How to create a financial forecast for a book and magazine wholesaler?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your book and magazine wholesaler.
Putting together a book and magazine wholesaler financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your book and magazine wholesaler.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a book and magazine wholesaler?
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 book and magazine wholesaler becomes handy.
Creating a book and magazine wholesaler 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 book and magazine wholesaler.
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 book and magazine wholesaler 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 book and magazine wholesaler'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 book and magazine wholesaler financial forecast?
A book and magazine 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 book and magazine 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 book and magazine 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 book and magazine 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 book and magazine wholesaler's financial forecast.
The sales forecast for a book and magazine wholesaler
The sales forecast, also called topline projection, is normally where you will start when building your book and magazine wholesaler 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 book and magazine wholesalers), and consider the elements below:
- The increase in popularity of e-books and digital magazines may result in a decrease in demand for physical books and magazines, leading to a potential decrease in your average price and number of monthly transactions.
- The introduction of new technologies, such as print-on-demand, may allow for more efficient and cost-effective production of books and magazines, potentially lowering your average price and increasing the number of monthly transactions.
- Changes in consumer preferences and trends, such as a shift towards sustainable and eco-friendly products, may impact the types of books and magazines that are in demand, potentially affecting your average price and number of monthly transactions.
- The economic climate, including factors such as inflation and unemployment rates, can greatly influence consumer spending habits and purchasing power, potentially affecting your average price and number of monthly transactions.
- The state of the publishing industry, including mergers and acquisitions, bankruptcy filings, and changes in distribution channels, can have a significant impact on the availability and pricing of books and magazines, potentially affecting your average price and number of monthly transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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 book and magazine wholesaler
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your book and magazine 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 book and magazine wholesaler will include some of the following items:
- Staff costs: This includes salaries, wages, bonuses, benefits, and any other expenses related to your employees. As a book and magazine wholesaler, you will need staff to handle tasks such as receiving inventory, managing orders, and handling customer inquiries.
- Accountancy fees: You will need to hire an accountant to handle your financial records, tax returns, and other bookkeeping tasks. This is an essential expense to ensure the financial health and compliance of your business.
- Insurance costs: As a wholesaler, you will need to protect your business against potential risks such as theft, damage, or liability. This may include general liability insurance, property insurance, and worker's compensation insurance.
- Software licences: To efficiently manage your inventory, orders, and other business processes, you will need to invest in software that is specifically designed for book and magazine wholesalers. This may include inventory management software, order tracking software, and customer relationship management (CRM) software.
- Banking fees: As a wholesaler, you will need a business bank account to handle your financial transactions. This may include fees for maintaining your account, wire transfers, and processing credit card payments.
- Rent: Your business will need a physical space to store your inventory and conduct business operations. This may include a warehouse, office space, or a storefront.
- Utilities: You will need to cover the costs of electricity, water, and other utilities for your business space. This may also include internet and phone services.
- Marketing expenses: To reach potential customers and promote your business, you may need to invest in marketing activities such as advertising, website development, and social media management.
- Transportation costs: As a wholesaler, you will need to deliver your products to your customers. This may include expenses for fuel, maintenance, and insurance for your delivery vehicles.
- Inventory costs: You will need to purchase inventory from publishers and distributors to sell to your customers. This may include the cost of purchasing books and magazines, as well as any fees for storing and managing your inventory.
- Packaging and shipping costs: When fulfilling orders, you will need to cover the costs of packaging materials and shipping fees to ensure your products reach your customers.
- Professional fees: You may need to hire lawyers, consultants, or other professionals to assist with legal or strategic matters related to your business.
- Office supplies: You will need to purchase office supplies such as paper, pens, and printer ink to keep your business running smoothly.
- Training and development: To stay competitive in the industry, you may need to invest in training and development for your employees, as well as yourself as a business owner.
- Taxes and licenses: As a business, you will need to pay taxes and obtain any necessary licenses to operate legally. This may include business licenses, sales tax, and income tax.
This list will need to be tailored to the specificities of your book and magazine wholesaler, but should offer a good starting point for your budget.
What investments are needed to start or grow a book and magazine wholesaler?
Your book and magazine 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 book and magazine wholesaler, these could include:
- Warehouse Equipment: As a book and magazine wholesaler, you will need specialized equipment such as forklifts, pallet jacks, and conveyor belts to efficiently handle and store your inventory. These items are considered fixed assets and will be a significant part of your capital expenditures.
- Delivery Trucks: In order to distribute your products to retailers, you will need to invest in a fleet of delivery trucks. These vehicles will be used for transportation and will be a crucial part of your business operations.
- Computer Systems: As technology plays a vital role in the book and magazine industry, you will need to invest in computer systems for various purposes such as inventory management, order processing, and accounting. These systems will be considered fixed assets and will require significant capital expenditure.
- Office Furniture and Supplies: In order to maintain an efficient and professional workplace, you will need to invest in office furniture such as desks, chairs, and filing cabinets. You will also need to purchase office supplies such as paper, printer ink, and stationery. These items are considered fixed assets and will be a part of your capital expenditures.
- Warehouse Renovation: As your business grows, you may need to expand your warehouse space or renovate your existing warehouse to accommodate more inventory. These renovations will be a significant capital expenditure for your book and magazine wholesaler business.
Again, this list will need to be adjusted according to the size and ambitions of your book and magazine 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 book and magazine wholesaler
The next step in the creation of your financial forecast for your book and magazine 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 book and magazine wholesaler?
Now let's have a look at the main output tables of your book and magazine wholesaler's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your book and magazine wholesaler is likely to be in the years to come.
For your book and magazine wholesaler 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 book and magazine wholesalers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your book and magazine wholesaler's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 book and magazine 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 book and magazine 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 book and magazine 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 book and magazine 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 book and magazine wholesaler's financial projections?
Building a book and magazine wholesaler 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 book and magazine 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
Outsourcing the creation of your book and magazine wholesaler financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your book and magazine wholesaler's financial forecast?
Creating an accurate and error-free book and magazine wholesaler 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 projection templates for inspiration
The Business Plan Shop has dozens of financial forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own book and magazine wholesaler, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your book and magazine wholesaler
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your book and magazine wholesaler.
- 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 book and magazine wholesaler. 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 sales for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
