Business plan (valuation)

A business plan is a forward-looking document setting out a company's strategic objectives, financial projections and operational roadmap over a defined horizon (typically 3 to 5 years). In a valuation context, it is the primary input to the DCF model: its revenue, margin and investment assumptions drive the projected free cash flows. Its critical review is central to financial due diligence: seller assumptions are benchmarked against historical performance, sector data and management's track record; a 10% overestimation of revenue growth can translate into a 15 to 25% overvaluation in a DCF.

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The financial business plan typically comprises a projected P&L, balance sheet and cash flow statement, built from bottom-up revenue projections (by product line, client segment, geography), rigorous cost modelling (fixed versus variable costs, hiring plan, R&D) and a financing plan; cash flows must reconcile with the P&L and balance sheet. It is the central document of any acquisition financing request or fundraising round. In an LBO, it underpins the DSCR and the investor's IRR projection: an overly optimistic plan without a stress scenario is a leading cause of covenant breaches in SME LBOs.

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Example: a Swiss services group projects 18% annual growth against 8% historical. The sector median (10%) and the documented pipeline (CHF 4.0 million) support a defensible 12% rate, cutting Year 5 EBITDA from CHF 5.2 to CHF 4.1 million and DCF enterprise value from CHF 38.0 to CHF 31.5 million: a CHF 6.5 million impact. Likewise, for a Swiss SaaS company projecting 40% annual ARR growth and margin expansion from -5% to 25%, the ramp requires CHF 2.0 million of hiring not reflected in the plan.

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Hectelion builds and critically reviews business plans and constructs independent valuation scenarios, providing buyers and investors with a defensible view of value uninfluenced by seller optimism.