The business plan is often one of the first documents shared during a fundraising or disposal process. Yet, many companies still treat it as a communication tool rather than a genuine decision-making support for the investor. Poorly structured, overly optimistic, or disconnected from operational realities, it can ultimately hinder the transaction. So, what are investors really looking for when reviewing a business plan during due diligence?

The business plan: a pivotal document in any transaction

Between communication support and valuation basis

The business plan serves several functions: it helps formalize strategy, define financial targets, and project financing needs. It is both a roadmap and a persuasive document. For investors, however, it primarily forms the basis for valuation: projected cash flows feed into discount models, valuation multiples, and return analyses.

Why investors scrutinize it carefully

Because they seek to reduce uncertainty. The business plan is analyzed to test the strength of the business model, the consistency of underlying assumptions, and the maturity of financial management. It also measures how aligned the company’s ambitions are with its available resources.

 

Common pitfalls

Unjustified growth assumptions

Many business plans rely on aspirational growth without detailing the underlying drivers (price, volume, market expansion, hiring, marketing).

“Magical” profitability within three years

EBITDA levels doubling in three years with no visible investments or incremental spending is a recurring theme.

Overlooked or under-modeled cash flow

A plan without a cash flow statement or working capital details lacks operational relevance.

 

What due diligence focuses on in a business plan

Quality and consistency of assumptions

Growth assumptions should be supported by verifiable data: historicals, sales pipeline, cost structure, pricing policies.

Alignment with historical performance

Ratios (gross margin, EBITDA, DSO, inventory) must be consistent with past performance, unless documented otherwise. Any break in trend must be explained.

Capacity to simulate alternative scenarios

Investors expect stress tests: what if revenue is 20% lower? What if production costs rise?

Integration with funding requirements

The plan must model the impact of financing (debt, equity, grants) on cash, working capital, capex, and the ability to deliver targets.

 

Business plan vs. operational reality: how to build credible forecasts

A robust financial methodology

The plan should rely on models that are simple, transparent, and reproducible. A clear Excel file with accessible formulas is preferred over a black-box tool.

Justification of key assumptions

Each assumption (growth, margin, capex) must be linked to a source: sector benchmark, internal data, management inputs.

Tools used

Whether using Excel or software tools (Agicap, Fygr, Forekasts), financial flow consistency (P&L, balance sheet, cash) must be ensured.

Involvement of operational teams

A business plan that is too financial and disconnected from operations lacks credibility. HR, sales, and production teams should contribute.

 

Practical guidance to prepare for due diligence

Structure clear documentation

The business plan should be supported by its assumptions, annexes, and an explanatory memo to ease understanding and reduce misinterpretations.

Anticipate typical investor questions

What is the breakeven point? Which cost items are the most volatile? How sensitive is revenue to commercial efforts?

Implement monthly tracking from closing

The business plan’s value also lies in its execution. Monthly monitoring of variances between actuals and forecasts helps adjust strategy proactively.

 

Conclusion

A credible business plan is not a promise—it is a tool for alignment between management, investors, and teams. It supports informed decision-making, secures the transaction, and streamlines negotiations.

Yérima Advisory supports management teams in building robust forecasts aligned with their ambitions and operational realities.