How to create a financial forecast for a bicycle and accessories wholesaler?
Creating a financial forecast for your bicycle and accessories 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 bicycle and accessories 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 bicycle and accessories wholesaler?
The financial projections for your bicycle and accessories wholesaler 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 bicycle and accessories wholesaler'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 used as input to build a bicycle and accessories wholesaler financial forecast?
A bicycle and accessories wholesaler's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing bicycle and accessories wholesaler, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a bicycle and accessories wholesaler startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the bicycle and accessories wholesaler running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your bicycle and accessories wholesaler's financial forecast.
The sales forecast for a bicycle and accessories wholesaler
From experience, it is usually best to start creating your bicycle and accessories wholesaler financial forecast by your sales forecast.
To create an accurate sales forecast for your bicycle and accessories wholesaler, you will have to rely on the data collected in your market research, or if you're running an existing bicycle and accessories 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:
- Seasonal demand: As a bicycle and accessories wholesaler, your average price and number of monthly transactions may be affected by seasonal demand. During warmer months, when people are more likely to be outside and engaging in outdoor activities, there may be a higher demand for bicycles and accessories, leading to an increase in both average price and number of monthly transactions. Conversely, during colder months, there may be a decrease in demand, resulting in a decrease in both average price and number of monthly transactions.
- Economic conditions: Economic conditions can also play a role in your average price and number of monthly transactions. During times of economic prosperity, consumers may be more willing to invest in higher-end bicycles and accessories, leading to an increase in average price. On the other hand, during times of economic downturn, consumers may be more price-sensitive and opt for lower-priced options, resulting in a decrease in average price. Additionally, economic conditions can also affect the overall demand for bicycles and accessories, which in turn can impact the number of monthly transactions.
- Product innovation: The introduction of new and innovative products can also impact your average price and number of monthly transactions. If you are able to offer unique and high-quality products that stand out in the market, you may be able to increase your average price. Additionally, these new products may also attract more customers, resulting in an increase in the number of monthly transactions.
- Competition: The level of competition in your market can also affect your average price and number of monthly transactions. If you are facing stiff competition from other bicycle and accessories wholesalers, you may need to adjust your prices in order to remain competitive. This may result in a decrease in your average price. Similarly, if you are able to differentiate yourself from competitors and offer a unique value proposition, you may be able to increase your average price and attract more customers, leading to an increase in the number of monthly transactions.
- Customer preferences: The preferences and trends of your target customers can also impact your average price and number of monthly transactions. For example, if there is a growing trend towards eco-friendly and sustainable products, you may need to adjust your product offerings to cater to this demand. This may result in a change in your average price as well as the number of monthly transactions. Additionally, keeping a close eye on customer preferences can help you anticipate future demand and plan accordingly.
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 bicycle and accessories wholesaler
The next step is to estimate the expenses needed to run your bicycle and accessories wholesaler 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 bicycle and accessories wholesaler's operating expenses should include the following items at a minimum:
- Staff Costs: This includes the salaries, benefits, and training costs for employees. As a bicycle and accessories wholesaler, you will need salespeople, warehouse workers, and administrative staff to run your business efficiently.
- Accountancy Fees: You will need to hire an accountant or bookkeeper to manage your financial records, prepare tax returns, and provide financial advice.
- Insurance Costs: You will need to protect your business and assets with insurance policies such as general liability, product liability, and worker's compensation insurance.
- Software Licences: To manage your inventory, sales, and other business operations, you will need to purchase software licenses for programs such as inventory management, accounting, and customer relationship management (CRM).
- Banking Fees: As a wholesaler, you will likely have a high volume of transactions, so you will need to budget for banking fees such as wire transfer fees, transaction fees, and account maintenance fees.
- Rent or Mortgage: If you have a physical storefront or warehouse, you will need to budget for rent or mortgage payments. This expense may also include utilities and maintenance costs.
- Marketing and Advertising: To attract customers and promote your products, you will need to budget for marketing and advertising expenses, such as online ads, print ads, and promotional materials.
- Inventory Costs: As a wholesaler, you will need to purchase inventory from manufacturers or distributors, which will be one of your major expenses.
- Shipping and Freight Costs: You will need to ship your products to customers or receive shipments from suppliers, so you will need to budget for shipping and freight costs.
- Travel and Entertainment: As a wholesaler, you may need to attend trade shows, meet with suppliers or customers, or visit warehouses. You will need to budget for travel and entertainment expenses such as airfare, hotel stays, and meals.
- Telephone and Internet: To communicate with suppliers and customers, you will need to budget for telephone and internet expenses.
- Office Supplies: You will need to keep your office stocked with supplies such as paper, pens, and printer ink, which can add up over time.
- Repairs and Maintenance: If you have a physical storefront or warehouse, you will need to budget for repairs and maintenance expenses such as plumbing, electrical, and HVAC services.
- Professional Memberships and Subscriptions: To stay informed about industry trends and network with other wholesalers, you may want to join professional organizations or subscribe to industry publications. These memberships and subscriptions will come with a cost.
- Legal Fees: As a business owner, you may need legal advice or assistance from time to time. You will need to budget for legal fees for services such as contract review, business formation, or trademark registration.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small bicycle and accessories wholesaler might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a bicycle and accessories wholesaler?
Creating and expanding a bicycle and accessories wholesaler also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a bicycle and accessories wholesaler could include elements such as:
- Inventory: As a bicycle and accessories wholesaler, you will need to invest in inventory to stock your warehouse or showroom with a variety of bicycles and accessories. This can include purchasing different sizes, styles, and brands of bicycles, as well as various accessories such as helmets, locks, lights, and more.
- Warehouse/Showroom Space: You will also need to consider the cost of renting or purchasing a warehouse or showroom space to store and display your inventory. This could include expenses such as rent, utilities, and maintenance.
- Delivery Vehicles: In order to transport your inventory to retailers or customers, you may need to invest in delivery vehicles such as trucks, vans, or bicycles with trailers. These vehicles will also require ongoing maintenance and fuel expenses.
- Equipment and Tools: As a wholesaler, you will need equipment and tools to assemble, repair, and maintain bicycles and accessories. This could include items such as workbenches, bike stands, tools, and safety gear.
- IT Infrastructure: In today's digital age, it is essential for businesses to have a strong IT infrastructure. This could include expenses such as computers, software, point-of-sale systems, and other technology to manage inventory, sales, and customer data.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your bicycle and accessories 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 bicycle and accessories wholesaler
The next step in the creation of your financial forecast for your bicycle and accessories 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 bicycle and accessories wholesaler?
Now let's have a look at the main output tables of your bicycle and accessories wholesaler's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your bicycle and accessories wholesaler's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a bicycle and accessories wholesaler 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
The projected balance sheet gives an overview of your bicycle and accessories 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 bicycle and accessories 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 forecast
Your bicycle and accessories wholesaler'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 bicycle and accessories wholesaler:
- 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 bicycle and accessories wholesaler'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 bicycle and accessories wholesaler'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 bicycle and accessories wholesaler's financial forecast?
Creating your bicycle and accessories 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 forecasting software to build your bicycle and accessories wholesaler'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
Enlisting the help of a consultant or accountant is also a good way to obtain a professional bicycle and accessories 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 bicycle and accessories wholesaler's financial forecast?
Creating an accurate and error-free bicycle and accessories wholesaler 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 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 bicycle and accessories 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 bicycle and accessories 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 turnover forecast for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a bicycle and accessories wholesaler? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
