Using your annual operating plan as a dynamic leadership tool

Welcome back to Vertex Angles, the weekly newsletter from Vertex Ventures US. We’re a boutique venture capital firm, investing in exciting companies across software infrastructure, developer tools, data, security, and vertical SaaS. If this email was forwarded to you, you can subscribe here to get Vertex Angles in your inbox every week.

Programming note: We’ll be taking next week off as the team celebrates the Thanksgiving holiday in the US. We hope you and yours have a happy Thanksgiving – the Vertex Ventures US team remains grateful for your continued support.

Believe it or not, we’re facing down the final days of 2024. We’re entering that nebulous time of the year where the pace starts to slow down, the holiday party invitations seem endless, and meetings are pushed off until “next year.”

But in the same way that people use this time to make their resolutions for the year ahead, now is the perfect time for founders to work on their Annual Operating Plan (AOP) for 2025 – whether they’re refreshing the AOP they already had, or starting on the process for the very first time.

That’s why Vertex US recently hosted Rickie G. , Senior VP of Revenue Operations and Customer Experience at Cyberhaven (one of our portfolio companies), for a master class on getting the most out of your AOP. The session was reserved for business and finance leaders at the companies with which we work, but I wanted to share what I found to be the biggest single takeaway: An AOP isn’t a static business document, but rather a dynamic leadership tool that helps you prioritize what matters the most.

“An AOP really is your playbook for the year. If you think about it, it's a bridge between your long-term vision and your short-term execution,” Rickie said. “It keeps everyone from leadership to investors to your teams aligned on what you're trying to achieve.”

Startup life often requires founders and early employees to wear many hats, as you simultaneously try to build the best possible product, recruit a team of all-stars, and generate enough momentum on the business side to ensure you win over customers and hit your milestones. That can trap startup leaders in a cycle of solving only the problem in front of them, rather than thinking strategically about what’s actually important for the company. That, in turn, can lead to misused resources, missed opportunities, and wasted time.

That’s what makes the AOP such an important tool for startups: It forces leadership to sit down and define their strategy and vision, making sure it aligns with the overall mission of the company. Once you have that, you can break it down into tactical goals around product, business development, sales, et cetera. That helps you define the most important metrics to track and, in turn, those OKRs and goals to which you want to hold your teams accountable. It also helps with setting budgets for the year, making sure your investment in each area is in line with your overall priorities.

The trick is to use the AOP to create ambitious but realistic goals. Its purpose isn’t to set the path of the company in stone, or to provide a foundation to hold employees to unrealistic expectations. Leadership teams should revisit the plan every so often during the year, tweaking things as needed to make sure it matches with the reality of the situation on the ground – and to ensure that financial discipline is being maintained as the company scales up.

On the subject of timing, Rickie warns that startup leaders should leave plenty of time to make sure the AOP process is as rigorous as possible. A good AOP needs buy-in from all stakeholders at the company, especially when it comes to budget. Once the overarching strategy is defined, it takes time for each team to assess the cost profile of pursuing their part of the puzzle. Then, it falls on leadership to take those figures in aggregate and allocate financial resources accordingly, based on what’s available.

In other words, a small startup might still have time to get their AOP ready for prime time by the time January rolls around as you read this, but it’s probably a tall order for a growth-stage company to finish theirs in the last month of Q4. Still, Rickie says, it’s an exercise worth doing no matter what, especially if you’ve never had an AOP before. Plus, he says, the more you do it, the easier it gets in some ways: You have more historical data on which to base your projections, speeding up the process a little bit.

New from the Vertex US team:

• If you’ll be at AWS re:Invent in Las Vegas next week, Vertex’s Megan Reynolds and Noah Carr will be hosting a breakfast event for infrastructure software founders, builders, and engineering leaders on the morning of Wednesday, December 4th. There are only a few slots left, so register here.

Vertex portfolio job of the week: Director of Product Marketing at Cyberhaven

Cyberhaven, the company revolutionizing data protection with cutting-edge AI, is seeking experienced, creative, and otherwise exceptional team players as it builds out its marketing organization. The Director of Product Marketing will craft narratives that communicate Cyberhaven’s value, making complex ideas accessible to both technical and non-technical audiences.

Apply Now

For more startup jobs from across the Vertex Ventures US portfolio, check out our jobs portal.

News from the Vertex US portfolio:

• In his final video in this series Metaview CEO Siadhal Magos shares his thoughts on why he wishes he had invested in his network earlier in his entrepreneurial journey.