How to create a financial forecast for a bike rental company?
Creating a financial forecast for your bike rental company, 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 bike rental company 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 bike rental company?
The financial projections for your bike rental company 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 bike rental company'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 bike rental company financial forecast?
A bike rental company'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 bike rental company.
If you are creating (or updating) the forecast of an existing bike rental company, 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 bike rental company 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 bike rental company 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 bike rental company's financial forecast.
The sales forecast for a bike rental company
From experience, it usually makes sense to start your bike rental company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your bike rental company (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your bike rental company's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Seasonal Demand: The time of year can greatly affect the demand for bike rentals. During peak seasons, such as summer or holidays, you can expect an increase in average price and number of monthly transactions as more customers will be looking to rent bikes.
- Weather Conditions: The weather can also have a significant impact on your business. Rainy or cold weather can decrease demand for bike rentals, while sunny and warm weather can increase it. This can affect your average price as you may need to offer discounts during slow months.
- Competition: The number of competitors in your area can affect your average price and number of monthly transactions. If there are many other bike rental companies in the same location, you may need to lower your prices to stay competitive. On the other hand, if you are the only bike rental company in the area, you can potentially charge higher prices.
- Tourism Trends: The popularity of your location as a tourist destination can also affect your business. If your area experiences a surge in tourism, you can expect an increase in demand for bike rentals. This can also affect your average price as tourists may be willing to pay more for a unique or convenient biking experience.
- Bike Maintenance and Quality: The condition and quality of your bikes can also impact your business. If your bikes are well-maintained and high-quality, you may be able to charge higher prices and attract more customers. However, if your bikes are in poor condition, this may lead to a decrease in demand and lower your average price.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
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 bike rental company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your bike rental company 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 bike rental company will include some of the following items:
- Staff costs: This includes salaries, wages, and any benefits for employees who will be working at your bike rental company. You may also need to budget for training and hiring costs.
- Rent: You will need to pay rent for a physical location where you can store and rent out bikes. This expense may vary depending on the location and size of your business.
- Insurance costs: It is important to have insurance to protect your business from any potential risks or liabilities. This may include liability insurance, property insurance, and worker's compensation insurance.
- Marketing and advertising: In order to attract customers, you will need to invest in marketing and advertising materials such as flyers, brochures, and online ads.
- Equipment maintenance: Bikes will require regular maintenance and repairs in order to keep them in good working condition. This may include purchasing replacement parts and hiring a mechanic.
- Accountancy fees: It is important to keep track of your finances and taxes, so you may need to hire an accountant or bookkeeper to help with this.
- Utilities: You will need to budget for electricity, water, and other utilities for your physical location.
- Software licenses: You may need to purchase software licenses for programs that will help you manage your business, such as accounting software or scheduling software.
- Supplies: This includes any office supplies, cleaning supplies, or bike equipment needed to run your business.
- Banking fees: You may need to pay fees for business bank accounts, credit card processing, and other financial services.
- Taxes and licenses: You will need to budget for business taxes and any necessary licenses or permits required to operate a bike rental company.
- Website maintenance: If you have a website for your business, you may need to pay for website hosting, domain registration, and website maintenance services.
- Office expenses: This includes any expenses related to running your business, such as office rent, office supplies, and internet services.
- Security: You may need to invest in security measures to protect your bikes and physical location from theft or damage.
- Legal fees: It is important to consult with a lawyer to ensure your business is compliant with all laws and regulations, which may result in legal fees.
This list will need to be tailored to the specificities of your bike rental company, but should offer a good starting point for your budget.
What investments are needed to start or grow a bike rental company?
Your bike rental company 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 bike rental company, these could include:
- Bicycles: As a bike rental company, the biggest capital expenditure you will have is purchasing bicycles. This includes both traditional bicycles and specialized bikes such as mountain bikes or electric bikes.
- Bike Repair and Maintenance Equipment: In order to keep your bicycles in top condition, you will need to invest in repair and maintenance equipment. This can include tools, spare parts, and cleaning supplies.
- Bike Storage Solutions: As a bike rental company, you will need a secure and organized way to store your bicycles when they are not in use. This can include bike racks, storage sheds, or even a designated storage area in your rental shop.
- Point of Sale System: To efficiently manage your rental transactions and track your inventory, you will need a reliable point of sale system. This can include hardware such as cash registers or tablets, as well as software for managing bookings and payments.
- Rental Shop Fixtures and Furniture: Your rental shop will need to be equipped with fixtures and furniture such as display racks, shelves, and chairs for customers. These items may seem small, but they are important for creating a professional and welcoming environment for your customers.
Again, this list will need to be adjusted according to the size and ambitions of your bike rental company.
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 bike rental company
The next step in the creation of your financial forecast for your bike 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 bike rental company?
Now let's have a look at the main output tables of your bike rental company'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 bike rental company'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 bike rental company will look different than for a startup.
The projected balance sheet
Your bike 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 forecast
Your bike rental company'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 bike rental company:
- 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 bike rental company'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 bike rental company'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 bike rental company's financial forecast?
Using the right tool or solution will make the creation of your bike rental company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your bike rental company's projections
The modern and easiest way is to use professional online financial forecasting 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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional bike 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 bike rental company's financial forecast?
Creating an accurate and error-free bike rental company 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 forecast shows expected growth, profitability, and cash generation metrics for your bike rental company.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- 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 bike rental company. Don't hesitate to contact us if you 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
- Financial forecast example
- How to project revenues for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
