How to create a financial forecast for a basketball equipment store?
Creating a financial forecast for your basketball equipment store, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your basketball equipment store is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a basketball equipment store?
The financial projections for your basketball equipment 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 basketball equipment 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 basketball equipment 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 basketball equipment 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 basketball equipment 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 basketball equipment 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 basketball equipment store's financial forecast.
The sales forecast for a basketball equipment store
The sales forecast, also called topline projection, is normally where you will start when building your basketball equipment store financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing basketball equipment stores), and consider the elements below:
- Basketball season: The time of year can have a significant impact on the average price and number of monthly transactions for your basketball equipment store. During peak basketball season, such as when the NBA or college basketball seasons are in full swing, demand for basketball equipment is typically higher, leading to potentially higher prices and more frequent transactions.
- Popularity of basketball in your local area: The popularity of basketball in your local area can also greatly influence your store's sales forecast. If basketball is a popular sport in your community, you may see a higher demand for equipment and potentially higher prices. On the other hand, if basketball is not as popular in your area, your store may experience lower demand and prices may be lower as well.
- Innovations in basketball technology: Advances in basketball technology, such as new ball designs or high-tech shoes, can also affect your store's sales forecast. If there are new and highly sought-after products on the market, customers may be willing to pay higher prices and make more frequent transactions to get their hands on them.
- Competition: The level of competition in the market can also impact your store's sales forecast. If there are many other basketball equipment stores in your area, you may need to adjust your prices and offerings to stay competitive. On the other hand, if you are the only basketball equipment store in the area, you may have more control over pricing and may see higher sales.
- Economic factors: The overall state of the economy can also play a role in the average price and number of monthly transactions for your basketball equipment store. During times of economic downturn, customers may be more price-sensitive and may make fewer purchases, while a strong economy may lead to higher prices and more frequent transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a basketball equipment store
The next step is to estimate the costs you’ll have to incur to operate your basketball equipment store.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your basketball equipment store's operating expenses should normally include the following items:
- Staff Costs: This includes the salaries and wages of all employees, including store managers, sales associates, and customer service representatives.
- Rent and Utilities: You will need to pay rent for your store location as well as utilities such as electricity, water, and gas.
- Inventory: This includes the cost of purchasing basketball equipment from suppliers.
- Marketing and Advertising: You will need to invest in promoting your store and products through various channels such as social media, print ads, and sponsorships.
- Accountancy Fees: It is important to hire an accountant to help manage your finances and file taxes.
- Insurance Costs: You will need to have insurance to protect your store and products from potential risks.
- Software Licenses: You may need to purchase licenses for software used in your store, such as point-of-sale systems and inventory management software.
- Banking Fees: This includes fees for credit card processing, bank account maintenance, and ATM transactions.
- Maintenance and Repairs: You will need to budget for regular maintenance and repairs for your store equipment, such as cash registers and display shelves.
- Office Supplies: This includes any supplies needed for day-to-day operations, such as paper, pens, and printer ink.
- Professional Fees: You may need to hire lawyers or consultants for legal advice or business services.
- Training and Development: Investing in the training and development of your staff can help improve their skills and performance.
- Taxes and Licenses: You will need to pay taxes and obtain necessary licenses to operate your store.
- Office Rent or Lease: If you have an office space separate from your store, you will need to pay rent or lease fees.
- Travel Expenses: If you attend trade shows or other events to source new products, you will need to budget for travel expenses.
This list is not exhaustive by any means, and will need to be tailored to your basketball equipment store's specific circumstances.
What investments are needed to start or grow a basketball equipment store?
Creating and expanding a basketball equipment store also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a basketball equipment store could include elements such as:
- Store Renovation: This includes any renovations or improvements made to the physical store space, such as new flooring, lighting, or fixtures to create an attractive and functional shopping environment for your customers.
- Inventory Purchases: As a basketball equipment store, you will need to regularly invest in new inventory to keep up with the latest trends and meet customer demand. This could include purchasing new basketballs, jerseys, shoes, and other equipment to stock your shelves.
- Point of Sale System: A modern and efficient point of sale system is essential for any retail store, including a basketball equipment store. This capital expenditure covers the cost of purchasing and setting up a system that can track sales, manage inventory, and process transactions quickly and accurately.
- Security Equipment: To protect your store and merchandise, you may want to invest in security equipment such as cameras, alarms, and locks. This will not only provide peace of mind but also help prevent theft and reduce losses.
- Furniture and Fixtures: In addition to the actual basketball equipment, your store will also need furniture and fixtures such as display cases, shelves, and seating for customers. These items are essential for creating a comfortable and organized shopping experience.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your basketball 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 basketball equipment store
The next step in the creation of your financial forecast for your basketball 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 basketball equipment store?
Now let's have a look at the main output tables of your basketball equipment store's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your basketball equipment store is likely to be in the years to come.
For your basketball 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 basketball 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
Your basketball equipment store's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business 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 basketball equipment 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 basketball equipment 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 basketball equipment 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 basketball equipment 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 basketball equipment store's financial projections?
Building a basketball 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 basketball equipment store's projections
The modern and easiest way is to use professional online financial forecasting software 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 forecasting 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 basketball equipment 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 basketball equipment store's financial forecast?
Creating an accurate and error-free basketball 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 basketball 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 basketball 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 basketball 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 project sales for a business?
- Sample financial forecast for business idea
Know someone who owns or is thinking of starting a basketball equipment store? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
