How to create a financial forecast for a brick manufacturer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your brick manufacturing business.
Putting together a brick manufacturing business 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 brick manufacturing business.
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 brick manufacturing business?
The financial projections for your brick manufacturing business 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 brick manufacturing business'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 brick manufacturing business financial forecast?
A brick manufacturing business'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 brick manufacturing business.
If you are creating (or updating) the forecast of an existing brick manufacturing business, 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 brick manufacturing business 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 brick manufacturing business 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 brick manufacturing business's financial forecast.
The sales forecast for a brick manufacturing business
The sales forecast, also called topline projection, is normally where you will start when building your brick manufacturing business 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 brick manufacturers), and consider the elements below:
- Seasonal demand: You may experience fluctuations in sales based on seasonal demand for bricks. For example, during the summer months, there may be an increase in demand for bricks due to construction projects and landscaping needs.
- Housing market growth: The growth of the housing market in your area can greatly impact the demand for bricks. As more houses are being built, there will be a higher demand for bricks, resulting in an increase in your average price and number of monthly transactions.
- Changes in building codes: Changes in building codes and regulations can also affect your sales forecast. If there are stricter regulations on the type of bricks that can be used for construction, you may need to adjust your prices or production to meet these new requirements.
- Availability of raw materials: The availability of raw materials such as clay and sand can also impact your sales forecast. If there is a shortage of these materials, it may increase your production costs and ultimately affect your average price and number of monthly transactions.
- Competition: The presence of competitors in your market can also impact your sales forecast. If there are other brick manufacturers in your area, you may need to adjust your prices or offer unique products to stay competitive and maintain 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 brick manufacturing business
The next step is to estimate the costs you’ll have to incur to operate your brick manufacturing business.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your brick manufacturing business's operating expenses should normally include the following items:
- Raw materials: This includes the cost of acquiring clay, sand, and other materials needed for brick production.
- Labor costs: This includes wages, salaries, and benefits for your production staff, as well as any administrative or management personnel.
- Equipment maintenance: Brick manufacturing equipment requires regular maintenance to ensure efficient and safe operation.
- Utilities: This includes electricity, water, and gas used in the production process.
- Rent or mortgage: If you do not own your production facility, you will need to budget for rent or mortgage payments.
- Insurance: As with any business, brick manufacturing carries risk and you will need to budget for insurance to protect your assets and employees.
- Transportation costs: This includes the cost of transporting raw materials to your facility and delivering finished products to customers.
- Accounting and bookkeeping: Keeping accurate financial records and preparing tax returns requires the services of a professional accountant.
- Marketing and advertising: To attract customers and promote your business, you will need to budget for marketing and advertising expenses.
- Software licenses: Brick manufacturing businesses may use specialized software for inventory management, production planning, and accounting.
- Banking fees: This includes fees for maintaining a business bank account and processing transactions.
- Legal fees: You may need the services of a lawyer for contracts, business formation, or other legal matters.
- Employee benefits: In addition to salaries, you may also offer benefits such as health insurance, retirement plans, and paid time off.
- Taxes: As a business owner, you will need to budget for taxes, including income tax, payroll tax, and sales tax.
- Training and development: Keeping your employees up-to-date with industry trends and best practices may require investing in training and development programs.
This list is not exhaustive by any means, and will need to be tailored to your brick manufacturing business's specific circumstances.
What investments are needed to start or grow a brick manufacturing business?
Creating and expanding a brick manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a brick manufacturing business could include elements such as:
- Brick-making machine: This is perhaps the most important capital expenditure for a brick manufacturing business. It is a large and expensive piece of equipment that is used to produce and mold bricks from raw materials such as clay, sand, and cement. The cost of a brick-making machine can vary depending on its size, capacity, and features.
- Kiln: A kiln is an essential component of a brick manufacturing business. It is used to fire the bricks and give them strength and durability. Kilns come in different sizes and types, such as tunnel kilns, intermittent kilns, and continuous kilns. The cost of a kiln can range from a few thousand dollars to hundreds of thousands of dollars.
- Molds and tools: Molds and tools are necessary for shaping and cutting the bricks during the manufacturing process. These include hand tools, such as shovels and trowels, as well as specialized tools like brick cutters and molds for different brick sizes and shapes. The cost of molds and tools can add up, especially if your business offers a variety of brick options.
- Transportation vehicles: Depending on the scale of your brick manufacturing business, you may need to invest in transportation vehicles to move raw materials and finished products. This can include trucks, forklifts, and trailers. The cost of these vehicles varies depending on their size and capabilities.
- Storage facilities: As a brick manufacturing business, you will need adequate storage facilities to store raw materials, equipment, and finished products. This can include warehouses, sheds, and storage containers. The cost of storage facilities will depend on their size, location, and construction materials.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your brick manufacturing 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.
The financing plan of your brick manufacturing business
The next step in the creation of your financial forecast for your brick manufacturing business 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 brick manufacturing business?
Now let's have a look at the main output tables of your brick manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your brick manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a brick manufacturing business 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 brick manufacturing business'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 brick manufacturing business. 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 brick manufacturing business'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 brick manufacturing business:
- 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 brick manufacturing business'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 brick manufacturing business'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 brick manufacturing business's financial projections?
Building a brick manufacturing business 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 brick manufacturing business'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.
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 brick manufacturing business 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 brick manufacturing business's financial forecast?
Creating an accurate and error-free brick manufacturing business 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 brick manufacturing business.
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 brick manufacturing business. 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 for a business idea
Know someone who runs or wants to start a brick manufacturing business? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
