Financing: How to create a convincing business plan

Starting and operating your own business involves initial investments and ongoing costs. Capital is required, which is rarely available at the time of founding. Therefore, external financing is more the rule than the exception. Regardless of whether it’s a bank loan, grants, or external investors, a good business idea is not enough; a comprehensible business plan is necessary. But what exactly needs to be included?

While the contents may vary greatly, a business plan should adhere to a few common standards. After a concise introduction, all details of the business model are explained. Concrete numbers substantiate the entire project. In the end, the main arguments are summarized. Supporting documents illustrating the statements are included in the appendix, along with any additional necessary documents.

Utilizing guidelines

Good templates for business plans are offered by chambers of commerce, industry and commerce associations, and credit institutions. These templates are usually free and can be used for personal purposes. The content can be quite similar, saving time and effort in structuring. Moreover, this allows you to focus on the truly important topics without getting lost in details.

To give readers an initial impression of the founder’s personality, you should present yourself. Professional and personal qualifications are listed, emphasizing individual strengths that enhance the chances of success in self-employment for the future business. A detailed CV is included in the appendix. In short, you present yourself as if applying for a management position.

Market assessment

In the business model description, the products offered are explained. Here, the target audience, the paying customers, is addressed. If the products or services are better than what is currently known, that should be highlighted. It is also essential to mention the pricing strategy. Are you the price leader, offering your assortment at particularly low prices? Or do you provide exceptionally high-quality products at higher prices as the quality leader? It is particularly interesting to showcase the concrete benefits for consumers and customers. Why should they buy from me? What problem do I solve with my business idea, and why is my solution better or more efficient than existing offers?

Carefully prepared and equipped with realistic figures: The business plan must be as airtight and comprehensible as possible.

Market environment

Rarely will one be the sole provider (permanently). In the immediate or broader environment, competitors are already active or will enter the market, just as I will. Therefore, it is essential to engage with the environment. What opportunities and risks exist regarding competition? What do you do better than existing businesses? Depending on the location, rental prices can vary significantly and need to be considered when founding a business or a branch. New companies need to establish visibility, so a valid marketing strategy must be included in every business plan to achieve this. If the planned measures are clear, it can be argued effectively to the bank about entering the market and increasing revenue.

Personnel and organization

It should be clearly outlined how the future operation is structured and what the company’s workflows will be. Finding good and loyal employees is a challenge in many industries. Can you assemble the workforce from the local area? Is the business operation secure in the event of unexpected absences? Depending on the company’s size, selected individuals should have specific responsibilities and lead teams. This allows the founder to maintain an overview. It is crucial to ensure that, alongside daily business tasks, there is also time for management duties.

Dealing with the necessary insurance is another aspect to consider when establishing a business. Risks of damage, liability claims, downtime, or accidents can threaten the existence of the business and impose significant obligations on business owners. It is advisable to seek independent advice, which can be supplemented by another opinion if necessary.

Those who want to convince investors of their business idea must particularly convince them of themselves.

Capital requirements and financing

To establish a manufacturing business or a service company, not only are physical premises needed, but also, depending on the scope of operations, technical equipment and storage spaces may be required. Additionally, a showroom can make sense under certain conditions. Various offers should be obtained to create a basis for calculation and decision-making. Initial costs might also arise for permits, licenses, or external consulting. Furthermore, personnel costs for the first weeks or months usually need to be financed upfront until sales revenues cover all costs, and perhaps even leave a first profit.

With these components, the total capital requirement, including reserves for unforeseen circumstances, is listed. For the portion that cannot be covered with existing equity, financing needs arise.

Sound planning

Upon submission of the business plan, banks and savings banks require detailed revenue, profit, and liquidity planning. This simulates the first three years of business. Templates are provided for this as well.

Based on expected customer frequency and the sales of products and services at the calculated prices, revenue is determined at the end of the day. For individual months, this is recorded in revenue planning, usually showing an upward trend until the target level is reached. In contrast, the anticipated costs are outlined. These include expenses for materials, personnel, premises, marketing, insurance, and other items. Interest and taxes are also added. The goal of economically oriented self-employment is for an adequate profit to remain for the founders after all costs are deducted.

Founders should work diligently on their future business plan. This convinces potential investors and helps to approach the business start in a structured manner.

Profit planning

Building on this, we focus on liquidity planning for the simulated period. The profit planning described above summarizes the months of each financial year. However, fluctuations will occur within the individual months. There are phases when cash flows in. And there are phases when little or no income can be generated. Nevertheless, it must be ensured that payment obligations can be met at all times.

The liquidity plan shows how the account balance and cash develop over the course of the year. The repayment rates for borrowed loans, as well as payments to the tax office, social security, and employees, must be transferred on fixed dates. This is why liquidity planning is so important, for example, to create sufficient flexibility for weaker periods with an overdraft facility.

Concise

At the end of a convincing business plan, there should be a similarly coherent conclusion. This succinctly summarizes the opportunities and strengths of the business being founded or the underlying business model. Then, the direct contacts are provided with the necessary information and arguments to evaluate a financing application before the decision-making bodies. Ideally, to endorse it.

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