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Your financial planning is at the heart of each business plan. After all, your business can only be successful if you are able to make the investments you need and if it is profitable in the longer term. Your financial plans can be divided up into several sections.

Capital requirements: choosing what to invest

As a first step, you will need to determine your capital requirements. This means that you need to write down how much money you need to set up your company. Your list should include all the expenses you will incur before your business starts operating, for example for machinery, buildings or other investments. You should also allow for a budget for what is known as the startup phase, which is usually deemed to be about six months. Remember how much money you need to pay for your cost of living, and don’t underestimate it.

The Startup Portal provides a template for a capital requirements plan and further information.

Financing plan: where to get the money

Once you have determined how much capital you need, you will need to work out where to get it from. The answer to this question should lie in a financing plan.

Normally, you would finance your enterprise with a mixture of equity (your own wealth) and borrowed capital (e.g. a bank loan). You should be able to say quite accurately how much equity you have. For borrowed capital, the answer is probably not as straightforward. After all, you want to use your business plan to convince creditors to give you a loan! They should be able to tell how much borrowed capital you require. 

A template for the financing plan is available for download on the Startup Portal. Make sure to mention possible risks for your enterprise and develop a worst-case scenario as well as a best-case scenario. 

Cash budget: balancing inputs and outputs

You should use a cash budget to determine whether you can cover your running expenses with your earnings. You need to set up this budget for the first six to twelve months after the launch of your business. Think about how much you will be spending on fixed costs. How much does the interest for your bank loans cost you, for example? How much do you intend to spend on sales and marketing? In the input column, you indicate your intended revenue and profit. To cover a situation where you will be spending more than you are earning, you should have an adequate cash reserve. 

Profitability forecast: what is your expected profit?

In a profitability forecast, you can indicate your intended revenue, expenditure and profit for the first three business years. A template is available on the Startup Portal. Even though you will have to estimate most of the figures, your calculations will give you a feeling for whether the investment in your business is likely to pay off. In addition, the expected profit is important for convincing creditors of your enterprise.

Consultancies, for example, will support you in setting up a profitability forecast. As you estimate your profit, you should make sure to bear in mind overall trends in your industry. Information about industry trends is available at industrial and professional associations and the Chambers of Industry and Commerce. It may also be helpful to take a look at the situation of comparable businesses. 

Information on the web

BMWi Overview no. 5. Capital requirements

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