How to create a financial forecast for a bulk paper wholesaler?
Developing and maintaining an up-to-date financial forecast for your bulk paper wholesaler is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a bulk paper wholesaler financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a bulk paper wholesaler?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your bulk paper wholesaler and ensure that it can be financially viable in the years to come.
A financial plan for a bulk paper wholesaler enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date bulk paper wholesaler forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your bulk paper wholesaler's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
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 needed to build a bulk paper wholesaler financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a bulk paper wholesaler, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the bulk paper wholesaler on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing bulk paper wholesaler, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your bulk paper wholesaler's financial forecast.
The sales forecast for a bulk paper wholesaler
From experience, it is usually best to start creating your bulk paper wholesaler financial forecast by your sales forecast.
To create an accurate sales forecast for your bulk paper wholesaler, you will have to rely on the data collected in your market research, or if you're running an existing bulk paper 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:
- You may experience an increase in average price due to rising demand for eco-friendly paper products. This may lead to higher production costs for manufacturers, resulting in a higher cost per unit for your bulk paper.
- If there is a shortage of raw materials such as wood pulp, the cost of purchasing paper may increase, thus impacting your average price. This could also lead to delays in delivery and potential loss of customers if you are unable to meet their demand.
- Changes in government regulations regarding import and export tariffs may affect the cost of paper products. This could result in fluctuations in your average price, as well as impact your ability to source paper from certain countries.
- Increased competition from online retailers and paper suppliers may lead to price wars and discounts. This could drive down your average price and potentially impact your profit margins.
- Changes in consumer behavior, such as a shift towards digital documentation and less reliance on paper, may lead to a decrease in the number of monthly transactions. This could have a direct impact on your sales and revenue.
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 bulk paper wholesaler
The next step is to estimate the costs you’ll have to incur to operate your bulk paper wholesaler.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your bulk paper wholesaler's operating expenses should normally include the following items:
- Staff costs: Salaries and benefits for your employees, including wages, bonuses, health insurance, and retirement contributions.
- Rent and utilities: The cost of leasing a warehouse or office space, as well as electricity, water, and internet bills.
- Inventory costs: The cost of purchasing bulk paper from suppliers, as well as storage fees and transportation expenses.
- Marketing and advertising: The cost of promoting your business through various channels, such as print ads, online ads, and trade shows.
- Accountancy fees: The cost of hiring an accountant to handle your financial records, tax filings, and other financial tasks.
- Insurance costs: The cost of insuring your business against potential risks, such as property damage, liability, and employee injuries.
- Software licenses: The cost of purchasing and renewing software licenses for programs used in your business, such as accounting software and inventory management systems.
- Banking fees: The cost of maintaining a business bank account, including transaction fees, wire transfer fees, and monthly service fees.
- Office supplies: The cost of purchasing supplies for your office, such as paper, printer ink, and pens.
- Training and development: The cost of providing training and development opportunities for your employees to improve their skills and knowledge.
- Legal fees: The cost of hiring a lawyer for legal advice and representation, such as drafting contracts and resolving disputes.
- Maintenance and repairs: The cost of maintaining and repairing equipment and machinery used in your business, such as forklifts and delivery trucks.
- Taxes and licenses: The cost of business licenses and permits, as well as taxes such as sales tax and income tax.
- Employee benefits: The cost of providing benefits to your employees, such as healthcare, retirement plans, and paid time off.
- Travel expenses: The cost of business-related travel, including airfare, lodging, and meals.
This list is not exhaustive by any means, and will need to be tailored to your bulk paper wholesaler's specific circumstances.
What investments are needed to start or grow a bulk paper wholesaler?
Once you have an idea of how much sales you could achieve and what it will cost to run your bulk paper wholesaler, it is time to look into the equipment required to launch or expand the activity.
For a bulk paper wholesaler, capital expenditures and initial working capital items could include:
- Warehouse Space: As a bulk paper wholesaler, you will need a large warehouse space to store your inventory. This will likely be one of your biggest capital expenditures as it involves purchasing or leasing the space, as well as any necessary renovations or upgrades.
- Forklifts and Other Material Handling Equipment: In order to efficiently move and store your bulk paper products, you will need to invest in forklifts and other material handling equipment. These can be expensive but are essential for your daily operations.
- Delivery Trucks: As a wholesaler, you will also need to invest in delivery trucks to transport your paper products to your customers. These trucks will need to be large enough to accommodate your bulk orders and may require specialized equipment, such as lift gates, to load and unload the paper.
- Computer Systems and Software: In today's digital age, it is crucial for businesses to have reliable computer systems and software to manage their operations. As a bulk paper wholesaler, you will need a system to track inventory, process orders, and manage customer accounts. This will require an initial investment in hardware and software, as well as ongoing maintenance and updates.
- Pallet Racking and Storage Solutions: To maximize the space in your warehouse and efficiently store your paper products, you will need to invest in pallet racking and other storage solutions. These can be customized to fit your specific needs and can be a significant capital expenditure.
Again, this list will need to be adjusted according to the specificities of your bulk paper 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 bulk paper wholesaler
The next step in the creation of your financial forecast for your bulk paper 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 bulk paper wholesaler?
Now let's have a look at the main output tables of your bulk paper wholesaler's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your bulk paper wholesaler's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a bulk paper 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
Your bulk paper 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 bulk paper 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 bulk paper 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 bulk paper 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 bulk paper 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 bulk paper wholesaler's financial projections?
Building a bulk paper 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 bulk paper wholesaler'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
Outsourcing the creation of your bulk paper 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 bulk paper wholesaler's financial forecast?
Creating an accurate and error-free bulk paper 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 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
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your bulk paper wholesaler future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a bulk paper wholesaler, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or 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
- Example of financial forecast
- How to create a sales forecast for a business?
- Financial forecast for a business idea
Know someone who owns or is thinking of starting a bulk paper wholesaler? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
