The first investment: How to create a convincing financial plan for investors

The financial plan is based on the logic of the profit and loss account. For start-ups in the early phase, sales planning (consisting of sales revenue, cost of sales and gross profit), cost planning (consisting of operating expenses) and liquidity planning (consisting of the operating result (EBIT)) are relevant.

1. define revenue streamsThe first step is to define the revenue streams, i.e. where the revenue comes from. These can be sales, licence fees or funding projects. It is important to focus here. Funding projects often promise large sums of money, but can distract from the core business. Investors want to see the revenue in the target business model.

2. recurring revenues: Consider to what extent it is possible to generate recurring revenue, e.g. through licences, pay-per-use, subscriptions or annual maintenance fees. Own metrics of the pricing model, such as "100T ARR at Seed financing" or "min. 1 million ARR for Series A financing", serve as important points of reference.

3. sales forecast: Metrics such as ARR, New ARR, Churn, Total ARR, MRR, Non-recurring revenue are used to forecast sales.

4. sales modelling: Model sales based on activity and the growth rate. Monthly growth of 10-20% is a common target value.

5. direct costs and gross profit: Consider the direct costs and the gross profit (Gross profit). For SaaS start-ups, the Gross Margin typically around 90%.

Cost planning is divided into different categories:

Personnel costs: The largest cost block. Categories such as founder salaries, non-wage labour costs (approx. 20%), salary increases, FTE (full-time equivalent) and much more can be planned. The following pages can be used to plan competitive employee salaries Destatis, Stepstone salary report, Robert Half salary overview. On the other hand, founder salaries should be chosen according to age and experience and only increase with success, as investors also expect a share of the risk through wage restraint.

Other cost categories:

• Rent: Consider whether a physical office is necessary. Start-up centres are often cheaper and offer networking opportunities.
• Insurances & contributions: Plan for membership fees and insurance.
• Marketing & Advertising: Try out different marketing measures and possibly use existing credits for tools such as HubSpot or Office 365 (You want credits? Then apply for the Open Pitch and become part of innoWerft Startups).
• Travelling expenses
• Material & Infrastructure
• Software rental: Check regularly whether you are paying for unused licences.
• Training costs: Plan a fixed budget for your employees. However, there is also a lot of free content that you can use to train yourself and your employees. Don't want to miss the next event? Then follow us Instagram!
• Legal & tax advice: These costs increase with the size of the financing round and should be calculated in advance.
• Other costs

Keep an eye on the ratio of costs to sales and be prepared to cut costs quickly in critical situations.

Liquidity planning shows when investments are necessary and helps to monitor the financial health of your startup.

Important points:

• Simplicity: Keep the planning as simple as possible and as complex as necessary.
• Time horizon: Plan in detail for the next three years and roughly for the following two years.
• Sales growth and financing strategy: Show how you plan follow-up investments and use the financial plan as a management tool for target/actual comparisons.

A financial plan should grow with your startup and the KPIs of the financial plan should be used as a management tool. A VC investment should accelerate your startup (you can find out how a VC investment works in here ) and the financial plan should reflect the capital requirements and capital efficiency. You should consider delays and their impact.

Are you ready to create your financial plan? Then fill in the Form and receive our template!