How to create a financial forecast for a 24/7 grocery store?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your 24/7 grocery store.
Putting together a 24/7 grocery store financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your 24/7 grocery store.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a 24/7 grocery store?
The financial projections for your 24/7 grocery store act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your 24/7 grocery store's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is needed to build a 24/7 grocery store financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a 24/7 grocery store, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the 24/7 grocery store on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing 24/7 grocery store, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your 24/7 grocery store's financial forecast.
The sales forecast for a 24/7 grocery store
From experience, it usually makes sense to start your 24/7 grocery store's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your 24/7 grocery store (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your 24/7 grocery store's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Changes in consumer preferences and trends: As a 24/7 grocery store, you may see a shift in consumer preferences towards healthier and organic options. This could lead to an increase in the average price per transaction as these items tend to be more expensive.
- Seasonal demand: Your store may experience higher sales during certain seasons, such as summer when people are more likely to have outdoor gatherings and need to stock up on supplies. This could impact the average number of monthly transactions and potentially lead to a higher average price per transaction.
- Competition: The presence of other 24/7 grocery stores or convenience stores in the area could affect your sales. If there are more options for customers, they may be more likely to shop around for lower prices, potentially decreasing the average price per transaction.
- Economic conditions: Changes in the economy, such as a recession or inflation, can impact consumer spending habits and affect your sales. For example, during a recession, people may be more price-sensitive and opt for cheaper options, decreasing the average price per transaction.
- Demographic changes: If there is a shift in the population in your area, it could affect your sales. For instance, an increase in the number of young families in the neighborhood could lead to higher demand for baby products and affect the average price per transaction.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a 24/7 grocery store
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your 24/7 grocery store on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a 24/7 grocery store will include some of the following items:
- Staff costs: This includes wages, salaries, benefits, and any other expenses related to your employees. With a 24/7 grocery store, you will need to have staff working around the clock, which will increase your staffing expenses.
- Rent or lease: Your store location is crucial to your business success, and it comes with a cost. Whether you are renting or leasing the space, you will need to budget for this expense.
- Utilities: With a 24/7 operation, your utility costs will be higher than a traditional grocery store. You will need to factor in the cost of electricity, water, gas, and any other utilities needed to keep your store running.
- Inventory: As a grocery store, you will need to constantly restock your shelves to meet the needs of your customers. This includes the cost of purchasing inventory, as well as any storage or transportation expenses.
- Marketing and advertising: To attract customers to your 24/7 grocery store, you will need to invest in marketing and advertising efforts. This could include digital advertising, print ads, or promotions.
- Accountancy fees: It's important to keep accurate financial records for your business. You may need to hire an accountant or pay for accounting software to manage your finances.
- Insurance costs: As a business owner, you need to protect your store and assets from potential risks. This could include liability insurance, property insurance, or workers' compensation insurance.
- Software licenses: To run your store efficiently, you may need to invest in various software licenses, such as point-of-sale systems, inventory management software, or accounting software.
- Banking fees: As a business owner, you will need to open a business bank account and may incur fees for transactions, wire transfers, or credit card processing.
- Maintenance and repairs: With a 24/7 operation, your store will experience wear and tear, and you will need to budget for regular maintenance and repairs to keep your store in good condition.
- Security: To protect your store from theft or vandalism, you may need to invest in security measures, such as cameras, alarms, or security personnel.
- Cleaning services: With a 24/7 operation, your store will need to be cleaned regularly to maintain a clean and sanitary environment for your customers. You may need to hire a cleaning service or invest in cleaning supplies.
- Taxes and licenses: As a business owner, you will need to pay taxes and obtain necessary licenses and permits to operate your 24/7 grocery store.
- Credit card processing fees: With more customers using credit and debit cards, you may incur fees for processing these payments. It's important to factor these fees into your operating expenses.
- Employee training and development: To ensure your employees are knowledgeable and provide excellent customer service, you may need to invest in employee training and development programs.
This list will need to be tailored to the specificities of your 24/7 grocery store, but should offer a good starting point for your budget.
What investments are needed to start or grow a 24/7 grocery store?
Your 24/7 grocery store financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a 24/7 grocery store, these could include:
- Refrigeration Equipment: This includes walk-in coolers, freezers, and display cases for perishable items. These are essential for keeping your products fresh and safe for consumption.
- Point of Sale (POS) System: A modern and efficient POS system is crucial for a 24/7 grocery store. This will not only help with accurate and efficient transactions, but also provide important data for inventory and sales tracking.
- Security Systems: With a 24/7 operation, it is important to invest in a reliable security system to ensure the safety of your store, employees, and customers. This may include CCTV cameras, alarm systems, and security personnel.
- Delivery Vehicles: If you offer delivery services for your customers, you will need to invest in reliable vehicles to ensure timely and efficient deliveries. This may include refrigerated trucks for perishable items.
- Shelving and Display Fixtures: These are necessary for organizing and displaying your products in an attractive and organized manner. This not only creates a pleasant shopping experience for customers, but also helps with inventory management and restocking.
Again, this list will need to be adjusted according to the size and ambitions of your 24/7 grocery store.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your 24/7 grocery store
The next step in the creation of your financial forecast for your 24/7 grocery store is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a 24/7 grocery store?
Now let's have a look at the main output tables of your 24/7 grocery store's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your 24/7 grocery store is likely to be in the years to come.
For your 24/7 grocery store to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established 24/7 grocery stores, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your 24/7 grocery store's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your 24/7 grocery store. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow projection
The cash flow forecast of your 24/7 grocery store will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the 24/7 grocery store's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your 24/7 grocery store is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your 24/7 grocery store's financial plan.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your 24/7 grocery store's financial projections?
Building a 24/7 grocery store financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your 24/7 grocery store's projections
The modern and easiest way is to use an online financial forecasting tool such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our projection software for free by signing up here.
Calling in a financial consultant or chartered accountant
Enlisting the help of a consultant or accountant is also a good way to obtain a professional 24/7 grocery store financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your 24/7 grocery store's financial forecast?
Creating an accurate and error-free 24/7 grocery store financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting software like The Business Plan Shop is built for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your 24/7 grocery store.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a 24/7 grocery store. Don't hesitate to contact us if you have any questions!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Financial forecast example
- How to create a sales forecast for a business?
- Sample financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
