What is financial planning and how does it work?

Financial plan, investment plan, liquidity plan or business plan – there are many terms for the thorough listing of one’s current or future, financial situation. First of all, it is important to distinguish between a bankable financial plan and private financial planning. Now you can find out how to create a personal financial plan and what it should look like.

Definition of a financial plan – what is a financial plan?

Apart from private financial planning, the financial plan is the heart of every business plan. Startups and young founders in particular know how important a meaningful and detailed business plan is. They have to find banks and investors, convince them of their merits and prove their expected success with figures. The financial plan thus presents the company’s development in figures. This makes it clear whether the foundation or an investment in a business is generally worthwhile. At the same time, it provides the founders with important information about how much capital to expect.

The structure – what does a financial plan contain?

Unfortunately, there is no universal pattern or template for creating a correct financial plan. If you search the web for “create financial plan sample”, you will find different outlines that you can use as a guide. But you can also use the following outline as a guideline when you are creating a financial plan.

  • List of sales and revenues – how much revenue do you expect in the following months and years?
  • What costs will be incurred in connection with the revenues? List these as variable costs.
  • List ongoing costs, such as wages to be paid and -marketing costs. What are the operating costs?
  • List all expenses that are one-time for the start-up (purchase of materials, vehicles, deposit).
  • What investments have already been made?
  • How about liquidity now, how much capital is needed?
  • Financing plan
  • Rentability calculation – until when can loans be repaid and when does the business model pay off?

The sales plan

Of course, a financial plan, especially at the beginning of a business start-up, can never be 100% correct or fully represent reality. The turnover planning is about calculating the turnover you expect to achieve with your service or your products. It is important to make a price calculation and to estimate how much can be earned within the first weeks, then months and later years. Take into account that you have to position yourself on the market. So it is likely that your sales figures will increase only slowly. In any case, stay realistic.

Calculate costs in the financial plan

Once the sales development is set, you can now calculate the expenses. It is important to distinguish between variable/sales-related costs and fixed operating costs. Variable costs include all company costs, which are incurred for example in production or the preparation of offers. Here you include costs for your materials or for the purchase of your goods. Operating costs include wages and salaries, as well as expenses for marketing and insurance.


With a financial plan you can determine the profitability of your business and your capital requirements. You can then present this to your investors or financiers for review. The goal is, of course, to convince them of your plans. In order to be successful, the essential questions should be answered. In any case, take your time for the calculations and always remain realistic. It is recommended to use a good tool for your financial plan and to build up your business with the help of a sophisticated accounting program.

Stafford Thorpe provides financial services to clients so we can protect and grow their wealth over time.



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