Business Plan

What is a business plan?

Business plan (German Businessplan, also Geschäftsplan or Unternehmensplan) refers to the written overall document in which a company sets out its strategy, business model, market, organisation, planning figures and capital requirement. It describes what the company wants to achieve in the coming years, with what means and under what assumptions.

The business plan serves two purposes: it is meant to convince capital providers and to make the company steerable. It is prepared for equity providers, that is, investors who take a stake in return for shares, for banks in credit review and for funding programmes in the application procedure. Internally, it is the yardstick for the management, shareholders and advisory board. Its figures come from the financial model, the company's calculation model, whose core is integrated financial planning with linked income, balance sheet and liquidity planning. There is no statutory duty to prepare one; it is required by capital providers and in many funding procedures.

Structure of a business plan

What a business plan contains varies by recipient. The core is largely uniform:

1. Executive summary: the key statements of the entire plan, readable on its own.
2. Company and business model: activity, legal form, shareholder structure, revenue sources and pricing model.
3. Product and customer benefit: which problem is solved, what customers do instead so far, stage of development and product planning.
4. Market and competition: size and development of the target market, customer segments, competitors and the company's own unique selling proposition (USP), supported by a market analysis.
5. Sales and market entry: channels, sales cycle, customer acquisition costs and partnerships, summarised in the go-to-market strategy, the plan for market entry.
6. Organisation and team: management, key people, structure of the organisation and headcount plan.
7. Implementation plan: milestones with dates and persons responsible.
8. Financial planning: income, balance sheet and liquidity planning in condensed form, scenarios and the underlying assumptions.
9. Capital requirement and use of proceeds: amount, source of funds, use by area and the milestones that are to be reached with it.
10. Opportunities and risks: the main risks, their effect on the plan and the countermeasures.

The summary is written last but read first, and many readers decide on the basis of it whether to read on. The appendix holds what supports the argument but would disturb the flow of reading: CVs, detailed tables, market data, references and intellectual property rights.

Business plan, financial model and equity story

Business plan and financial model are often equated but denote different things. The financial model is a calculation logic, usually in a spreadsheet: from entered assumptions, income, balance sheet and liquidity are calculated monthly or quarterly. The business plan is a text with tables and graphics that shows and justifies the results of this model. It takes over the figures but does not calculate them itself.

The link between the two parts is where business plans most often fail in review. If the text announces that three sales staff will be hired in the second quarter, the model must show three personnel cost lines from that point, with employer contributions, workplace costs and a ramp-up period without additional revenue. If the text names market entry in Austria, the model needs costs for sales, legal advice and possibly a branch. Every statement that refers to figures has a counterpart in the model, every larger movement in the model an explanation in the text.

The equity story is the third element in this context. It is the investment rationale in a few sentences and stands at the top of the summary in the business plan. Put simply, it answers the question why a stake is worthwhile. The business plan describes how the company intends to achieve the announced development, and the financial model calculates what that means in euros and months.

What investors, banks and funding bodies look for in a business plan

Equity providers

Venture capital and growth investors read the business plan as a deepening of what the pitch deck promises. They are interested in market size, growth rate, unit economics (the profitability per customer) and the path to the next funding round or to profitability. Before investing, they reconcile the plan in due diligence, their review of the company, with actual figures, contracts and sales data. Participation agreements often warrant that the business plan was prepared with care and rests on assumptions that the management considers justifiable. A warranty that the plan figures will be achieved, by contrast, is unusual.

Banks

Banks check above all debt service capacity, that is, whether the company can bear interest and repayment from ongoing business. For this, liquidity planning, available collateral and past annual financial statements are the focus. Growth assumptions are read rather cautiously. A plan that supports repayment only in the optimistic case is not sufficient in credit review.

Development banks and funding programmes

In funding procedures, the business plan is often part of the application. What matters is innovative content, feasibility, financing plan and, for equity programmes, whether the overall financing is secured. Many programmes prescribe the structure and forms. The information in the application should match the plan for investors, because deviations are noticed in later reviews and trigger queries from both sides.

Internal steering

In companies with investors, annual planning is often a transaction requiring consent. The shareholders' agreement or the rules of procedure of the management then provide that the budget and business plan are approved by the shareholders' meeting or an advisory board. The approved plan becomes the yardstick for the management. Variances are explained in management reporting, the regular internal reporting to the management, advisory board and shareholders.

