions, which can negatively impact your business.

2. Spreadsheets are prone to human error

Wherever manual data entry is concerned, errors creep in. Common examples are missing data due to unintentional deletions, mistyped formulae and incorrect cell references. It’s difficult for business users to notice them given the size and complexity of the models created on Excel spreadsheets.

Impact
  • Even a tiny error can send forecasts haywire with severe consequences. An accountant at Fidelity Investments, one of the largest financial services corporations in the world, mistakenly omitted a minus sign while doing a tax calculation, turning a $1.3 billion loss into a $1.3 billion gain. It led to the withdrawal of the fund distribution that year.
  • As mentioned earlier, these errors could lead executives to pursue strategies that can hurt growth, which they wouldn’t have gone after otherwise.

3. Spreadsheets are difficult to collaborate on

Cross-functional planning is complex. And its complexity increases with an increasing number of stakeholders in the planning process. 

A significant amount of time is spent driving alignment. Take standardizing metric definitions such as Sales Qualified Lead (SQL) and their measurement rules for example. Another common area of disagreement is agreeing on assumptions that go into plans. 

Today, internal communication is managed on many tools such as emails, messaging platforms and file storage software like Google Drive. This makes it difficult for stakeholders to find the information (Excel files) they need. 

Impact

Several practical limitations come to the fore here. 

  • Version control: Tracking the correct version of a spreadsheet worked on by different people becomes hard as multiple copies exist. This could result in business users referring to the wrong spreadsheet.
  • Secure report distribution: It’s easy to miss adding stakeholders on important communications, which can cause project delays affecting deadlines. Worse, accidentally sharing plans and reports widely can cause legal repercussions for disclosing sensitive information.
  • Standardized templates: The lack of standardized templates results in each team “speaking their own language.” They have their own processes, preferred formats and methods to build out their departmental plans and forecasts. This requires additional effort to understand the spreadsheet and then apply the information causing further delays.

4. Spreadsheets are time-consuming

As cited above, creating and maintaining financial and revenue models on spreadsheets is time-intensive. From aggregating data across your business systems, consolidating them in spreadsheets, tracking and duplicating information between spreadsheets, and validating the data for accuracy means an inordinate amount of analyst’s time is spent away from strategy and on low impact tasks.

Impact
  • Companies are unable to invest time and resources in high-impact activities such as strategic analysis or evaluating more scenarios to mitigate risks or tap into opportunities.

The hidden costs of spreadsheet-based planning and forecasting

In dollar terms, these constraints and drawbacks add up and curtails business growth.

Continuous planning, rolling forecasts, and scenario planning are becoming increasingly important concepts for running a successful SaaS business. However, time and resource constraints of planning on Excel sheets prevents companies from increasing the frequency of planning cycles and limits the number of scenarios analyzed. This prevents companies from responding faster to changing conditions—say, an opportunity arising due to a competitor struggling or the risk of dealing with high levels of employee attrition.

Impact
  • On the whole, your business ends up unable to predict revenue and business outcomes. 
  • Companies that fall short of their targets end up having to layoff people. It also affects their future fundraises as investors lose confidence and trust in the leadership. 
  • Companies that go over revenue targets could mean a missed opportunity to accelerate growth and immediate future risk of not being able to service onboarded customers.

The need for a faster planning and decision-making tool

Modern finance and revenue teams at SaaS companies need their data from core business systems to be constantly updated and refreshed to ensure more accurate decision-making. 

Access to near-real-time information from business applications is essential for monitoring business performance targets and quickly adjusting to changing conditions.

Teams also need a way to reduce formula errors and improve model maintainability. 

For example, replacing cell references with English-language formulas that need to be defined just once. The added advantage is that it also captures the relationship between metrics. This makes it easier to understand the impact of changes in business drivers on the target metrics. It also helps in simulating scenarios and conducting root cause analyses to understand slowdowns in growth or identify bottlenecks.

All of this requires a purpose-built tool that helps simplify the planning process. 

Choosing a financial and revenue planning platform for faster modeling

The flexibility and richness of functions offered in spreadsheets make them difficult to replace. But, as a SaaS business grows in complexity and size, continued use of Excel for planning can affect their growth rate, with the hidden costs becoming too large to ignore.

Drivetrain’s collaborative and connected planning solution gives SaaS businesses major cost and productivity gains. 

It adds value to your planning, budgeting and forecasting efforts by way of:

  • Automated data centralization: Drivetrain comes with over 200 pre-built integrations to business tools (ERP, CRM, HRIS, billing and invoicing systems) to ensure all necessary financial and business data are always up to date. We also provide additional methods to connect to your data sources (Google sheets, APIs, CSV uploads, and more). This gives you a single source of truth and ensures data reliability and consistency across your models.
  • Better collaboration: Drivetrain increases visibility into long-term business planning by breaking down silos and aligning teams on the definitions of various shared metrics and their measurement rules. This helps track business performance (actuals) against your plan targets and forecasts, enabling continuous planning and rolling forecasts. 
  • Faster error-free modeling: Drivetrain helps you enhance revenue by transitioning from reactive to proactive and predictive planning with new outcome-based business models. Since Drivetrain uses plain English-language formulas to capture metric relationships, you can run What-If scenarios in minutes to understand the impact of events and decisions, enabling you to identify and react to risks and opportunities.
  • Quicker, more confident decision-making: Built-in root-cause analysis tool help identify the bottlenecks to growth and scenario analysis tool helps assess the impact of your decisions before you make them.

With Drivetrain, planning is flexible, scalable, centralized, and inspires confident decision-making.

Learn more about how Drivetrain can help your organization scale your business growth. Reach out to us at learn@drivetrain.ai or schedule a free demonstration

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