The financial plan: not the favorite topic of the average start-up founder. Nevertheless, such a plan is very important. It shows the financial state of your business and where you want to go. And that’s crucial for all kinds of stakeholders, from your co-founders to your investors. That’s why we’re giving you an introduction to the wonderful world of the financial plan and sharing our tips on how best to format it.

Your financial plan as a mirror

A mirror is the best metaphor for a financial plan. This is because such a plan reflects a number of elements of your start-up to different stakeholders:

  1. It shows your vision, strategy, ambition and what you have already achieved. It presents what you already did, what you can do and what you want to do.
  2. It forces founders to think realistically about their business and helps them make decisions quickly. In addition, as a start-up you have to make many assumptions, for example about your customers or your costs. A financial plan forces you to look at it critically.
  3. It reflects the state, needs and future prospects of a start-up to investors. It also shows where you could still use help (which you certainly shouldn’t be afraid to ask for).

Wrong, out-of-date and too optimistic

Nevertheless, the financial plan is not an infallible tool. It also has limitations that you need to understand, especially as a start-up:

  1. A financial plan is never right, because your business is constantly changing. Your schedule timing can therefore shift very suddenly.
  2. A financial plan is always out-of-date because start-ups, especially in the early stages, often need to make a quick pivot or change business model.
  3. A financial plan is always optimistic, because as a start-up you have to scale quickly. For example, almost any early financial plan will overestimate revenue and underestimate expenses.

Of course, this does not mean that a financial plan is useless. It is a crucial tool for estimating the results of your start-up. But even when it’s not 100% correct, it will still serve as a mirror for various factors to better understand your start-up. By the way, stakeholders like investors know that your financial plan is not flawless. It’s especially important because it forces you to make a prediction, and even when it’s not correct it shows something about your business.

Financial plan: the basis

The basis of a financial plan is relatively simple and consists of two elements: revenue and expenses. In your financial plan, you highlight both of these things and project them over a chosen time period, such as a month, a quarter, or a year.

On top of that, you should ideally also include a summary of your overall results and a cash-flow plan. This highlights how quickly cash comes in and goes out (important note: cash in your bank account is different than your revenue, because not everything you bill comes in immediately).

Would you like to know exactly what a plan like this looks like? Belfius has a tool for drawing up a financial plan, and the Professional Institute of Accountants and Tax Consultants provides an example.

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Top-down or bottom-up

A central element of a financial plan is the forecast of your expenses and income. And you can do that top-down or bottom-up.

In a top-down forecast you start from the size of the market. Then you calculate what percentage of that you will claim. You base the turnover you will achieve on that, and the costs you will have to incur to realise that turnover. A bottom-up projection turns this model on its head. You start here from the sales you are already making, or know you will make. And you build on that to calculate your future sales and expenses.

Generally, the rule of thumb is that bottom-up projections are more realistic and preferable to top-down projections. Nevertheless, you should compare both methods and see which one works best for your situation.


Keep an eye on your target group

It’s important to keep your target audience in mind when creating your financial plan. Some typical target groups are your co-founders (and yourself), the bank, the government and investors. Different elements are important for each target group.

For the founders, the emphasis is on making decisions. So you want to quickly evaluate whether your strategy is working, and whether you need to make any adjustments. Comparing what you predicted in your plan with how reality turned out is crucial here.

A financial plan for the bank or the government (when they provide a loan) emphasizes repayment capacity. Clearly show the figures that prove whether you can repay the loan.

Finally,investors want to know how you are going to achieve your growth. Growth is crucial for them as they want to recover their capital within a certain period of time. There is a difference between business angels and Venture Capitalists (VC). Business angels usually want to make a profit faster, so their early investment starts paying off like lightning. A VC or venture capitalist is more likely to choose steep growth based on high costs. For them, making a loss is less of a problem.

Building a separate financial template in, say, Excel or Google Sheets can be useful for each of these three audiences. This way you can quickly adapt and report to each group in a correct way

Frequently Asked Questions

Below is a series of questions we often get from start-ups, and our answers to them.

For which period should you make a financial plan?

Depending on your sector, and the development time of your product or technology, you should plan several years ahead. At least 1 or 2 years, usually 3 years. Nevertheless, it depends on your target audience. An annual plan is useful for highlighting the big picture and for strategic planning. A quarterly plan is presented to your board of directors and other possible stakeholders. A monthly plan is useful to quickly make internal adjustments.

How detailed should a financial plan be?

Again, that depends on your target audience. A VC may want to see your customer acquisition cost in the financial plan, but for a bank that figure is less useful. An overly detailed financial plan often gives the impression that your startup is more stable than it actually is. A shorter financial plan that you adjust quickly is often better than a long, complicated plan that is difficult to untangle.

How do I put a financial plan in my pitch deck?

In your pitch deck, you do indeed often incorporate a financial plan. In the actual presentation this may be a short version , containing only the most important points. Do provide backup numbers so you can answer each question and go into more detail as needed.

How long does it take to prepare a financial plan?

A rule of thumb is to take a maximum of half an hour to adjust and up-date your financial plan. Your first financial plans will of course require you to work longer, but after that you should make adjustments quickly. This forces you to create a modular and flexible plan. And so you don’t get lost in endless numbers and metrics. It is therefore best to focus on the mindset of adapting and switching quickly. If you have to give an important presentation, such a plan may of course take longer to make.

Common mistakes

Some common mistakes we often encounter with start-ups:

Overestimate speed of turnover

Bringing in sales takes time. After closing a deal, it can easily take several months before you see the first revenue, especially if you’re working with large companies. New start-ups often overestimate how quickly revenue will get to them.

Turnover also requires costs

In order to generate turnover, you must also incur costs. For example, if you project that you will double your sales, this will very often mean hiring more people. And costs add up, of course. The bottom-up method of predicting your turnover maps this out better, by the way. You start from an existing situation, including your costs, and you project further.

Management also takes time (and money)

The time you put into management tasks, from HR to administration, are easy to forget. Nevertheless, these tasks also take time, and as your startup grows , they will grow with it.

Top-down projection

A top-down projection of your sales will be wrong in many cases. Nevertheless, it’s tempting to think that way, especially since you can project rapid growth that way. Instead, try to keep it realistic, always comparing it to your bottom-up projection.

A plan that is too complex

A final common mistake is to put too much detail in your financial plan. Such a plan should allow you to make adjustments quickly, and communicate information to stakeholders. By overloading a plan with numbers, you make sure that you and your target audience can no longer see the wood for the trees.

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