Worked example: deriving the capital requirement in the business plan

A software company with EUR 2.0 million ARR (annual recurring revenue) wants to increase its recurring revenue to EUR 5.0 million in 24 months. The business plan derives the capital requirement from the liquidity planning of the financial model, not from a desired round size:

• cumulative cash outflow, that is, summed up over 24 months, from ongoing business and investments according to the plan: EUR 3.6 million
• minimum reserve at the end of month 24: three months of the then planned cash outflow of EUR 150,000 per month = EUR 450,000
• liquid funds on hand: EUR 500,000
• capital requirement: EUR 3.6 million plus EUR 0.45 million minus EUR 0.5 million = EUR 3.55 million
• round size set: EUR 4.0 million
• additional reserve from rounding up: 4.0 minus 3.55 = EUR 0.45 million, that is, three further months at EUR 150,000 cash outflow
• liquid funds at the end of month 24: 0.5 plus 4.0 minus 3.6 = EUR 0.9 million, which corresponds to six months of the then planned cash outflow

In the capital requirement and use of proceeds section, this amount is broken down by purpose, for example sales, product development, marketing and administration, and linked to the milestones up to month 24. Readers then check two things: whether the sum of the purposes matches the cash outflow in the model and whether the milestones justify a next funding round or reaching break-even. Because a funding round itself takes several months, the reserve of six months also shows that talks on follow-on financing must begin well before month 24.

Distinction: business plan, pitch deck and budget

• Pitch deck: the condensed presentation for approaching investors. The business plan is more detailed and serves review.
• Budget: the detailed planning for the next financial year, usually by cost centre and month. The business plan reaches further into the future and is less detailed.

Common mistakes

• Text and model drift apart. Announced hires, markets or products are missing in the planning calculation or appear there at a different time.
• Only one scenario. A plan without a cautious case leaves open what happens if sales progress more slowly than planned. Investors and banks ask about this in almost every review.
• Underestimated personnel costs. On top of gross salary come employer social security contributions, workplace costs, onboarding and the time until a position is filled.
• Risks as a formality. A risk section with general points such as the economy but no link to the plan shows that the actual risks have not been analysed.
• Capital requirement without derivation. A round size that does not follow from liquidity planning leaves open whether it is sufficient or set too high.
• Outdated status. If the actual figures of a plan are several months old, corrections are needed in the discussion, which reduce trust in the entire plan.

Frequently asked questions

How long is a business plan?

Often 20 to 40 pages plus appendix. One to two pages is the benchmark for the summary. Funding programmes sometimes prescribe the length.

What period does the planning cover?

As a rule, three to five years. At least the first year is planned monthly, the following years quarterly or annually. In review, the first 12 to 24 months are looked at most closely, because they can best be compared with the current course of business.

Does a company with a pitch deck still need a business plan?

As a rule yes, although not always as a classic text document. Many venture capital investors work in review with a pitch deck, financial model and data room and expect the content of a business plan in a detailed memorandum or an extended deck. Banks and development banks almost always require the plan as a separate document.

Who prepares the business plan?

The management, where appropriate with the support of advisers. It must be able to stand behind and justify every statement in discussion. A plan that third parties or AI tools have prepared entirely shows itself at the latest at the first follow-up questions.

Is there a template for a business plan?

Yes. Chambers of industry and commerce, development banks and start-up portals provide outlines and templates, usually free of charge; some funding programmes bindingly prescribe their own template. For investors, such a template is useful as a structuring aid. The figures, however, belong not in text tables but in a financial model from which the plan takes them.

How often is the business plan updated?

At least once a year with budget planning and additionally with every material change, for example before a funding round. During the year, a forecast, that is, the projection from actual values and the current expectation, shows where the financial year is likely to end. If the figures deviate from the plan on a lasting basis, the plan is revised.

The Roemer Capital view

We begin every business plan with the financial model and write the text only afterwards. That way every statement that refers to figures has its line in the calculation from the start, and the question whether text and model match no longer arises in review. The planning period is at least three years, calculated in a base case as well as in a cautious and an optimistic case. We keep the summary to one to two pages.

In fractional CFO engagements, in which we take over the finance function for a period, we maintain the plan beyond the round: budget, monthly reports and investor communication refer to the same planning. If a plan serves investors, a bank and a funding application at the same time, we ensure that all versions come from one model, even if structure and emphasis differ.