Creating a business plan: From business idea to robust financial plan

The most important points at a glance

• A business plan links business idea, market, organisation and financial planning and shows whether a project is economically viable.
• A robust revenue plan is based on comprehensible assumptions regarding sales volume, prices, market and available resources.
• The financial plan shows how revenue, costs, investments and cash flows affect profit, liquidity and capital requirements.
• Capital requirements and financing should be derived from the liquidity plan. Working capital, interest and repayments must also be taken into account.
• Scenario and sensitivity analyses help assess how robust the plan is with regard to changing assumptions.
• Once prepared, the business plan can serve as a basis for ongoing corporate management using target/actual comparisons and forecasts.

What is a business plan?

A business plan describes how a company intends to implement its business idea in the market and operate it on a commercially viable basis. It combines business model, market, organisation and financial planning into a sound basis for decision-making.

It is not only relevant when founding a company. A business plan also helps to clarify assumptions and examine their operational and financial impact in cases of growth, investments, new business areas or financing.

What belongs in a business plan?

A business plan contains all the information required to assess the business model, its implementation and its economic viability. The key factor here is coherence: assumptions about market, sales and organisation must later be reflected in the financial planning.

Business idea and business model

Describe which problem your company solves, which customers your offering is relevant for and what specific benefit it delivers. This should make it clear why customers are willing to pay for what you offer.

Then explain the revenue model and the main differentiating features. A unique selling proposition (USP) is particularly relevant if it creates a genuine advantage over existing alternatives.

Management, organisation and staff

Show who is responsible for implementation and which skills, processes and human resources are required. The personnel plan should match the expected business development and take into account not only salaries but also employer contributions and social security costs.

Market and competition

The market analysis should show which customer groups you are targeting, how the relevant market is developing and what market potential is realistically attainable for your company.

In addition, the competition analysis shows which direct and indirect competitors you compete with for customers and how you position yourself. Also take into account relevant market entry barriers. These insights form the basis for realistic assumptions on sales volumes and revenue.

Marketing and sales

Describe which marketing and sales channels you use to acquire customers and how the sales process works. Take into account sales cycles, sales capacity and customer acquisition costs, especially if the business plan anticipates strong growth.

Opportunities and risks

Present the key opportunities and risks of the business model realistically. A SWOT analysis – the structured assessment of strengths, weaknesses, opportunities and threats – helps to compare these factors and derive concrete actions.

Financial plan

The financial plan maps the economic impact of the preceding planning and covers in particular revenue, costs, investments, liquidity, capital requirements and financing. The individual components are discussed in more detail below.

Appendix and supporting documents

Market data, relevant contracts, quotations, permits and other supporting documents in the appendix can substantiate key statements in the business plan. This keeps the main section clear while allowing the underlying information to be reviewed if needed.

How do you plan your revenue realistically?

Realistic revenue planning is based on transparent drivers rather than a predefined target revenue. Which drivers are relevant depends on the business model: for example, sales volume and selling price in retail, or billable hours and hourly rates for service companies.

It is essential that revenue assumptions are consistent with the market and sales plan. Also factor in growth phases, seasonality as well as one-off and recurring revenues. Planned customer numbers and sales volumes must fit the accessible market, sales capacity and available resources.

Document the key assumptions behind your plan. This preserves transparency regarding how the planned revenue is generated and which assumptions need to be adjusted if market, prices or sales volumes develop differently.

How do you prepare the financial plan?

The financial plan translates the assumptions of the business plan into figures. The starting point is the revenue plan; supplemented by costs, investments and cash flows, it shows how profit and liquidity develop and what financing needs arise.

The financial plan usually includes an income statement forecast and a liquidity plan; depending on purpose and level of detail, a projected balance sheet can also be useful. For assessment, metrics such as contribution margin, EBIT, EBITDA, profit margin and cash flow can also be relevant.

Costs and investments

Record all costs required to implement the plan, such as for staff, marketing, infrastructure and ongoing operations. Distinguish between fixed and variable costs.

