How to create a financial forecast for a boat rental company?
Creating a financial forecast for your boat 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 boat 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 boat 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 boat rental company becomes handy.
Creating a boat 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 boat 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 boat 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 boat 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.
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 boat rental company financial forecast?
A boat 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 boat rental company.
If you are creating (or updating) the forecast of an existing boat 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 boat 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 boat 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 boat rental company's financial forecast.
The sales forecast for a boat rental company
The sales forecast, also called topline projection, is normally where you will start when building your boat 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 boat rental companies), and consider the elements below:
- Seasonal Demand: As a boat rental company, your business is heavily influenced by seasonal demand. During peak summer months, you can expect a higher number of monthly transactions as people are more likely to rent boats for leisure activities. On the other hand, during colder months, you may experience a decrease in demand and therefore a decrease in average price per transaction.
- Location: The location of your business can also impact your average price and number of monthly transactions. If your company is located in a popular tourist destination with high demand for boat rentals, you may be able to charge higher prices and see an increase in monthly transactions. However, if your location is in a less popular area, you may need to offer lower prices to attract customers and may see a decrease in monthly transactions.
- Competition: The level of competition in your area can also affect your average price and number of monthly transactions. If there are many other boat rental companies in close proximity, you may need to lower your prices to remain competitive and attract customers. This could result in a decrease in average price per transaction. Conversely, if you are the only boat rental company in the area, you may be able to charge higher prices and see an increase in average price and monthly transactions.
- Weather Conditions: The weather can have a significant impact on your business. If there are frequent storms or unfavorable weather conditions, customers may be less likely to rent boats, resulting in a decrease in monthly transactions. On the other hand, if the weather is consistently sunny and warm, you may see an increase in demand and therefore an increase in average price and monthly transactions.
- Type of Boats Offered: The type of boats you offer can also affect your average price and number of monthly transactions. If you have a variety of high-end, luxury boats, you may be able to charge higher prices and see an increase in average price per transaction. However, if your fleet mainly consists of basic, budget-friendly boats, you may need to offer lower prices and may see a decrease in average price and monthly transactions.
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 boat rental company
The next step is to estimate the expenses needed to run your boat 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 boat rental company's operating expenses should include the following items at a minimum:
- Staff Costs: This includes the salaries, wages, and benefits for all employees, such as boat rental attendants, maintenance crew, and administrative staff.
- Fuel Costs: You will need to budget for the cost of fuel to power your boats, as well as any fuel used for transportation or maintenance vehicles.
- Boat Maintenance and Repair: Regular maintenance and repairs are essential for keeping your boats in good working condition. This can include engine tune-ups, hull cleaning, and replacement of worn parts.
- Dock or Marina Fees: If you are renting space at a dock or marina, you will need to budget for the monthly or annual fees.
- Insurance Costs: It is important to have insurance coverage for your boats, as well as liability insurance to protect your business in case of accidents or damages.
- Accountancy Fees: You may need to hire an accountant to help you manage your finances and file taxes for your boat rental company.
- Marketing and Advertising: To attract customers, you will need to invest in marketing and advertising, such as creating a website, social media presence, and print materials.
- Permits and Licenses: Depending on your location, you may need to obtain permits and licenses to operate a boat rental business.
- Software Licenses: You may need to purchase software for managing reservations, bookings, and customer information.
- Banking Fees: You will need to budget for fees associated with business bank accounts, credit card processing, and other financial transactions.
- Taxes: As a business owner, you will be responsible for paying various taxes, such as income tax, sales tax, and property tax.
- Utilities: You will need to pay for utilities such as electricity, water, and internet for your office and any other facilities you may use.
- Office Supplies: You will need to purchase office supplies, such as paper, ink, and other materials for running your business.
- Training and Development: Investing in training and development for your employees can help improve customer service and overall operations.
- Credit Card Processing Fees: If you accept credit card payments, you will need to budget for processing fees charged by credit card companies.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small boat 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 boat rental company?
Once you have an idea of how much sales you could achieve and what it will cost to run your boat rental company, it is time to look into the equipment required to launch or expand the activity.
For a boat rental company, capital expenditures and initial working capital items could include:
- Boats: This is the most essential capital expenditure for a boat rental company. You will need to purchase boats to rent out to your customers. These can range from small fishing boats to luxury yachts, depending on your target market. Make sure to consider the cost of purchasing the boats, as well as maintenance and repairs.
- Docking Facilities: Another important capital expenditure is the construction or purchase of docking facilities for your boats. This can include docks, piers, and marinas. These facilities will provide a safe and convenient place for your customers to access the boats.
- Safety Equipment: As a boat rental company, it is your responsibility to ensure the safety of your customers. This may require the purchase of safety equipment such as life jackets, fire extinguishers, first aid kits, and navigation tools. These items are essential for any boat rental business and should be included in your expenditure forecast.
- Office Equipment: To run your business efficiently, you will need to invest in office equipment such as computers, printers, phones, and furniture. These items will help you manage reservations, keep track of financials, and communicate with customers.
- Transportation Vehicles: Depending on the location of your boat rental company, you may need to purchase transportation vehicles to transport boats from the storage facility to the docking area. This can include trucks, trailers, or even a boat lift. Consider the cost of purchasing and maintaining these vehicles in your expenditure forecast.
Again, this list will need to be adjusted according to the specificities of your boat 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 boat rental company
The next step in the creation of your financial forecast for your boat 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 boat rental company?
Now let's have a look at the main output tables of your boat rental company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your boat rental company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a boat rental company 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 boat 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 projected cash flow statement
A projected cash flow statement for a boat rental company 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 boat rental company'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 boat rental company 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 boat rental company's financial projections?
Building a boat 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 boat 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.
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 boat rental company 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 boat rental company's financial forecast?
Creating an accurate and error-free boat rental company financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting 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 boat 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 boat 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
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- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
