A brilliant business idea or a planned growth project is only the beginning. Precise planning is essential to ensure that the project does not fail halfway through because the financial resources run out. This works best with a capital requirement plan. It determines exactly how much money is needed to securely finance the start-up, investments, and the start-up phase. The following article explains which items belong in the plan, how to create it step by step, and why it is often the deciding factor for banks and investors.

The most important facts in brief:

• Definition: The capital requirements plan determines the total financial requirements for start-ups, projects, or expansions.
• Components: Start-up costs, investments (fixed assets), start-up costs (operating resources), and liquidity reserve.
• Purpose: Serves as the "price tag" for the project and is a mandatory requirement for the financing plan.
• Objective: Securing financing until the break-even point and convincing investors.
• Advantages: Avoidance of additional financing, clear overview for investors, security in the start-up phase.

Table of contents:

1. The capital requirements plan: definition and business classification
2. Structure and components: The four pillars of capital requirements
3. Creating a capital requirements plan: Step-by-step guide with practical example
   • Step 1: Verify investments through offers
   • Step 2: Determine start-up costs and fees
   • Step 3: Calculate the operating resource requirements (start-up phase)
   • Step 4: Add a margin
4. Capital requirement plan: Example of a media agency (GmbH)
5. Relevance of capital requirement planning for banks and investors
6. Common mistakes in capital requirement planning and how to avoid them
7. FAQs

The capital requirements plan: definition and business classification

The capital requirements plan forms the financial foundation of every business plan. It provides the answer to the question of how funds will be used and quantifies the total financial requirements that must be covered before and during the start of business operations. From a business management perspective, it is the starting point for financial planning. Only when the capital requirements (how much money is needed for what?) have been precisely determined can the financing plan (where does the money come from? Equity vs. debt capital) be drawn up in the second step.

It is not enough to simply add up the sums for investments in machinery or office equipment. A professional capital requirement plan takes the time factor into account: it must secure the Cash position until the break-even point is reached. This means that it also covers the operational gap in the start-up phase, when running costs (rent, personnel, marketing) are already being incurred but sales are not yet sufficient to cover them.

But what is capital requirement? In practice, it consists of two main areas:

1. Long-term investment requirements: This includes all fixed assets that serve the company (e.g., real estate, vehicles, licenses, IT hardware).
2. Short-term operating capital requirements: This includes current assets (inventory) and pre-financing of running costs during the start-up phase.

If this precise distinction is missing or if the start-up phase is calculated too optimistically, there is a risk of additional financing being required. This is often difficult to obtain from banks and signals a lack of planning competence to investors.

Structure and components: The four pillars of capital requirements

So that the capital requirement plan to fulfill its function as a reliable control element, all expenses must be recorded without exception. In business practice, a division into four main categories has proven useful. This structure not only helps with internal calculations, but is also crucial for external investors to understand the use of funds (investment vs. consumption).

1. Start-up costs and formalities: These are one-time expenses that are absolutely necessary in order to legally and organizationally commence business operations. These costs are often incurred before the first euro of revenue is generated.
   • Authorities and agencies: Fees for business registration, commercial register entry, and any specialized permits or licenses.
   • Legal form costs: Notary fees (especially for GmbH or UG), costs for the articles of association, and court costs.
   • Consulting: Fees for tax advisors, lawyers, or management consultants who assist in preparing the business plan or drafting contracts.
   • Market entry: Costs for market research, intellectual property rights applications (patents/trademarks), and corporate design (logo, website creation).
2. Investments in fixed assets: This block includes all purchases of economic goods that serve the company in the long term. From the banks' point of view, this part often represents the "valuable" part of the financing, as these goods can (in part) serve as collateral for loans.
   • Intangible assets: Purchase of software licenses, patents, franchise fees, or goodwill (in the case of acquisitions).
   • Property, plant, and equipment: Real estate (purchase or renovation), machinery, technical equipment, vehicles, office and business equipment, and IT hardware.
   • Financial assets: Investments in other companies or long-term securities (usually less relevant for operational start-ups, but mentioned for the sake of completeness).
3. Working capital and start-up phase: This is the most technically demanding item in the capital requirements plan and the most common source of errors. Here, the pre-financing of ongoing business operations must be calculated. The aim is to bridge the period during which ongoing expenses exceed income (start-up losses).
   • Initial stocking of warehouses: Procurement of the initial stock or materials in order to be able to deliver at all.
   • Ongoing fixed costs: rent, personnel, insurance, leasing payments, energy, and telecommunications for the first 3 to 6 months (or until the planned break-even point).
   • Marketing and sales: Budget for launch campaigns, advertisements, and sales activities to acquire customers.
   • Pre-financing of receivables: When customers pay with payment terms (e.g., 30 days), this gap must be covered in terms of liquidity.
4. Liquidity reserve and buffer: A static plan meets a dynamic reality. Unforeseen events, such as price increases for raw materials, delayed building permits, or a slow start to operations, must not immediately lead to insolvency.
   • Calculation: In practice, a flat-rate surcharge of 10 to 20 percent is often added to the total amount of the above-mentioned items.
   • Function: This reserve is used exclusively to cover risks and not to finance forgotten investments retrospectively.