Investments should be planned separately: the payment affects liquidity, while the investment impacts profit through depreciation. Also consider costs that are incurred before the corresponding revenue is generated and therefore need to be pre-financed.

Liquidity planning

The liquidity plan compares expected cash inflows and outflows over time. Unlike the income statement, it shows whether the company can meet its payment obligations at all times.

Pay particular attention to payment terms, receivables, payables and inventories. These factors influence working capital, i.e. the capital tied up short term in ongoing operations. This makes potential liquidity bottlenecks visible even if the company is profitable according to the income statement.

How do you plan capital requirements and financing?

Capital requirements show how much additional capital your company needs, when it is needed and for what purpose. They result from the financial and liquidity planning and should be determined before you decide on specific financing.

In addition to planned investments, also consider funds for the start-up phase, ongoing operations and an appropriate liquidity reserve. In growing companies, working capital can further increase capital requirements. This is the case, for example, if customers pay later while salaries and supplier invoices are already due.

Only once the amount and timing of capital requirements are clear can financing be structured sensibly. Depending on the company and the project, equity, debt or a combination of different forms of financing may be suitable.

Interest, repayments and other financing costs must then be fed back into the financial and liquidity plan. This allows you to check whether the company can actually support the chosen financing under the planned assumptions.

How do you assess economic viability?

A business plan is economically viable if, under realistic assumptions, the company can operate profitably on a sustainable basis, ensure sufficient liquidity and service its financing. A positive income statement alone is not enough.

An important reference point is the break-even point. It shows from which revenue or sales volume onwards income covers total costs. When this point should be reached cannot be defined in general terms. The business model, cost structure and financing are decisive.

Equally important is the view of cash flow and liquidity. A fundamentally profitable business model can run into financial difficulties if high investments, long payment terms or the repayment of debt are not sufficiently taken into account.

How do scenario and sensitivity analyses help?

Scenario analyses show how the plan develops under changing conditions. In addition to the expected base case, you can, for example, examine the impact of lower sales volumes, lower prices or higher personnel costs on profit, liquidity and capital requirements.

A sensitivity analysis is more targeted: individual key assumptions are varied to determine their impact on the plan. This lets you see which factors are particularly critical and from which deviations countermeasures or additional financing become necessary.

How do you check your business plan for plausibility?

A plausible business plan is internally consistent: assumptions regarding market, sales and resources must match the planned revenue, costs and financing needs. You should systematically review precisely these interdependencies before finalising the plan.

Also check whether key market, sales, price and cost assumptions have been derived in a transparent way and substantiated where necessary. The text and financial plan must not contradict each other; capital requirements, financing and the results of the scenario or sensitivity analysis must also fit together consistently.

Before using the plan definitively, you should also ensure that all key components as well as required supporting documents and appendices are included. This makes the business plan comprehensible both for internal decisions and for banks, investors and other stakeholders.

What belongs in the executive summary?

The executive summary concisely summarises the key statements of the business plan. It should condense the business model, market and financial planning so that readers can quickly gain a sound understanding of the project.

This includes, in particular, business idea and customer benefit, target market and positioning, the people responsible as well as the most important financial key figures. If financing is being sought, capital requirements and planned financing should also be clearly visible.

Although the executive summary appears at the beginning of the business plan, you should only write it at the very end. This ensures that the summary is based on the final plan and does not contain any statements that contradict the rest of the business plan.

How does the business plan become a management tool?

A business plan can also serve as a basis for corporate management after it has been drawn up. To this end, the key financial and operational assumptions are translated into measurable targets and regularly compared with actual performance.

An actual vs. budget comparison shows where revenue, costs, profit or liquidity deviate from the plan. What matters is not only the size of the deviation but also its cause: if revenue lags behind plan, this may be due to sales volumes, prices or delayed customer acquisition.

If key assumptions change, the forecast should be updated accordingly. This turns the business plan into a basis for budgeting, reporting and ongoing management decisions.