Before investing: seven questions for a clearer business case

A projected return is the final line of a chain of decisions. Before accepting the percentage, an investor needs to understand the asset, the operating model, the capital still required, the evidence behind the forecast and the people expected to deliver it.

This is particularly important when an investment combines property with an operating business, such as hospitality, serviced accommodation or another activity that depends on licences, staff, distribution and day-to-day management. The building may provide security and long-term value, but the operating result will usually depend on much more than ownership.

The seven questions below are designed as a practical first filter for an investment project in Spain. They do not replace legal, tax, technical, financial or commercial due diligence, and they do not assess any specific opportunity. Their purpose is to turn an attractive headline into a structured conversation that can be tested.

Start with evidence, not with the promised return

A useful business case distinguishes between four levels of information:

Level	What it means	Typical example
Verified fact	Supported by a current document or independent record	Registered ownership, existing licence, signed supply contract
Historical evidence	Observed in previous operations, with a defined period and source	Monthly revenue, occupied nights, payroll or energy costs
Management assumption	A reasoned expectation that still needs to be delivered	New average rate, longer opening season, lower distribution cost
Scenario	A deliberate combination of assumptions used to test resilience	Base, downside and upside cases

This separation matters because a forecast can look precise while still depending heavily on unverified inputs. A strong dossier shows where every important number comes from, when it was observed and who is responsible for confirming it.

1. What exactly is included in the transaction?

The first question is about the perimeter of the deal. A presentation may refer to “the hotel”, “the resort” or “the project” as if each were a single object, while the proposed transaction can contain several different components:

• the land and buildings;
• furniture, machinery and operating equipment;
• licences, permits and administrative files;
• websites, brands, telephone numbers and digital accounts;
• supplier, employment, booking or management contracts;
• deposits, reservations and other commitments already made;
• the shares or assets of an operating company;
• liabilities, guarantees or obligations that may remain outside the sale.

These components do not necessarily have the same owner, value, useful life or transfer process. The business case should therefore include a transaction-perimeter schedule: what is included, what is excluded, who currently owns each item, what evidence is available and what condition must be satisfied before completion.

For the real-estate component, the Spanish Land Registry's informational extract helps identify the property, registered ownership, rights and limitations. Registradores explains the scope of this information. It is an important starting point, but it is not a substitute for coordinated legal, planning, technical and operational review.

A practical test

Ask whether the project could operate the day after completion with everything listed as included. If the answer depends on a missing licence, a third-party agreement, equipment owned by another company or an undocumented right of access, that dependency belongs in the investment decision.

2. What is the full capital requirement?

The purchase price is only one part of the capital commitment. A complete budget normally separates at least the following buckets:

Capital bucket	Questions to answer
Acquisition	What is paid for the property, business, equipment or shares?
Transaction costs	Which taxes, professional fees, registrations and financing costs apply?
Immediate works	What must be repaired, adapted or regularised before operating?
Improvement programme	Which upgrades support the proposed positioning and revenue?
Equipment and launch	What is needed for furniture, systems, recruitment, marketing and reopening?
Working capital	How many months of payroll, utilities, supplies and debt service must be funded?
Contingency	What reserve covers cost overruns, delays or discoveries during execution?

Each amount should be labelled as a verified invoice, signed quotation, indicative estimate or management assumption. Dates matter as well: an old construction estimate may no longer represent the cost or availability of the work.

The budget also needs a timeline. Two projects with the same total investment may have very different financing needs if one requires most of the capital before opening and the other can phase expenditure after revenue begins. A monthly cash-flow view is therefore more informative than a single total.

Questions that expose hidden capital needs

• Is VAT or another recoverable tax included in the cash requirement even if it may later be reclaimed?
• Is interest during works or the pre-opening period included?
• Does the model provide for replacement of short-life equipment?
• Is there enough liquidity for a slower commercial ramp-up?
• Are owner drawings or distributions assumed before the operation has built a reserve?

3. How does the business generate revenue?

A revenue forecast should be reconstructable from operational drivers. For an accommodation project, the core relationship is usually:

Available units × open days × occupancy × average achieved rate = accommodation revenue

Additional income—food and beverage, wellness, events, parking, rentals or other services—should be modelled separately. Each stream has its own capacity, price, demand pattern and delivery cost.

The forecast should explain:

• who the intended customer is and why the offer is relevant to that customer;
• which countries, channels and intermediaries are expected to generate demand;
• the number of saleable units and any units held back for owners, staff or maintenance;
• opening dates, seasonality and weekly demand patterns;
• the difference between the advertised price and the net rate after discounts, commissions and taxes;
• cancellation, no-show and refund assumptions;
• the time needed for reviews, distribution rankings and repeat demand to develop.

Historical performance can be valuable, but it is not automatically the correct forecast. If the concept, audience, pricing, management or opening calendar changes, the model must bridge explicitly from the old operation to the new one. It should show which historical data remain relevant and which assumptions belong to the repositioning plan.

Test the commercial logic

For each major revenue assumption, write one sentence beginning with: “We expect this because…”. If the explanation relies only on the attractiveness of the location or on a competitor's advertised price, more evidence is required. Useful support may include actual booking data, channel reports, comparable achieved rates, search demand, contracted groups or a documented sales pipeline.

4. Which costs and definitions could change the apparent return?

Returns cannot be compared until the numerator, denominator and period are defined. “Yield”, “ROI”, “operating return” and “cash return” are often used for different calculations.

A transparent business case should present a simple results waterfall:

1. Gross revenue.
2. Less discounts, commissions, refunds and directly related taxes.
3. Less variable operating costs.
4. Less fixed payroll, utilities, maintenance, insurance, administration and marketing.
5. Less operator or management fees.
6. Operating result before financing and owner-specific taxes.
7. Less debt service, recurring capital expenditure and agreed reserves.
8. Cash potentially available to the investor.