Creating a capital requirements plan: Step-by-step guide with practical example

The creation of a solid capital requirement plan is not a matter of estimation, but rather a process that must be based on concrete offers and realistic assumptions. Anyone who makes rough estimates here risks liquidity gaps later on. The process can be divided into four logical steps.

Step 1: Verify investments through offers

List all necessary purchases for fixed assets. Do not estimate prices; instead, obtain specific quotes and cost estimates for larger items (machinery, vehicles, IT systems). This proves to banks that the need is real and in line with market conditions.

Step 2: Determine start-up costs and fees

Research the exact costs for the notary, commercial register, and business registration. These vary depending on the legal form and region. Also include fees for consultants in your capital requirements plan.

Step 3: Calculate the operating resource requirements (start-up phase)

This is the most complex part. Create a forecast of ongoing fixed costs (staff, rent, insurance) for the first 6 months. Subtract your conservative estimate of income from this. The difference is the capital requirement that must be covered until cash flow becomes positive.

Step 4: Add a margin

Add a safety buffer of approximately 10 to 15 percent to the subtotal of all items.

Capital requirement plan: Example of a media agency (GmbH)

The following fictional example of setting up an agency illustrates how the total requirements are composed. It shows that the actual investments often only make up part of the total, while the pre-financing of ongoing operations (operating resources) represents a significant portion.

Relevance of capital requirement planning for banks and investors

For external investors, the capital requirements plan is much more than just a list of figures. It serves as an indicator of the professionalism of the management; banks and investors primarily review the plan based on two criteria:

• 1. Plausibility: Are the assumed costs in line with market conditions? Have buffers been built in or has the budget been cut to the bone? Capital requirements that are set too low are often viewed more critically than those that are slightly too high, as additional financing is extremely unpopular and complicated in the banking process.
• 2. Ratio of investment to consumption: Investors like to see a large portion of capital flowing into value-adding investments (product development, machinery, customer acquisition) rather than into excessive salaries or prestigious offices in the start-up phase.

Common mistakes in capital requirement planning and how to avoid them

Even experienced entrepreneurs make mistakes in capital requirement planning that later lead to serious liquidity bottlenecks . The pitfalls often lie in the details or in overly optimistic assumptions. Here are the most common stumbling blocks in capital requirements plan and how to avoid them:

Mistake 1: The "net trap" (forgetting sales tax) In business plans and income statements, calculations are generally based on net amounts. However, this Cash position dangerous for the Cash position .

• The problem: When you make investments (e.g., a machine for €50,000 net), you have to transfer €59,500 (gross) to the supplier. You will receive the €9,500 input tax back from the tax office, but often only weeks or months later.
• The solution: Include this temporary sales tax pre-financing in your capital requirements as a short-term peak requirement.

Mistake 2: Best-case planning for the start-up phase Many founders assume in their capital requirements plan that sales will immediately start pouring in during the first month.

• The problem: Delays in deliveries, technical equipment, or customer acquisition are the rule, not the exception. If sales come in two months later than planned, fixed costs such as rent and salaries still have to be paid.
• The solution: Calculate the "base case" (realistic scenario) and also create a "worst case" scenario. Is the Cash position sufficient if sales are 30% lower?

Mistake 3: Entrepreneur's salary and private living expenses This point primarily affects sole proprietors and partnerships (GbR, OHG), not GmbH managing directors (whose salaries are business expenses).

• The problem: In the start-up phase, profits are often zero or negative. However, the entrepreneur has to pay rent and buy food out of their own pocket. If they take money out of the company's coffers, this money is then missing for the business.
• The solution: Private living expenses for at least 6 to 12 months must either be covered by capital requirements (as withdrawals) or secured by private reserves. They must not be ignored.

Mistake 4: Static view A capital requirements plan is often created once for the bank and then filed away in a drawer.

• The problem: Market prices change, projects are postponed. A rigid plan loses its validity after just a few weeks.
• The solution: The transition to rolling Cash flow planning.

FAQs

• What is capital requirement and what is a capital requirement plan?
  It is a detailed list of all financial resources required for a starting a business, an expansion, or a project. It answers the question: "How much money do I need in total until the project becomes self-sustaining?"
• What is the difference between a capital requirements plan and a financing plan?
  The capital requirement plan determines the total amount of funds required (use of funds / how much?). The financing plan then clarifies where these funds will come from (source of funds / where from?), i.e., the breakdown into equity, bank loans, and subsidies.
• Why do banks require a capital requirements plan?
  For credit institutions, the plan is proof that the founder or entrepreneur has thought through their project. It serves to check plausibility and ensures that the loan amount is sufficient to lead the company safely into profitability without the need for critical additional financing.