As your auto repair shop business idea begins to take shape, you become increasingly aware of the steps needed to set it up.
Among your market research, searching for a suitable location, and writing the all-important repair shop business plan, developing a financial forecast for an auto repair shop is one of the essential steps you must take before launching your project.
If you're not completely sure of the best way to go about achieving this, don't worry. Simply follow the guide below for advice on how to draft up an accurate financial forecast.
Why make a financial forecast for an auto repair shop?
A financial forecast for an auto repair shop allows you to assess whether or not your business is likely to be profitable.
It's essential in giving an entrepreneur the opportunity to think (in detail) about the various financial aspects of their business, from the list of investments (including vehicles and repair tools) required to operate it, to how much money is required to help get it off the ground. Assessing these elements will thus help you identify the strengths and flaws of your project.
Whether you're keen to anticipate: the initial funding requirement, how much you'll need to spend on maintenance in the future, or how much profit you can expect: creating a financial forecast for your auto repair shop will give you a clear vision of the future.
It’s also important to remember that your auto repair shop’s budget will be essential when you’re looking for financing. You can be 100% certain that a banker or investor will ask you for these numbers when presenting your project, so make sure they’re set out accurately and attractively for your auto repair shop financial forecast.
What information is needed to draw up an auto repair shop's financial forecast?
You'll need a significant amount of data to set out a realistic financial forecast for your auto repair shop.
Much of this will have been gathered during the preliminary market research stage and includes:
- The average price of a repair
- How many times a year an average car requires maintenance work
- How many customers are in your catchment area (this will depend mainly on your location)
- Your competitors - who they are, where they're located, and whether they specialise in cars or other vehicles too (such as motorcycles)
Even if a lot of this information can be found online and within industry magazines, we recommend that you also get in touch with professionals within the car repair sector to obtain as much insider knowledge as possible.
Consider grabbing a coffee with the owner of an auto repair shop that isn't one of your direct competitors to get someone else's perspective on how the market's doing.
The second step for your auto repair shop financial forecast is drawing up a precise list of the resources needed to keep the business running on a day-to-day basis. Between staff, utility bills, and repair tools, it’s important to ensure these are all accounted for if you want to create a budget that’s as close to reality as possible
When putting these costs together, ensure you view them alongside a list of quotes that you've requested from suppliers to accurately cost each item.
Your sales forecast
The best way to start your financial forecast for an auto repair shop is by setting out a sales forecast. This will give you a better idea as to the potential turnover of your auto repair shop.
To estimate it, you'll have to rely on the data collected in your market research - by evaluating the average price of each repair service you'll be offering and the number of customers you'll be expecting for each one.
Bear in mind that your turnover will be limited by your garage's capacity, so it's important to figure out exactly how many cars can be in for repair at the same time, given the available space, staff, and average time to complete the repair.
The overhead costs for your auto repair shop financial forecast
Overheads are the expenses needed to operate the business on a day-to-day basis, including staff and essential equipment.
For starters, do a quick calculation to find out how many members of staff you'll need to carry out the repairs. This will give you an idea of how much money you'll have to put aside for wages - making sure you include the manager's within your estimate, too.
Then it's time to look at your utility and insurance bills, consulting your list of estimated quotes from suppliers whilst doing so to ensure your calculations are as accurate as possible in your auto repair shop financial forecast.
Investments required for your auto repair shop
There’s no getting away from it, several investments will need to be made in setting up your auto repair shop.
As with overheads, we recommend listing all the equipment needed to launch your business (from a till for sales staff, to furniture and car parts), using quotes provided by suppliers to create accurate estimates.
Tables that define the financial forecast for your auto repair shop
Once you've collected this information, it will be presented within the three tables below:
The profit & loss statement
This table gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
The projected balance sheet
Thanks to the projected balance sheet, you're able to observe the value of your business's assets at the end of each year. The assets section of the table lists everything the company owns, while the liabilities side gives an overview of its debts.
The projected cash flow statement
The third table will give you a detailed breakdown of the cash generated and spent by your auto repair shop and will help ensure that you have sufficient cash flow to repay any loans and keep your equipment in good condition.
Which tool should you use to create a financial forecast for your auto repair shop?
By this stage, you're surely wondering what the best way is to set up the financial forecast for your auto repair shop.
So that's why we're presenting three solutions below, along with their advantages and disadvantages.
1. Using a spreadsheet
If you have a solid background in accounting or advanced knowledge of financial modelling, using spreadsheet software like Excel or Google Sheets is a cheap solution for creating a financial forecast.
However, using a spreadsheet can become a pretty time-consuming task, and, if you aren't used to using Excel for financial modeling, can't protect you from possible (and quite frankly, inevitable) calculation errors.
2. Calling on a consultant or a chartered accountant
Enlisting the help of a consultant or accountant will let you obtain accurate figures from a professional point of view for your auto repair shop financial forecast.
The downside of this solution is its cost, however, as obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to set you back around £700 or $1,000.
If you opt for this solution, make sure the accountant has prior knowledge of the car repair industry, so that they can challenge your figures and offer insights.
3. Using an online forecasting software
You can also choose to use online forecasting software to help you with your budget.
There are several advantages to using specialized software to create a financial forecast
- You can easily make your financial projections, letting the software take care of the calculations
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank
If you are interested in this type of solution, you can try our software for free by signing up here.
We hope that this article helped you to see more clearly what needs to be done to create your auto repair shop forecast.
Don't hesitate to contact us if you have any questions!
Also on The Business Plan Shop
- Business plan template for an auto repair shop
- The key steps to taking over an auto repair shop
- Everything you need to know about how to start an auto repair shop
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