How to create a financial forecast for a battery manufacturer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your battery manufacturing business.
Putting together a battery manufacturing business 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 battery manufacturing business.
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 battery manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your battery manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a battery manufacturing business 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 battery manufacturing business 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 battery manufacturing business'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 needed to build a battery manufacturing business 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 battery manufacturing business, 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 battery manufacturing business 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 battery manufacturing business, 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 battery manufacturing business's financial forecast.
The sales forecast for a battery manufacturing business
The sales forecast, also called topline projection, is normally where you will start when building your battery manufacturing business 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 battery manufacturers), and consider the elements below:
- Your production capacity: If you are able to increase your production capacity, you may be able to sell more batteries per month, which could result in a decrease in average price due to economies of scale.
- Technological advancements: As battery technology improves, you may be able to offer more advanced or higher quality batteries, which could increase your average price and potentially attract more customers.
- Competition: If there are other battery manufacturers in the market, you may need to adjust your prices to remain competitive, which could affect your average price and number of monthly transactions.
- Consumer demand: Changes in consumer preferences and demand for certain types of batteries, such as rechargeable or environmentally-friendly options, can impact your sales and average price.
- Raw material costs: The cost of materials used to make batteries, such as lithium or cobalt, can fluctuate and affect your production costs, which may then impact your average price and number of transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 battery manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your battery manufacturing business 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 battery manufacturing business will include some of the following items:
- Staff Costs: This includes salaries, wages, and benefits for all employees in your battery manufacturing business, such as production workers, engineers, and administrative staff.
- Accountancy Fees: You will need to hire an accountant or accounting firm to handle your financial statements, tax returns, and other financial matters related to your battery manufacturing business.
- Insurance Costs: You will need to purchase insurance for your battery manufacturing business to protect against potential risks, such as property damage, product liability, and workers' compensation.
- Software Licences: Your battery manufacturing business may require specialized software for tasks such as inventory management, production planning, and quality control. These software licences will need to be renewed periodically.
- Banking Fees: You will need to have a business bank account and may incur fees for services such as wire transfers, overdrafts, and international transactions.
- Raw Materials: This includes the cost of purchasing materials, such as metals, chemicals, and plastics, to produce your batteries.
- Utilities: Your battery manufacturing business will require electricity, water, and other utilities to operate. These costs may vary depending on your location and production volume.
- Rent/Lease: If you do not own the building where your battery manufacturing business is located, you will need to pay rent or lease fees to the landlord.
- Maintenance and Repairs: You will need to budget for regular maintenance and repairs of your production equipment and facility to ensure smooth operations.
- Marketing and Advertising: You may need to allocate funds for marketing and advertising activities to promote your battery manufacturing business and reach potential customers.
- Shipping and Freight: If you sell your batteries to customers, you will need to cover the cost of shipping and freight to deliver the products to their destination.
- Training and Development: To ensure the quality of your products, you may need to invest in training and development programs for your employees.
- Legal Fees: You may need to seek legal advice or services for matters such as contracts, patents, and intellectual property related to your battery manufacturing business.
- Taxes: Your battery manufacturing business will be subject to various taxes, such as income tax, sales tax, and property tax.
- Office Supplies: You will need to purchase office supplies, such as paper, ink, and stationery, for day-to-day operations of your battery manufacturing business.
This list will need to be tailored to the specificities of your battery manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a battery manufacturing business?
Once you have an idea of how much sales you could achieve and what it will cost to run your battery manufacturing business, it is time to look into the equipment required to launch or expand the activity.
For a battery manufacturing business, capital expenditures and initial working capital items could include:
- Equipment: This includes machinery and tools used in the production of batteries such as mixing machines, filling machines, and testing equipment.
- Facility Upgrades: As battery manufacturing requires specialized facilities, you may need to make upgrades to your current facility or purchase a new one. This could include installing ventilation systems, upgrading electrical systems, or adding specialized storage areas.
- Raw Materials: In order to produce batteries, you will need to purchase raw materials such as lithium, nickel, and cobalt. These materials can be expensive and may require bulk purchases.
- Transportation Vehicles: As a battery manufacturing business, you will need to transport your products to customers or distributors. This may require purchasing vehicles such as trucks or vans.
- Waste Disposal Equipment: Batteries can pose a risk to the environment if not disposed of properly. You may need to invest in waste disposal equipment to ensure proper handling and disposal of any hazardous materials.
Again, this list will need to be adjusted according to the specificities of your battery manufacturing business.
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 battery manufacturing business
The next step in the creation of your financial forecast for your battery manufacturing business 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 battery manufacturing business?
Now let's have a look at the main output tables of your battery manufacturing business's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast 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.
A healthy battery manufacturing business's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established battery manufacturing business will look different than for a startup.
The projected balance sheet
Your battery manufacturing business's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 forecast
Your battery manufacturing business'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 battery manufacturing business:
- 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 battery manufacturing business'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 battery manufacturing business'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 battery manufacturing business's financial forecast?
Using the right tool or solution will make the creation of your battery manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your battery manufacturing business'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
Outsourcing the creation of your battery manufacturing business financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your battery manufacturing business's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free battery manufacturing business financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your battery manufacturing business's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 battery manufacturing business 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 battery manufacturing business, 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 revenues for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a battery manufacturing business? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
