5 July 2022 | Financial Planning & Analysis

Capital Planning: Your Most Important Financial Asset

When you’re growing your startup, it’s easy to fixate on short-term challenges and goals.

How will you grow this year? What campaigns do you need to execute next quarter?

But in order to scale, you need to start thinking long term.

That’s where capital planning comes into play.

Capital planning is all about making strategic financial decisions for your company’s future and putting processes in place to implement them.

If you want to build the next unicorn, keep reading to learn more about what capital planning is and how to do it.

What Is Capital Planning?

Capital planning is the process of outlining an action plan for the allocation and distribution of your company’s capital for several years into the future.

Other forms of financial planning (such as budgets, forecasts, and cash flow projections) tend to be shorter term, looking at the upcoming financial year or zooming in even further to the level of the quarter or month.

However, capital planning is a much more long-term process. It’s typically done for large-scale projects as opposed to day-to-day or monthly expenses.

For example, organizations engage in capital planning processes when they are interested in:

Why Is Capital Planning Important?

Business developments like rebranding or acquiring and merging a new company are, as you’d expect, expensive undertakings.

They can easily cost millions of dollars and take over a year to be completed.

Before you commit to a project of that size, capital planning allows you to answer questions like:

Without a well-developed plan for capital spending, you run the risk of running through your war chest and can find yourself unable to meet financial obligations like debt repayments.

Debt Financing 101: A Guide For Founders

Who Is Responsible For Capital Planning?

Capital planning should be a collaborative process.

While, in most organizations, the CFO (Chief Financial Officer) will head up the project, the capital planning group should also consist of:

Capital Planning – Important Terms

Capital planning is a fairly technical undertaking, and those skilled in the process will need to have a strong understanding of the following common terms.

Capital Planning Group

The capital planning group is the group of people responsible for managing the capital planning process.

They’re responsible for tasks like:

Capital Management Committee

A capital management committee is a group of executives whose role is primarily to approve or decline projects and spending as proposed by the capital planning group.

Capital Request Form

This is a standardized form that includes all of the necessary capital project information so the planning group can accurately assess the pros and cons of the project and decide whether or not to seek approval from the capital management committee.

Capital Project Approval Process

Every company will have its own unique capital project approval process, and it may even use separate processes for different spending amounts.

In any case, the capital project approval process is a series of steps that must be fulfilled in order for a capital spending project to be greenlit.

Capital Project Drivers

The capital project drivers are essentially the main reasons or motivators behind a project’s existence.

Common examples include

Operating (Routine) Capital vs. New Capital

Distinguishes between capital spending that requires explicit approval through the capital project approval process, and those for which approval can be automated or signed off on in bulk, provided they fall within dictated spending and project parameters.

Minor vs. Major Capital

A delineation between two types of capital spending, generally based on a dollar amount (though the risk may also be assessed).

In general, minor capital requests require a less extensive process and fewer hoops to jump through in order to receive approval.

Monthly Variance Report

A report that is provided to management that analyzes any variance between budgeted and actual project spending.

Monthly Capital Expenditures Report

This is a basic report issued by the finance team that details the capital that has been spent each month.

Its goal is to keep all group and committee members up to date.

Business Unit Leaders

Business unit leaders are the department heads (for example, marketing, sales, etc.) that sit on the capital management committee.


Finance team members that are involved in the capital planning group as well as the capital management committee.

For example, the CFO might sit on the management team, while a financial analyst supports the planning side.

Management Programs

Software platforms that help capital planning teams manage the entire process.

How to Do Capital Planning

Capital planning teams engage in the following activities:

Identifying Needs

The first step in any capital planning process is to understand and define the needs of the company.

This might start broad (e.g., revenue growth), but needs to be narrowed down to specific, measurable metrics (e.g., increase revenue by 20% in 12 months).

Determining Financial Impacts

This involves answering questions like:

Financial and Scenario Modeling

The capital planning team must plan financials for the ideal scenario, but also prepare models for alternative situations that arise.

For instance, what happens if the cost of the project is 15% higher than estimated.

Can you afford the higher costs? What adjustments will you need to make?

Prioritization of Capital Requests

Capital planning teams rarely work on a single project.

They’ll receive multiple requests from different departments at any one time, so it’s their job to determine which projects are most critical to the business as it stands today, and prioritize spending accordingly.

Developing a Financial Plan

This includes forecasting financial aspects such as:

Providing Visibility to Key Stakeholders

Throughout the capital planning process, it’s crucial that everyone involved (the members of the capital planning group and the capital management committee) are kept up to date with regular reports on spending, capital allocation, and project wins.


To be successful at capital planning, you’ll not only need to develop the skills we’ve discussed above; you’ll also need a capable financial planning and modeling platform by your side to help you assess various situations and provide accurate reports to your leadership team.

Don’t have one? Check out Finmark, we’re just what you’re looking for.

Josh Krissansen
Josh Krissansen

This content is presented “as is,” and is not intended to provide tax, legal or financial advice. Please consult your advisor with any questions.

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Historically financial modeling has been hard, complicated, and inaccurate. But financials are the lifeblood of any company. They’re too important to be ignored or outsourced. They should be a core part of every founder’s job. This doesn’t have to be scary. And you don’t have to do it alone. The Finmark Blog is here to educate founders on key financial metrics, startup best practices, and everything else to give you the confidence to drive your business forward.

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