Financial Planning & Analysis

How to Develop a 5-Year Strategic Financial Plan

This blog is based on my experience of developing and implementing 5-year strategic financial plans for several Fortune 500 companies. Recently, I had the opportunity to create the first-ever 5-year strategic plan for the categories within a Consumer Product BU, requiring me to work across category teams and functional groups to deliver a product that would be the foundation of strategic growth.

Throughout my 15 years of FP&A experience, I’ve had a chance to put together top-down strategic plans (where you are given an overall growth target and have to build your plan to hit those CAGRs) and bottoms-up strategic plans (where you build your strategic plan by item, property, or product type and consolidate to an overall growth rate). Whether this is your first attempt at completing a strategic and long-term financial plan, or you are revamping your planning process, you should follow these tips to ensure success. 

Consult with your Research and Insight Group. (And Early!)

This is a critical part of the 5-year strategic and long-term financial planning process. It is important that the resources dedicated to building your strategic and long-term financial plan are working closely with the research team and the products teams to identify strategic initiatives and help the product teams determine how strategic initiatives will drive and impact their business.

It is also important to submit research requests in a timely manner to give your research team enough time to evaluate relevant data sources, purchase (if necessary), sift through all the data and synthesize information. If you are part of a large corporation or you are evolving as a business, it is possible that the research team may be overwhelmed by data requests if not properly staffed. Also, don’t assume your product managers already have the latest research or are already aware of the latest trends. Make sure you have empirical data whenever possible to back up your strategies.

Think about strategic initiatives, not tactical plans.

This can be a tricky proposition for product managers, as focusing on tactical solutions to sell more product and keep costs low is what they are more accustomed to doing. Make sure that you have strategic and financial resources that can push the product teams to contemplate big picture ideas and “think outside the box.” Dial into strategies that will really drive revenue growth and hopefully take the business in a new, exciting, more profitable direction. Focus on two or three big ideas that will be the overarching story of how your products will connect to the consumer and drive continued growth throughout the strategic and long-term planning period.

Questions will always come up when evaluating different strategic plans. One can always question assumptions made in terms of customer acceptance, retention rates, pricing, etc. It is important to find strategic and financial partners who understand and are comfortable in the unknown. It is quite alright to get this wrong. It is your best guess.

The goal is to think about progress, not a perfect project.

For many first-time 5-year strategic and long-term financial planners, simply starting the process seems like a victory. Consider it more about the process vs. the result. A lot of the assumptions that you make may not come about. Sometimes the resources ask for the strategic initiative and it doesn’t get approved right away. All of that is fine, as the process will help you expand what you think is possible for your business. And, your Corporate Controllers will know what potential your business could have with the right amount of investment, all of which is valuable information for the overall company.

Don’t forget about the financials.

Make sure you have a strategic and financial partner comfortable in both the building and organizing of strategies as well as building the corresponding financials. This entails ensuring:

  • All strategic initiatives are properly evaluated and presented to the CFO of the business unit or organization.
  • All ideas are thoroughly flushed out.
  • All additional resources, including marketing dollars, operational requirements, or additional headcount are presented in a favorable manner.
  • A balance exists between “pie-in-the-sky” optimism and typical financial conservativism to understand what the actuals needs would be in the most likely scenario to bring about high growth with fiscal responsibility.

Plan ahead, stick to a timeline, resource properly, and start the process at least 6 months before delivery date.

Long term and strategic financial planning should eventually become a year-round exercise that is incorporated into the normal forecast and budget cycle of any business unit. It may take 4-6 months from the time research requests are made to the deliverable being shared with executives. The strategic and long-term plan will have to be done in correlation with the normal process of annual operating budgets and monthly forecasting, so you will need some buffering time to focus on other tasks while keeping your eye on the long-term plan.

Having a dedicated resource that sits within the business unit, but outside the daily functional finance task has proven to be a prudent way of tackling the balancing act between the strategic and long-term process without disrupting the business flow.

Invest in new technological platforms.

I’m always surprised by how many corporations and especially divisions within large corporations are still using Excel for their budget/forecast/long-term planning needs. The market for ERP software becomes easily available through the influx of new platforms targeting small and medium sized companies/divisions for a reasonable price. Having a good, flexible system that can easily consolidate financial records over multiple years and help to use Artificial Intelligence to assist with predictive projects based on multiple growth factors will help you build a more robust long-term financial model that can be used as a benchmark for future budgets/forecasts. Such a system will also make the transfer of this data to corporate, whether it be in colorful presentations or system uploads to large ERP systems much faster, saving a lot of man hours in the process.

Get expert long-term and strategic financial plan support.

If you are contemplating developing your first 5-year strategic and long-term financial plan or looking to make improvements in a current process, we invite you to visit our service page to learn more about how we can help.

We’ve also created a companion timeline for this piece that you can download by clicking the button below!

5-year strategic financial planning timeline download button

About the Author

Lester brings over 15 years of financial planning & analysis and budgeting experience in consumer products, healthcare, and publishing. Prior to working at 8020, he served in various leadership roles in the consumer products industry: Director, Finance at Warner Bros. Consumer Products, Senior Manager, Retail Analytics at Disney Consumer Products, and Manager, Finance at Disney Publishing Worldwide. At Warner Bros., Lester helped institute the 5-year Strategic planning for business units within Consumer products. Lester’s experience also includes financial modeling, financial management for small start-ups, as well as forecasting system research, selection and implementation of few forecasting software and processes. Lester holds a bachelor’s degree in Economics from Stanford University and an MBA from the University of Michigan’s Ross School of Business with a concentration in finance and corporate strategy.

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