Not sure if you need a business plan or cashflow plan? Here’s how to decide, from private households to startups . But cash always comes first.

Cash is king — an old saying that nothing else matters in business. No cash, no business.

The same is true for your private household: No cash, no food on the table.

So it’s easy to argue that you cannot run a business without a cashflow plan. However, I would argue that you don’t need a business plan for all types of business.

Let’s look into different kinds of business.

Private Household

In a way, your private household is a business. I run our household on the same cashflow plan template as Yonder, the company I co-founded.

Private household finance is quite simple — if you don’t spend more in the long run than you earn, then there will always be enough cash available to put food on the table. And if you can keep a cash reserve on top to replace a broken car or carry out unplanned maintenance on your house, you are doing great.

You will never need a business plan for your private household, not even if you are trying to get a mortgage for your house. Because a private household will never scale.

One-Person Business

A one-person business is pretty similar to a private household. In all likelihood, it will never scale. Forget the get-rich-quick stories about a single person building the next unicorn on AI, it won’t happen.

As a one-person business, you typically sell the services provided by a single person. So it’s similar to a household income: You can’t spend more than you make in the long run. Keeping a cash reserve prevents you from going bust in case demand for your services is low, you get sick for a longer time, or you need to make small investments like a new computer or pay somebody to build your website.

In contrast to a private household, outside investment for a one-person is off-limits, you won’t even get a mortgage for your one-person business. So you will never need a business plan for a one-person business.

Small Business

There are two types of small business.

The first type of small business is a one-person business that gradually expands to two, then three persons when demand for your services is high. When you make that crucial decision to expand from one person to two persons in your small business, at least a prototype of a business plan is helpful alongside your cashflow plan: Employing a second person is an investment in the first phase, and you need to have a plan how you can recover that investment in a second phase.

The second type of small business is all those five to 15-person companies out there that provide services or produce goods. Of course, they all run on a tight cashflow plan, but as soon as there are investment decisions to be made like procuring machinery, equipment, and the like, a business plan will need to second the cashflow plan.

Early-Stage Startup

All early-stage startups start as bootstrapped startups: The founders chip in their savings, and the cash flow plan determines how long you can run on those savings before going bust or attracting outside investment. The founders turn every dollar before spending it, and besides building the product and attracting customers, they are looking for early-stage investors.

Of course, early-stage investors want to see a business plan, showing them what size the company will be in 3–5 years. Looking back five years, when we attracted our first investors at Yonder, I have to laugh at my 2019 business plan. Of course, it didn’t foresee the COVID-19 pandemic and the effect it would have on aviation, our first vertical. But even without the pandemic, revenue assumptions were an early guess before we had a critical mass of customers. So retrospectively, the business plan was wrong. But as usual, a plan is a plan is a plan, and I have never seen a plan survive reality.

Later-Stage Startup

Once you reach product-market fit, your revenues are 7-digit, and your sales pipeline is stronger than just a few contacts from the founders’ network, projecting the future is becoming more important and more feasible.

If you want to attract growth investors or even start to think about an exit, you will need a much more detailed business plan alongside your cashflow plan. Most likely, growth investors or acquires will judge your future performance by looking at your business plan, so it’s worth spending some time to prepare a credible business plan. Once you have your business plan ready, it needs to be mapped to your cashflow plan.

Even in a later-stage startup, the business plan will remain a plan, subject to forced changes by reality. Never forget that.

Conclusion

Summing things up, it’s fair to say that an accurate cashflow plan is required for every business at every stage. Don’t forget that cash is like oxygen for your business: If you run out of it, you’re dead within minutes.

A business plan is not required for all businesses, but at some point, it makes sense to have one. But never forget that reality doesn’t care too much about your sophisticated plans.