The model should state where each quoted return sits in this sequence and what capital base it uses. A percentage calculated before management fees and replacement reserves cannot be compared with a cash return after financing.

Costs also need operating drivers. Laundry, cleaning, breakfast, distribution fees or card charges may move with occupied nights or revenue. Payroll, insurance and many compliance costs may remain even when occupancy falls. Separating fixed and variable costs makes the downside scenario more credible.

Do not overlook recurring capital expenditure

Furniture, technical installations and guest-facing areas wear out. If the model distributes all operating cash without providing for replacement, the apparent return may be achieved only by postponing expenditure. A business case should show an explicit reserve or a multi-year renewal plan.

5. What happens when the plan is late, more expensive or less successful?

A single forecast is not a risk analysis. At minimum, the dossier should include base, downside and upside scenarios using internally consistent assumptions.

The downside case should test more than lower revenue. Typical questions include:

• What if completion or reopening is delayed by three or six months?
• What if works cost more or a second phase becomes necessary?
• What if occupancy builds more slowly while fixed costs begin on time?
• What if the achieved rate is lower because discounts or intermediaries are needed?
• What if energy, payroll, maintenance or financing costs rise?
• How much additional cash is required before the project becomes self-funding?

Sensitivity analysis can then isolate the variables that matter most. A project may be resilient to a small change in average rate but highly sensitive to opening date, staffing structure or debt cost. Those high-impact variables deserve stronger evidence and closer monitoring.

The break-even point is especially useful: the occupancy, price or revenue level at which the operation covers its defined costs. It gives the investor and operator a common early-warning threshold.

Risk does not mean that a negative outcome will occur; it means actual results can differ from expectations. The CNMV's financial glossary provides a useful general definition. The practical response is not to eliminate uncertainty, but to identify it, price it, allocate it and monitor it.

6. Who is responsible for delivering the plan after completion?

An investable project needs an operating model as well as a financial model. The dossier should identify who will:

• obtain or maintain the necessary licences and registrations;
• recruit, employ and supervise the team;
• set prices and manage distribution channels;
• approve expenditure and supplier contracts;
• maintain the property and operating equipment;
• produce monthly financial and operating reports;
• manage tax, accounting, insurance and compliance workflows;
• decide when performance differs from budget.

Decision rights should be explicit. Which actions can the operator take within an approved budget? Which require owner approval? What happens in an emergency? How often are results reviewed, and in which currency and accounting format?

A practical monthly dashboard might include available capacity, occupancy, achieved rate, revenue by stream, payroll ratio, distribution cost, maintenance incidents, cash balance, capital expenditure and forecast variance. The exact indicators depend on the business, but they should connect directly to the assumptions used in the business case.

If SpainINT is expected to coordinate the post-acquisition operation, that role should be documented separately: scope, delegated authority, fees, reporting rhythm, performance indicators and escalation rules. The objective is to translate the approved business case into an accountable operating plan—not to imply that performance can be guaranteed.

7. What remains to be verified before a decision?

Every serious dossier contains open items. Hiding them does not make the project stronger; organising them does.

Use a verification register with at least these fields:

Field	Purpose
Question or document	Defines exactly what is missing
Category	Legal, tax, technical, commercial, financial or operational
Current evidence	Shows what is already known and from which source
Owner	Names the person responsible for obtaining or reviewing it
Deadline	Connects the item to an offer, contract or completion milestone
Decision impact	Explains what changes if the answer is unfavourable
Status	Open, received, reviewed, resolved or accepted as a risk

Prioritise items that can change ownership, legality of use, total capital, opening date, financing availability or the central revenue thesis. Some questions can be resolved before an offer; others may become conditions, warranties, retentions or post-completion actions. The appropriate treatment belongs to the legal and commercial negotiation.

Warning signs in an investment presentation

Pause and ask for clarification when:

• the headline return is shown without a definition or capital denominator;
• forecasts and historical figures appear in the same table without clear labels;
• the purchase price is presented as the total investment;
• licences are described as “in place” without identifying the holder, scope and current evidence;
• market prices are used as if they were achieved net rates;
• management is described as included but no scope, fee or reporting obligation is defined;
• the downside case reduces profit but does not show the extra cash required;
• outstanding checks have no owner, deadline or consequence.

None of these points proves that an opportunity is unsuitable. They identify where the discussion must become more precise.

What a decision-ready business case should contain

Before moving to a binding commitment, an investor should be able to locate, at minimum:

• a clear transaction perimeter;
• sources and dates for the principal facts;
• a complete capital budget and funding timeline;
• a driver-based revenue model;
• operating costs with defined assumptions;
• base, downside and upside scenarios;
• break-even and key sensitivities;
• an operating and governance plan;
• a verification register with decision impacts;
• a concise explanation of returns, risks and investor cash flows.

This structure does not remove the need for specialist review. It makes that review more efficient by connecting documents and questions to the financial consequences of the decision.

From information to execution

SpainINT Select is designed to make investment information understandable before a transaction and usable afterwards. General analysis explains how to examine a market or project. Selected opportunities can then be presented with a documented investment thesis, assumptions, evidence, risks and an operating plan. Where agreed, SpainINT can also coordinate the acquisition and subsequent management within a defined mandate.

Continue with our guides and the opportunity dossier structure. Framework by SpainINT Select; source pages consulted on 11 September 2026. The linked Spanish sources support only the specific points indicated and do not validate an individual project. Forecasts are not guarantees, and investors should obtain appropriate independent professional advice.