How to Make a Business Plan: Key Financial Metrics

Learn how to write a business plan, understand ROI, IRR, EBIT, DSCR, FNPV, amortisation and Net Profit Margin.

Why Financial Metrics Matter in a Business Plan

When people ask how to make a business plan, they often focus on vision, market analysis, and operations. But investors, banks, and financing institutions look deeper — at the numbers. Financial metrics are the language of business. They demonstrate profitability, risk, and long-term growth potential.

Without clear financial indicators, even the best idea may fail to secure funding. Let’s explore the essential financial metrics every business plan should include.

Key Financial Metrics for a Successful Business Plan

1. ROI Return on Investment

The Return on Investment (ROI) is one of the most common and powerful financial metrics used in business planning. It measures the profitability of an investment by comparing the net profit generated to the cost of that investment. The formula is:

ROI = (Net Profit ÷ Investment Cost) × 100

This percentage tells you how efficiently your money is being used. For example, if you invest €50,000 into a project and it generates a net profit of €10,000, the ROI is 20%, meaning you earn €0.20 for every €1 invested.

Why it matters: Investors and lenders carefully review ROI when evaluating your business plan because it shows whether your project creates enough value to justify the risk. A higher ROI indicates a more attractive investment opportunity. In practice, ROI helps compare different projects or strategies to decide where to allocate resources most effectively.

Including ROI in your business plan financial analysis demonstrates that you understand profitability, risk, and capital efficiency — all critical factors for convincing banks, investors, or partners.

2. IRR Internal Rate of Return

is the discount rate that makes the Net Present Value (NPV) of all future cash flows equal to zero. A higher IRR indicates a more attractive investment opportunity, which is why banks and investors compare IRR against their required thresholds before approving financing.

Why it matters: IRR directly impacts your ability to secure financing. A project with a 15% IRR will be far more appealing to lenders than one with 8% IRR, especially when bank lending rates hover around 10%. This metric helps both you and your investors quickly assess whether a project is worth pursuing.

3. FNPV Financial Net Present Value

The Financial Net Present Value (FNPV) measures the present value of future cash flows generated by a project or business, discounted back to today’s terms. In other words, it shows how much your investment is worth right now after accounting for time and risk.

Why it matters: A positive FNPV means your project is expected to create value and is financially viable, making it more attractive to investors and lenders. A negative FNPV signals potential losses, which often leads to financing challenges. For example, if a project has an FNPV of €150,000, it indicates that after covering costs and discounting future cash flows, the project adds €150,000 of value today.

4. EBIT Earnings Before Interest and Taxes

EBIT is one of the most widely used profitability indicators. It shows the profit your business generates purely from its operations, excluding financing costs (interest) and taxes. Essentially, it answers the question: How profitable is your core business activity?

Why it matters: EBIT is crucial for comparing the operational performance of companies across industries or within the same sector, regardless of their financing structure or tax environment. A strong EBIT in your business plan reassures investors that your operations are sustainable, even before external costs are considered. For instance, a startup with a positive EBIT but high interest costs may still be operationally sound, which is a positive sign for future growth..

5. DSCR Debt Service Coverage Ratio

The Debt Service Coverage Ratio (DSCR) is a critical metric for lenders. It is calculated as:

DSCR = Net Operating Income /Debt Service (loan instalments + interest)

This ratio shows how easily your business can cover debt payments with its operating income.

Why it matters: A DSCR above 1 indicates your cash flow is sufficient to repay debt obligations, which increases trust with banks and investors. A DSCR below 1 suggests that you may struggle to meet repayments, raising financial risk.

For example, a DSCR of 1.5 means you generate 1.5 times the cash flow needed to cover loan payments — a strong position for securing financing. Including DSCR in your business plan demonstrates financial discipline and repayment ability, both key for attracting lenders..

6. Net Profit Margin

The Net Profit Margin shows how much actual profit remains from each unit of revenue after all costs, taxes, and expenses are deducted. It is usually expressed as a percentage.

Why it matters: A high net profit margin means your business is efficient, sustainable, and scalable. A low margin may indicate high costs or pricing issues. For example, a net profit margin of 20% means that for every €1,000 in revenue, your company keeps €200 as profit.

In your business plan, clearly presenting your projected net profit margin helps investors and stakeholders understand the true profitability of your model. It reassures them that your business is not only generating sales but also turning those sales into sustainable profit..

7. Amortisation and Asset Depreciation

Represent the process of allocating the cost of loans or assets over a defined period, helping businesses transform large expenses into manageable payments.

In a business plan, amortisation highlights to lenders and investors that you have a clear repayment strategy and a solid grasp of your financial commitments. Presenting structured repayment schedules—whether through annuity instalments or equal principal instalments—demonstrates your ability to manage cash flow, reduce financial risk, and ensure long-term stability.

Depreciation, on the other hand, shows how the value of physical assets decreases over time due to usage, wear, or obsolescence. Including depreciation schedules in your plan provides transparency about the real cost of operating assets and reinforces financial credibility in the eyes of investors..

8. Loan Repayment Structures: Annuity Instalments vs. Equal Principal Instalments

Annuity Instalment: Equal payments over time, combining interest and principal. Easier for cash flow management.

Equal Principal Instalments: Principal is repaid equally, but interest decreases over time. Higher payments in the beginning, lower in the end.

Why it matters: Showing both repayment methods in your financial plan proves transparency and risk awareness.

Example: Applying Metrics in a Business Plan

Imagine you need €100,000 financing to launch your project. Your business plan should include:

ROI: 25% in 3 years

IRR: 18%

FNPV: +€20,000

DSCR: 1.4 (safe for lenders)

EBIT: €40,000 annually

Net Profit Margin: 12%

These numbers demonstrate to investors and banks that your business is not just an idea, but a financially sustainable project.

The Easy Way: Writing Your Business Plan with VitoshaBG

Are you unsure how to calculate these financial metrics or how to prepare a strong business plan for investors?

At VitoshaBG, we make the process simple, effective, and tailored to your business.