For the bank
It has to show the debt is sustainable: that the expected cash flows cover the repayments, with a margin.
Businesses · Planning
Business plan
It serves two different purposes that are often confused: persuading someone to give you money, and working out for yourself whether the project stands up. The second use is the more valuable one, and it is also the one almost nobody bothers with.
01 · The two functions
Two different uses of the same document
A business plan has an external function (presenting the project to a bank, to a body that awards grants, to a potential partner) and an internal function, which is finding out whether the numbers add up.
The external function produces documents that are polished in form and optimistic in substance. The internal function produces numbers that sometimes say not to go ahead, and that is why it gets skipped.
A well-built plan serves both, because an outside reader can almost always tell the difference between a plan that has been reasoned through and one worked backwards from the desired result.
For a grant call
It must follow the structure the call requires and stand up to the stated assessment criteria.
For a partner
It sets out what each person contributes, what they expect and over what time frame.
For you
It tells you how much money you need before the business can support itself, which is the most important question and the one least often asked.
02 · The parts
What a business plan contains
The structure varies with the reader, but these parts are always there. The narrative makes the numbers readable; the numbers make the narrative credible.
- Executive summary: what you do, for whom, with what advantage. One page, written last.
- The people behind it: who the promoters are, what they have already done, what skills they bring.
- Product or service: what you sell, how it works, what sets it apart.
- Market and customers: who buys, how large the pool is, how you reach it.
- Competition: who is already there, at what prices, with what positioning.
- Operating plan: where, with what resources, with how many people, on what timetable.
- Profit and loss plan: revenue, costs, margin, break-even point.
- Financial plan: how much is needed, when, where it comes from, when it comes back.
- Scenarios: what happens if revenue reaches 70% of expectations.
03 · The part that counts
How the projections are built
There is only one rule: every number must come from reasoning that can be checked, not from a growth percentage applied to an invented starting figure.
The difference between a credible plan and one that is not shows up in three places: where the first revenue comes from, how long it takes to collect it, and how many costs build up in the meantime.
Build revenue from the bottom up
Not "a share of the market", but: how many customers, how often, at what price. Every factor must be a quantity you can estimate.
Separate fixed and variable costs
Fixed costs set the break-even point, variable costs the margin. Mixing them up makes the plan unreadable.
Build the cash plan
It is not the same as the profit and loss account. An invoice issued is not money collected, and taxes are paid on an accruals basis, not on collections.
Work out the peak funding need
The moment when cash is at its lowest. That is the money you need, not the total of the investments.
The peak funding need is the number missing from nine plans out of ten. A business can be profitable on paper and fail because it did not foresee the four months when money goes out and none comes in.
04 · What to avoid
The mistakes that stand out at first glance
People who assess plans read a great many of them, and spot the same flaws every time.
| Mistake | Why it stands out |
|---|---|
| Straight-line double-digit growth for five years | No market behaves like that, and the reader knows it |
| No customer acquisition cost | Customers do not arrive for free: if the cost is not there, an item is missing |
| Revenue from the first month | It ignores the start-up period, which always exists |
| No cautious scenario | It signals that the plan has not been tested |
| No pay for the owner | If you do not pay yourself, the plan is not sustainable: it is a subsidy |
| Taxes and contributions missing from the cash plan | It is the mistake that kills the most real businesses, not just plans |
| Competition described as non-existent | Either the market is not there, or nobody looked |
The questions the reader will ask you
If the plan does not answer these, it is not ready.
- Where do the first ten customers come from, by name?
- What happens if revenue is half of what you forecast?
- How much money is needed before the business supports itself?
- Who does what, and what happens if that person is not there?
05 · Credit
What the people assessing creditworthiness look at
The bank does not assess the idea: it assesses your ability to repay. The plan is there to show that the expected cash flows cover the repayments even in a less favourable scenario.
- Debt sustainability: the ratio between operating cash flow and debt service, with a margin.
- Partners' contribution: how much of their own capital has gone in. A project funded entirely by debt is a project nobody is committed to.
- Security: personal sureties, collateral, or cover provided by public loan-security funds.
- Track record: past financial statements, banking history, regularity of tax and social security payments.
- Consistency between the plan presented and the actual accounting figures: inconsistencies weigh more than a low number.
Public loan-security funds are often decisive for people with no security of their own. But they have to be set up together with the application, not after a refusal: the bank takes them into account from the start of its assessment.
06 · The plan lives on
What to do with it once it is handed in
A plan that ends up in a drawer has served only its external function. The internal one starts the next day.
- Compare actual results with the forecast every quarter: the difference is the most useful information you have.
- Update the cash forecast with real data: initial estimates age quickly.
- Revisit the assumptions that turned out to be wrong, instead of ignoring them.
- For companies, the plan feeds into the adequate organisational structures required by law: the cash forecast the rules call for is the one you have already built.
- If the project changes substantially, the plan has to be redone, not patched at the edges.
Frequently asked
The questions that keep coming up
Do I need a business plan to open a partita IVA?
Formally, no: no plan is required to open a partita IVA (Italian VAT number).
In substance, yes, at least in its simplest form: how much you invoice, how much you spend, how much is left and how much money you need in the first months. Four numbers, and knowing those four numbers changes your decisions.
How many years should it cover?
Three years is the standard for most situations; five when there are investments with long payback periods or when the grant call requires it.
Beyond three years the numbers are indicative. What really counts is the month-by-month detail for the first year, where the real funding need shows up.
Can I use a downloaded template?
As a structure, yes, and it actually helps you not forget sections. The problem is never the format: it is whether the numbers inside have been built from the bottom up rather than copied.
A nicely laid-out plan with invented revenue does more harm than no plan at all, because it also undermines the credibility of whatever is good in the project.
How long does it take to put one together?
The technical part, with the data in hand, can be built in a reasonably short time. The long part is gathering the data: real supplier prices, the cost of premises, payment times in your sector.
If you arrive with that information already gathered, the work is cut in half, and you end up with a plan that is much easier to defend.
Let's talk
A credible plan starts from the numbers you have, not the ones you would like
Bring us the idea and the data you already have: expected revenue, known costs, timing. From there we build something that holds up when someone else reads it.