How to create a financial forecast for a beverages and drinks wholesaler?
Creating a financial forecast for your beverages and drinks wholesaler, 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 beverages and drinks wholesaler 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 beverages and drinks wholesaler?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your beverages and drinks wholesaler and ensure that it can be financially viable in the years to come.
A financial plan for a beverages and drinks wholesaler 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 beverages and drinks wholesaler 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 beverages and drinks wholesaler'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 used as input to build a beverages and drinks wholesaler financial forecast?
A beverages and drinks wholesaler's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing beverages and drinks wholesaler.
If you are creating (or updating) the forecast of an existing beverages and drinks wholesaler, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new beverages and drinks wholesaler startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the beverages and drinks wholesaler to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your beverages and drinks wholesaler's financial forecast.
The sales forecast for a beverages and drinks wholesaler
From experience, it is usually best to start creating your beverages and drinks wholesaler financial forecast by your sales forecast.
To create an accurate sales forecast for your beverages and drinks wholesaler, you will have to rely on the data collected in your market research, or if you're running an existing beverages and drinks wholesaler, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- Changes in consumer preferences: As a beverages and drinks wholesaler, you are heavily influenced by consumer preferences and trends. If there is a sudden shift in consumer demand for healthier or more premium options, it may affect your average price and number of monthly transactions.
- Seasonal demand: Your sales forecast should take into account seasonal demand for certain beverages and drinks. For example, if you primarily sell hot beverages, you can expect a decrease in sales during the summer months, which may affect your average price and number of monthly transactions.
- Competition: The presence of new or existing competitors in your market can impact your average price and number of monthly transactions. If a competitor offers a similar product at a lower price, you may need to adjust your prices to remain competitive and maintain your transaction volume.
- Changes in economic conditions: Economic conditions, such as a recession or inflation, can affect consumer spending and, in turn, your average price and number of monthly transactions. During tough economic times, consumers may be more price-sensitive and opt for cheaper beverage options.
- Availability of raw materials: As a wholesaler, you rely on a steady supply of raw materials to produce and distribute your beverages. Any disruptions or shortages in the supply chain can affect your costs and potentially lead to an increase in your average price and a decrease in your number of monthly transactions.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
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 beverages and drinks wholesaler
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your beverages and drinks wholesaler 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 beverages and drinks wholesaler will include some of the following items:
- Staff costs: This includes salaries, benefits, and training for your employees. As a beverages and drinks wholesaler, you will need staff to assist with stocking, order fulfillment, and customer service.
- Accountancy fees: You may choose to hire an accountant to handle your financial records, taxes, and other financial matters. This can be especially beneficial if you are not well-versed in accounting.
- Insurance costs: As a wholesaler, you will need to protect your business and assets with insurance. This may include general liability insurance, property insurance, and workers' compensation insurance.
- Software licenses: In order to manage your inventory and sales, you may need to purchase software licenses for accounting, inventory management, and order processing.
- Banking fees: Your business will incur banking fees for services such as wire transfers, credit card processing, and account maintenance.
- Rent and utilities: If you have a physical location for your business, you will need to pay rent and utilities such as electricity, water, and internet.
- Marketing and advertising: It's important to promote your business and products to attract customers. This may include costs for online advertising, print materials, and sponsorships.
- Transportation and delivery: As a wholesaler, you will need to transport and deliver your products to customers. This may involve costs such as fuel, vehicle maintenance, and shipping fees.
- Inventory costs: You will need to purchase inventory from suppliers in order to stock your warehouse. This includes the cost of the products themselves as well as any associated fees, such as customs fees for international shipments.
- Legal fees: It's important to have legal counsel to protect your business and ensure compliance with laws and regulations. This may include fees for contracts, trademarks, and other legal services.
- Office supplies and equipment: You will need basic office supplies and equipment to run your business, such as paper, pens, and computers. These expenses can add up over time.
- Professional memberships and subscriptions: As a wholesaler, you may benefit from joining professional organizations or subscribing to industry publications to stay informed and network with others in the industry.
- Repairs and maintenance: Your warehouse, equipment, and vehicles may require occasional repairs and maintenance to keep them in good working condition.
- Taxes and licenses: As a business, you will need to pay taxes and obtain necessary licenses and permits. These costs may vary depending on your location and type of business.
- Travel expenses: If you attend trade shows or visit suppliers, you may need to cover travel expenses such as airfare, lodging, and meals.
This list will need to be tailored to the specificities of your beverages and drinks wholesaler, but should offer a good starting point for your budget.
What investments are needed to start or grow a beverages and drinks wholesaler?
Your beverages and drinks wholesaler financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a beverages and drinks wholesaler, these could include:
- Equipment: This can include items such as refrigerators, freezers, coffee machines, and other necessary equipment for storage and preparation of beverages and drinks.
- Furniture and Fixtures: This can include tables, chairs, counters, and other necessary fixtures for creating a comfortable and functional environment for customers to enjoy their beverages and drinks.
- Vehicles: If your beverages and drinks wholesaler involves delivery services, you may need to purchase vehicles for transportation. This can include trucks, vans, or cars for transporting your products to different locations.
- Building or Storefront: If you are starting your wholesaler from scratch, you may need to purchase or rent a building or storefront to house your business operations. This can include renovation costs, lease payments, and other related expenses.
- Technology: In today's digital age, technology is essential for any business. As a beverages and drinks wholesaler, you may need to invest in a point-of-sale system, inventory management software, and other technology to help streamline your operations and improve efficiency.
Again, this list will need to be adjusted according to the size and ambitions of your beverages and drinks wholesaler.
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 beverages and drinks wholesaler
The next step in the creation of your financial forecast for your beverages and drinks wholesaler 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 beverages and drinks wholesaler?
Now let's have a look at the main output tables of your beverages and drinks wholesaler'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 beverages and drinks wholesaler'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 beverages and drinks wholesaler will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your beverages and drinks wholesaler'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 beverages and drinks wholesaler. 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 projection
The cash flow forecast of your beverages and drinks wholesaler 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 beverages and drinks wholesaler'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 beverages and drinks wholesaler 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 beverages and drinks wholesaler'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 beverages and drinks wholesaler's financial forecast?
Creating your beverages and drinks wholesaler's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your beverages and drinks wholesaler's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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 beverages and drinks wholesaler 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 beverages and drinks wholesaler'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 beverages and drinks wholesaler 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 beverages and drinks wholesaler'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 beverages and drinks wholesaler.
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 beverages and drinks wholesaler. 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 sales forecast for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a beverages and drinks wholesaler? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
