When working with clients on Enterprise Performance Management (EPM) implementations, one of the most common questions finance leaders ask is:

“Should we use a top-down or bottom-up planning approach?”

It’s a great question—and one that reveals a lot about how organizations balance strategy and execution.

Each method has its strengths, weaknesses, and ideal use cases. But the real power lies in knowing when to use which, and ultimately, how to combine both to create a more effective and adaptive planning framework.

In this blog, we’ll break down the two approaches with examples, compare them across key factors, and explain why high-performing finance teams are increasingly turning to hybrid planning models.

What’s the Difference?

Let’s start with a quick comparison:

Planning Factor	Top-Down Planning	Bottom-Up Planning
Who Drives It?	Senior executives (CFOs, CEOs)	Functional leaders and operational teams
How It Works	Leadership sets high-level targets; teams align accordingly	Teams build detailed plans based on actual data and forecasts
Speed	Fast – ideal for tight deadlines and quick reforecasts	Slower – requires cross-functional input
Accuracy	May miss operational nuances	High – based on real-world assumptions and data
Team Involvement	Limited engagement	High collaboration and ownership
Best Suited For	Strategic planning, board reporting	Budgeting, forecasting, cost control, operational execution

Example: Planning Hotel Revenue

To make this tangible, let’s compare the two approaches using a hotel revenue planning scenario:

1- Top-Down Approach

Assumes revenue based on external market data:

Expected Revenue = Total Market Size × Target Market Share

For example, if the national market is $500M and your goal is to capture 2% of it, your expected revenue is $10M.

• Pros: Fast, directionally useful for setting targets
• Cons: May overlook seasonality, operational constraints, or changing customer behavior

2- Bottom-Up Approach

Builds revenue based on actual operational metrics:

Expected Revenue = Rooms Sold × Average Revenue per Room  

Rooms Sold = Number of Rooms × Occupancy Rate

For example:
100 rooms × 75% occupancy × $150 per room × 365 days = ~$4.1M

• Pros: Grounded in real performance indicators
• Cons: Time-consuming and may lack big-picture strategic alignment

So, Which One Should You Use?

Here’s the truth: Both approaches are essential—and neither is sufficient on its own.

• Top-down planning helps align the organization with strategic goals. It gives clarity on where you’re going.
  
• Bottom-up planning offers visibility into how you’ll get there, based on capacity, constraints, and operational input.
  

Think of them as yin and yang—interdependent forces that, when integrated, create a more complete and effective planning system.

Why High-Performing Finance Teams Use a Hybrid Approach

More and more finance teams are moving away from rigid, single-style planning and embracing hybrid models that combine both approaches. Here’s why:

1. Strategic Alignment Meets Operational Reality

Hybrid planning allows you to set ambitious top-level goals while ensuring that they are grounded in operational feasibility.

Example: A CEO may set a revenue growth target of 15%. Finance and operations teams can then model what that growth requires—be it increased headcount, better conversion rates, or expanded capacity.

2. Stronger Plan Validation

By blending top-down and bottom-up inputs, you stress-test your assumptions from multiple angles. This helps:

• Surface unrealistic targets
  
• Identify bottlenecks early
  
• Improve stakeholder confidence
  

3. Better Collaboration and Accountability

Involving both senior leaders and departmental teams leads to stronger ownership, increased transparency, and better execution of the plan.

The Result? A Planning Engine Ready for FY25 and Beyond

When top-down and bottom-up planning work together, your finance team gains:

• Clarity from executive direction
  
• Precision from granular, data-driven inputs
  
• Agility to reforecast and adapt when assumptions change
  

Whether you’re budgeting for next quarter or building a long-term financial model, hybrid planning offers the flexibility and accuracy modern finance teams need.

Want to plan smarter for FY25 and beyond?
Let PPN Solutions show you how hybrid planning can transform your finance strategy