How to create a financial forecast for a beach restaurant?
Creating a financial forecast for your beach restaurant, 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 beach restaurant 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 beach restaurant?
The financial projections for your beach restaurant 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 beach restaurant'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 beach restaurant 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 beach restaurant, 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 beach restaurant 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 beach restaurant, 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 beach restaurant's financial forecast.
The sales forecast for a beach restaurant
The sales forecast, also called topline projection, is normally where you will start when building your beach restaurant 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 beach restaurants), and consider the elements below:
- You can expect an increase in the average price of dishes during peak season due to the higher demand for fresh seafood and local produce.
- The number of monthly transactions may decrease during periods of inclement weather, such as storms or heavy rain, as customers may be less likely to visit the beach.
- The popularity of beach events, such as music festivals or sports tournaments, can positively impact the average price as visitors may be willing to spend more on a special dining experience.
- During the summer months, you may see an increase in the number of monthly transactions as families and tourists flock to the beach for vacation and are more likely to dine out at your restaurant.
- An increase in competition from other beach restaurants or food trucks in the area may lead to a decrease in the average price as customers have more options to choose from.
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 beach restaurant
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your beach restaurant 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 beach restaurant will include some of the following items:
- Staff costs: This includes the salaries, wages, and benefits for all employees working at the beach restaurant, such as servers, cooks, and bartenders.
- Accountancy fees: You may need to hire an accountant to help manage your restaurant's financial records and taxes.
- Insurance costs: It is important to have insurance to protect your beach restaurant from any unexpected events, such as natural disasters or accidents.
- Software licences: You may need to purchase software licences for point-of-sale systems, reservation systems, and other technology used in your restaurant.
- Banking fees: These are fees charged by banks for services such as processing credit card payments and managing your restaurant's bank accounts.
- Food and beverage costs: This includes the cost of purchasing ingredients and beverages for your menu items.
- Rent or lease payments: If you do not own the property where your beach restaurant is located, you will need to pay rent or lease payments to the property owner.
- Utilities: This includes electricity, gas, water, and other utilities needed to operate your restaurant.
- Marketing and advertising expenses: You may need to spend money on marketing and advertising to attract customers to your beach restaurant.
- Equipment maintenance and repairs: As a beach restaurant owner, you will need to regularly maintain and repair equipment, such as ovens, refrigerators, and dishwashers.
- Cleaning and janitorial services: It is important to keep your restaurant clean and presentable, so you may need to hire cleaning and janitorial services to help with this.
- Liquor license fees: If you plan to serve alcohol at your beach restaurant, you will need to obtain a liquor license and pay fees associated with it.
- Music and entertainment costs: If you plan to have live music or other forms of entertainment at your beach restaurant, you will need to budget for these expenses.
- Credit card processing fees: When customers use credit cards to pay for their meals, you will need to pay fees to the credit card processing company.
- Uniforms and supplies: Your staff will need uniforms and other supplies to perform their jobs, so you will need to budget for these expenses.
This list will need to be tailored to the specificities of your beach restaurant, but should offer a good starting point for your budget.
What investments are needed to start or grow a beach restaurant?
Creating and expanding a beach restaurant also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a beach restaurant could include elements such as:
- Restaurant equipment: This includes items such as ovens, grills, refrigerators, and freezers that are essential for preparing and storing food in a beach restaurant setting. These equipment are necessary for the daily operations of the restaurant, and should be of high quality to ensure efficiency and durability.
- Outdoor furniture: As a beach restaurant, you will likely have a large outdoor seating area for your customers to enjoy the beautiful views and ocean breeze. This will require purchasing tables, chairs, umbrellas, and other outdoor furniture that can withstand the elements and provide a comfortable and inviting atmosphere for your guests.
- Beachfront property lease: One of the biggest expenses for a beach restaurant is the lease for the property itself. Depending on the location and popularity of the beach, this can be a significant cost. It's important to carefully consider the terms and length of the lease before committing to it, as it will directly impact your financial forecast.
- Renovations and renovations: As with any business, renovations and repairs will be necessary to maintain the appearance and functionality of your beach restaurant. This could include things like painting, replacing flooring, or fixing any damages caused by weather or wear and tear. It's important to budget for these expenses to keep your restaurant looking its best.
- Point of sale system: A modern and efficient point of sale (POS) system is essential for any restaurant, including a beach restaurant. This technology allows you to accurately track sales, inventory, and expenses, making it easier to manage your finances and make informed business decisions. While this may be a significant upfront cost, it can greatly benefit your restaurant in the long run.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your beach restaurant.
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 beach restaurant
The next step in the creation of your financial forecast for your beach restaurant 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 beach restaurant?
Now let's have a look at the main output tables of your beach restaurant's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your beach restaurant's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a beach restaurant 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
Your beach restaurant'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 projected cash flow statement
A projected cash flow statement for a beach restaurant is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your beach restaurant's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the beach restaurant 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 beach restaurant's financial projections?
Building a beach restaurant 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 beach restaurant'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 beach restaurant 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 beach restaurant'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 beach restaurant 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 beach restaurant'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
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your beach restaurant.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a beach restaurant. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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 projections
- How to create a turnover forecast for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a beach restaurant? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
