How to create a financial forecast for a bagel shop?
Developing and maintaining an up-to-date financial forecast for your bagel shop is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a bagel shop financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a bagel shop?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your bagel shop and ensure that it can be financially viable in the years to come.
A financial plan for a bagel shop 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 bagel shop 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 bagel shop'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 solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
What information is used as input to build a bagel shop financial forecast?
A bagel shop'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 bagel shop, 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 bagel shop 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 bagel shop 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 bagel shop's financial forecast.
The sales forecast for a bagel shop
From experience, it usually makes sense to start your bagel shop's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your bagel shop (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 bagel shop'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:
- Your location can greatly impact your average price and number of monthly transactions. If you are located in a busy downtown area with high foot traffic, you may be able to charge higher prices and see a higher number of transactions. On the other hand, if you are in a more rural or suburban area, you may need to lower your prices to attract customers and may see fewer transactions overall.
- The quality of your ingredients can also affect your average price and number of transactions. If you use high-quality, fresh ingredients, you may be able to charge higher prices and attract more customers. However, if your ingredients are lower quality, you may need to lower your prices to remain competitive and may see fewer transactions as a result.
- The time of day can also impact your business's average price and number of monthly transactions. For example, if you offer breakfast bagels, you may see higher prices and more transactions in the morning. If you offer lunch or dinner options, you may see a different pattern throughout the day.
- The season can also play a role in your average price and number of transactions. For example, during the holiday season, customers may be more willing to splurge on specialty bagels or may be seeking out catering options for parties and gatherings. In the summer, you may see a rise in sales for iced coffee and cold bagel sandwiches.
- The competition in your area can also impact your average price and number of transactions. If there are multiple bagel shops in your area, you may need to adjust your prices to remain competitive and may see a decrease in transactions. Alternatively, if you are the only bagel shop in the area, you may be able to charge higher prices and see more transactions.
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.
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The operating expenses for a bagel shop
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your bagel shop 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 bagel shop will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for your employees, such as bakers, cashiers, and managers.
- Rent: This is the cost of leasing or renting your bagel shop space, including any common area maintenance fees.
- Utilities: This covers the cost of electricity, gas, water, and other necessary utilities for your shop.
- Ingredients: This expense includes the cost of purchasing all the necessary ingredients for making your bagels, such as flour, yeast, and toppings.
- Equipment Maintenance: This includes the cost of regularly maintaining and repairing your bagel-making equipment, such as ovens and mixers.
- Marketing: This is the cost of promoting your bagel shop through advertising, social media, and other marketing efforts.
- Packaging Materials: This expense includes the cost of packaging materials, such as bags and boxes, for your customers to take their bagels home.
- Accountancy Fees: This covers the cost of hiring an accountant to help you with bookkeeping, taxes, and other financial tasks.
- Insurance Costs: This includes the cost of insurance to protect your bagel shop from potential risks, such as property damage or liability claims.
- Software Licenses: This expense covers the cost of any necessary software licenses, such as point-of-sale systems or accounting software.
- Banking Fees: This includes the cost of transaction fees, bank charges, and other fees associated with managing your business bank account.
- Cleaning Supplies: This expense covers the cost of purchasing cleaning supplies, such as detergents and paper towels, to maintain a clean and sanitary bagel shop.
- Uniforms: If you require your employees to wear uniforms, this expense covers the cost of purchasing and maintaining them.
- Training and Development: This expense covers the cost of training your employees and investing in their professional development to improve their skills and knowledge.
- Legal Fees: This includes the cost of hiring a lawyer for any legal services related to your bagel shop, such as drafting contracts or handling disputes.
This list will need to be tailored to the specificities of your bagel shop, but should offer a good starting point for your budget.
What investments are needed to start or grow a bagel shop?
Once you have an idea of how much sales you could achieve and what it will cost to run your bagel shop, it is time to look into the equipment required to launch or expand the activity.
For a bagel shop, capital expenditures and initial working capital items could include:
- Equipment: This includes all necessary machinery and appliances for your bagel shop, such as mixers, ovens, refrigerators, and display cases. These items are essential for the production and display of your products.
- Furniture and Fixtures: This category includes all the tables, chairs, and other furniture needed for your customers to enjoy their bagels. It also includes any fixtures, such as shelving and displays, that are necessary for the functioning of your shop.
- Renovations and Improvements: If you are starting a bagel shop from scratch, you may need to make renovations and improvements to the space before opening. This could include installing plumbing, electrical work, and any necessary construction to make the space suitable for your business.
- Delivery Vehicle: If you plan on offering delivery services, you may need to purchase a delivery vehicle. This could be a van or truck to transport your bagels and other goods to customers.
- POS System: A point-of-sale (POS) system is essential for tracking sales, managing inventory, and processing payments. This can include hardware, software, and any necessary training to use the system effectively.
Again, this list will need to be adjusted according to the specificities of your bagel shop.
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 bagel shop
The next step in the creation of your financial forecast for your bagel shop 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 bagel shop?
Now let's have a look at the main output tables of your bagel shop's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your bagel shop's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a bagel shop should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
The projected balance sheet gives an overview of your bagel shop'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 bagel shop. 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 bagel shop'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 bagel shop:
- 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 bagel shop'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 bagel shop's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.
Need a solid financial forecast?
The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.
Which tool should you use to create your bagel shop's financial projections?
Building a bagel shop 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 bagel shop'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 bagel shop 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 bagel shop's financial forecast?
Creating an accurate and error-free bagel shop 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
- 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 bagel shop 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 bagel shop, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.
Need inspiration for your business plan?
The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.
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