How to create a financial forecast for a baby equipment 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 baby equipment store.
Putting together a baby equipment 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 baby equipment 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 baby equipment store?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your baby equipment store and ensure that it can be financially viable in the years to come.
A financial plan for a baby equipment store enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date baby equipment store forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your baby equipment store's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
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 used as input to build a baby equipment store financial forecast?
A baby equipment store's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing baby equipment store, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a baby equipment store startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the baby equipment store running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your baby equipment store's financial forecast.
The sales forecast for a baby equipment store
From experience, it is usually best to start creating your baby equipment store financial forecast by your sales forecast.
To create an accurate sales forecast for your baby equipment store, you will have to rely on the data collected in your market research, or if you're running an existing baby equipment store, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- Demographic changes: As the population of your local area shifts to include more young families, there may be an increase in demand for baby equipment, resulting in a higher average price for your products and more monthly transactions.
- Consumer trends and preferences: If there is a growing trend towards eco-friendly and sustainable baby products, it may be beneficial for your store to stock and promote these types of products, potentially leading to a higher average price and more monthly transactions.
- Competition: The presence of new or established competitors in your area may impact your average price and monthly transactions. If there is a high level of competition, you may need to adjust your prices or marketing strategies to attract customers and maintain sales.
- Economic conditions: Economic factors such as a recession or inflation can greatly affect consumer spending habits. In times of economic downturn, customers may be more price-sensitive and opt for cheaper baby equipment, resulting in a lower average price and fewer monthly transactions.
- Technology advancements: With the rise of online shopping and e-commerce, it is important for your store to stay up-to-date with technology and offer convenient online purchasing options. This can potentially increase your average price as customers may be willing to pay more for the convenience, and may also lead to more monthly transactions as it expands your customer reach.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
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 baby equipment store
The next step is to estimate the costs you’ll have to incur to operate your baby equipment store.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your baby equipment store's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and any other costs associated with hiring and maintaining staff members. In a baby equipment store, you will need employees to help with sales, customer service, and inventory management.
- Accountancy fees: You will need to hire an accountant to help you keep track of your finances, file taxes, and ensure compliance with any relevant laws and regulations.
- Insurance costs: It is important to have insurance for your baby equipment store to protect against any potential liabilities, such as accidents or product recalls.
- Software licenses: You will need to purchase licenses for any software you use to manage your store, such as inventory management or point-of-sale systems.
- Banking fees: Your store will have banking fees associated with processing payments, making deposits, and managing your business accounts.
- Rent: This is the cost of leasing a physical space for your store. It is important to choose a location that is convenient for your customers and has enough space to display and store your inventory.
- Utilities: You will need to pay for electricity, water, and other utilities to keep your store running.
- Inventory costs: This includes the cost of purchasing your baby equipment inventory, as well as any shipping or storage fees.
- Marketing and advertising: It is important to promote your baby equipment store to attract customers. This may include advertising in local media, creating a website and social media pages, and participating in events or partnerships.
- Supplies: You will need to purchase supplies such as office and cleaning supplies to keep your store running smoothly.
- Training and development: It is important to invest in the training and development of your staff to ensure they have the necessary skills to provide excellent customer service and manage inventory effectively.
- Repairs and maintenance: You will need to budget for any necessary repairs or maintenance to keep your store in good condition and ensure the safety of your customers.
- Professional fees: You may need to hire lawyers, consultants, or other professionals to help you with legal or operational matters related to your baby equipment store.
- Taxes and licenses: You will need to pay taxes on your business income and obtain any necessary licenses or permits to operate your store.
- Credit card fees: If you accept credit card payments, you will need to pay fees to the credit card companies for processing these transactions.
This list is not exhaustive by any means, and will need to be tailored to your baby equipment store's specific circumstances.
What investments are needed to start or grow a baby equipment store?
Creating and expanding a baby equipment store also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a baby equipment store could include elements such as:
- Inventory: This includes the cost of purchasing or leasing baby equipment such as strollers, cribs, car seats, and high chairs. It also includes the cost of keeping a sufficient level of inventory to meet customer demand.
- Store Fixtures and Furniture: This includes the cost of purchasing or leasing display shelves, racks, and other furniture needed to showcase and store baby equipment. It also includes the cost of any necessary renovations or updates to the store's interior.
- Point-of-Sale (POS) System: This includes the cost of purchasing or leasing a POS system for processing customer transactions. This system may also include features such as inventory management, sales tracking, and customer data collection.
- Delivery Vehicles: If your store offers delivery services, you may need to purchase or lease vehicles to transport baby equipment to customers' homes. This expense could include the cost of the vehicles themselves, as well as insurance and maintenance costs.
- Security System: To protect your store and inventory, you may need to invest in a security system. This could include cameras, alarms, and other measures to prevent theft and vandalism.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your baby equipment 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 baby equipment store
The next step in the creation of your financial forecast for your baby equipment 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 baby equipment store?
Now let's have a look at the main output tables of your baby equipment store's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your baby equipment store is likely to be in the years to come.
For your baby equipment 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 baby equipment 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 baby equipment 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 baby equipment 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 forecast
Your baby equipment store's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the baby equipment store:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your baby equipment store's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your baby equipment store's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.
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 baby equipment store's financial projections?
Building a baby equipment 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 baby equipment 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional baby equipment store financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your baby equipment store's financial forecast?
Creating an accurate and error-free baby equipment store financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection 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 projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own baby equipment store, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your baby equipment store future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a baby equipment store, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or 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
- Example of financial forecast
- How to write a baby equipment store business plan
- How to create a sales forecast for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a baby equipment store? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
