A financial business plan is a structured document that projects a company's financial performance over a horizon of 3 to 5 years — typically comprising a profit and loss account, a balance sheet and a cash flow statement — based on explicit operational, commercial and investment assumptions. It is the central document of any acquisition financing request, any fundraising round and any DCF valuation.

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A credible financial business plan is built from bottom-up revenue projections (by product line, by client segment, by geography), rigorous cost structure modelling (fixed vs variable costs, hiring plan, R&D investments) and a financing plan aligned with the growth ambitions. It must be internally consistent — cash flows must reconcile with the P&L and balance sheet — and externally benchmarked against sector comparables.

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In the context of a LBO, the business plan is the foundation of the DSCR calculation and the investor's IRR projection. An overly optimistic business plan — without a documented stress scenario — is one of the main causes of covenant breaches in SME LBOs. The financial due diligence conducted by the acquirer systematically challenges the business plan's assumptions.

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Example: the business plan of a Swiss services SME projecting CHF 15.0 million revenue in year 5 (from CHF 8.0 million today) implies a CAGR of 13.4%. The due diligence benchmarks this growth against sector comparables (median CAGR 7.5%) and adjusts the central scenario to 10% — reducing the DCF valuation from CHF 12.0 to CHF 10.4 million.

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At Hectelion, we build and critically review financial business plans in the context of acquisitions, fundraising rounds and independent valuations for Franco-Swiss companies.