Business plans need to result in financial projections in order to have meaning. This means the plan needs to be translated into the language of finance, specifying exactly the sources of revenues and the cost structure. Therefore a more detailed analysis of forecasted volumes, prices, fixed and variable costs is needed.
Business plan models are highly subjective as they base on the expectations of its creators. Therefore its very important to carefully analysis and compare the business plan to comparable parameters or benchmarks to find out if the plan is realistic or not.
A good business plan model results in financial projections which create value for shareholders. The way to validate this, is to compare the DCF values of different business plans. One should the business plan which creates the most value for shareholders.
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