Driver-Based Planning
The foundation of modern FP&A. A practical guide to building faster, more accurate, more collaborative plans using the levers that actually move the business.
Overview
What Is Driver-Based Planning?
Driver-based planning links your financial outputs (revenue, expenses, headcount, cash, margins) to the operational inputs that actually cause them:
- units sold
- pipeline conversion
- price
- churn
- staffing ratio
- productivity
- volume
- contracts
- seasonality
Instead of hardcoding numbers, you're building mathematical relationships that scale, update automatically, and stay accurate.
Drivers turn FP&A from manual number-changing into automated insight generation.
The Three Types of Drivers
Every business uses a mix of:
1. Volume Drivers
- Units sold
- Bookings
- Pipeline
- Customers
- Transactions
- Subscriptions
- Usage metrics
Volume determines activity.
2. Rate/Price Drivers
- Price per unit
- Discount rate
- Churn rate
- Renewal rate
- Salary rate
- Bonus target
- Commission %
- Billing rate
Rates determine value.
3. Efficiency/Productivity Drivers
- Ramp time
- Sales capacity
- Ops productivity
- Marketing efficiency
- Support ratios
- Headcount-to-output ratios
Efficiency determines profitability.
Why It Matters
Modern companies change fast. Markets change fast. Pipeline changes fast. Hiring changes fast.
Driver-based planning lets FP&A:
Forecast Faster
No more rebuilding full models — change a few drivers and everything updates.
Embed Business Logic
Finance becomes a partner, not a spreadsheet operator.
Improve Accuracy
If assumptions change, the model changes automatically.
Model Scenarios
"What if revenue drops 10%?" → change 1 driver. "What if hiring slows?" → change 1 driver.
Scale the Planning Process
Works for 2 entities or 200. Works for 10 accounts or 1,000.
Driver-based planning is the backbone of continuous planning.
Driver-Based Planning Examples
By Function
Revenue Planning
- Pipeline × Conversion Rate × Average Deal Size
- Active customers × Price × Renewal rate
- Units × Price × Mix
COGS Planning
- Units × Unit Cost
- Staff hours × Billable rate
- Vendor contracts × tiered pricing
OPEX Planning
Marketing:
Spend → Leads → Pipeline → Revenue
Sales:
Headcount × Productivity × Ramp time
Product/Engineering:
Team size × salary + overhead
G&A:
Staffing ratio × growth assumption
Headcount Planning
- Start HC + New Hires − Attrition
- Compensation = HC × Salary Rate × Bonus
- Benefits % × Payroll
Cash Planning
- Collections driver: AR days × revenue
- Payment terms × AP
- CapEx schedules
SaaS Planning
- Customer count × ARPU × churn
- Expansion rate × gross retention
- Support tickets × staffing ratio
How to Build a Driver-Based Model (Step-by-Step)
- Step 1 — Identify the key levers of the business
2–5 per function. Not 50.
Examples: Pipeline → conversion → bookings | Headcount → productivity | Units → price | Customers → churn - Step 2 — Map the relationships
Turn business logic into formulas.
Example: Bookings = Pipeline × Conversion Rate × Average Deal Size - Step 3 — Build a central driver sheet
A single tab/page where FP&A updates: growth assumptions, pricing, hiring rates, volume, productivity.
Modern tools call this the "drivers module." - Step 4 — Connect drivers to financial statements
Revenue → COGS → OPEX → Cash flow.
Your model becomes: scalable, auditable, predictable - Step 5 — Align with business partners
Validate assumptions with: Sales, Marketing, Operations, HR, Product.
Business partnering strengthens the model. - Step 6 — Automate it inside a planning tool
Driver-based planning is where tools like Pigment shine.
How It Fits Into Modern FP&A
Why Driver-Based Planning Fails (Common Pitfalls)
Most mid-market companies struggle here because:
- Too many drivers
- The wrong drivers
- No ownership
- Stale assumptions
- Hardcoded numbers
- No linkage to financials
- Tools not designed for driver logic
Too many drivers: The model collapses under the weight of complexity.
The wrong drivers: They pick metrics that don't actually move results.
No ownership: Sales assumes FP&A owns the drivers. FP&A assumes Sales owns the drivers.
Stale assumptions: Drivers updated once a year are useless.
Hardcoded numbers: Excel ruins everything with one hidden value.
No linkage to financials: Drivers float in isolation → no impact analysis.
Tools not designed for driver logic: Legacy tools choke on advanced driver modeling.
How Modern FP&A Tools Support Driver-Based Planning
Pigment
Real-time drivers, interconnected models, instant recalculation.
Planful
Structured templates, solid mid-market driver automation.
Adaptive Planning
Strong built-in modeling, but more rigid.
Vena
Excel-first → easier for traditional teams.
Mosaic / Firmbase / Abacum
Pre-built SaaS drivers, fast deployment.
When Driver-Based Planning Matters Most
- High-growth companies
- SaaS + subscription models
- Manufacturing
- Multi-entity orgs
- Companies with more than 300 employees
- Complex revenue models
- Rapid headcount scaling
- Volatile pipeline environments
What "Good" Driver-Based Planning Looks Like
A world-class driver model:
- Has fewer than 30 total drivers
- Updates automatically
- Feeds all financial statements
- Drives scenario planning
- Is owned by FP&A AND the business
- Is tool-supported
- Drives fast, monthly forecasting
- Helps executives make decisions quickly
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Need help building a driver-based model or selecting the right planning tool?
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