How to create a financial forecast for a beach umbrella rental company?

Developing and maintaining an up-to-date financial forecast for your beach umbrella rental company 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 beach umbrella rental company 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 beach umbrella rental company?

In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your beach umbrella rental company becomes handy.

Creating a beach umbrella rental company financial forecast forces you to take stock of where your business stands and where you want it to go. 

Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your beach umbrella rental company.

Having this clear plan in place will give you the confidence needed to move forward with your business’s development. 

Having an up-to-date financial forecast for a beach umbrella rental company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall. 

Finally, your beach umbrella rental company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.

What information is needed to build a beach umbrella rental company 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 umbrella rental company, 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 umbrella rental company 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 umbrella rental company, 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 umbrella rental company's financial forecast.

The sales forecast for a beach umbrella rental company

The sales forecast, also called topline projection, is normally where you will start when building your beach umbrella rental company 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 umbrella rental companies), and consider the elements below:

After the sales forecast comes the operating expenses budget, which we will now look into in more detail.

The operating expenses for a beach umbrella rental company

The next step is to estimate the expenses needed to run your beach umbrella rental company on a day-to-day basis.

These will vary based on the level of sales expected, and the location and size of your business. 

But your beach umbrella rental company's operating expenses should include the following items at a minimum:

This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small beach umbrella rental company might not have the same level of expenditure as a larger one, for example.

What investments are needed to start or grow a beach umbrella rental company?

Creating and expanding a beach umbrella rental company also requires investments which you need to factor into your financial forecast.

Capital expenditures and initial working capital items for a beach umbrella rental company could include elements such as:

Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your beach umbrella rental company.

The financing plan of your beach umbrella rental company

The next step in the creation of your financial forecast for your beach umbrella rental company 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 umbrella rental company?

Now let's have a look at the main output tables of your beach umbrella rental company's financial forecast.

The projected profit & loss statement

The projected profit & loss shows how profitable your beach umbrella rental company is likely to be in the years to come.

For your beach umbrella rental company 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 beach umbrella rental companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.

The projected balance sheet

Your beach umbrella rental company'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 beach umbrella rental company 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 beach umbrella rental company'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 beach umbrella rental company 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 beach umbrella rental company's financial plan. 

Which tool should you use to create your beach umbrella rental company's financial projections?

Building a beach umbrella rental company 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 umbrella rental company'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 beach umbrella rental company 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 beach umbrella rental company'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 umbrella rental company 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 umbrella rental company'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.

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 beach umbrella rental company, 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

1. A financial forecast shows expected growth, profitability, and cash generation metrics for your beach umbrella rental company.
2. Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
3. Using financial forecasting software is the modern way of creating and maintaining financial projections.

We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a beach umbrella rental company. Don't hesitate to contact us if you have any questions!

Also on The Business Plan Shop

• Financial forecast example
• How to create a turnover forecast for a business?
• Example of financial forecast for business idea

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