How to create a financial forecast for a butcher shop?
Creating a financial forecast for your butcher shop, 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 butcher shop 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 butcher shop?
The financial projections for your butcher shop 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 butcher shop'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 butcher shop financial forecast?
A butcher shop'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 butcher shop.
If you are creating (or updating) the forecast of an existing butcher shop, 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 butcher shop 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 butcher shop 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 butcher shop's financial forecast.
The sales forecast for a butcher shop
From experience, it usually makes sense to start your butcher shop's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your butcher shop (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 butcher shop'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:
- Local Meat Supply: The availability and quality of locally sourced meat can greatly impact the prices and transactions at your butcher shop. If there is a shortage of local meat, prices may increase due to the need to source from further away. This could also lead to a decrease in transactions if customers are not willing to pay higher prices.
- Seasonal Demand: The demand for certain cuts of meat may fluctuate throughout the year. For example, during the summer, there may be a higher demand for grilling meats such as burgers and steaks, while in the winter, there may be a higher demand for roasts and stews. Understanding these seasonal trends can help you adjust your prices and inventory to meet customer demand.
- Health Trends: The rise in popularity of certain diets, such as paleo or keto, can affect the types of meat that customers are looking for. This could lead to a shift in the average price of your products, as leaner cuts of meat may be more in demand. It could also impact the number of transactions, as some customers may be cutting back on meat consumption altogether.
- Competition: The presence of other butcher shops in your area can impact your prices and transactions. If there is a high concentration of competitors, you may need to keep your prices lower to stay competitive. On the other hand, if you are the only butcher shop in the area, you may be able to charge higher prices and see an increase in transactions due to limited options for customers.
- Economic Factors: Economic factors such as inflation, unemployment, and consumer spending can also affect your business. During times of economic instability, customers may be more price-conscious and opt for cheaper cuts of meat or buy less overall, leading to a decrease in average price and transactions. On the other hand, during times of economic growth, customers may be more willing to splurge on higher-priced cuts, leading to an increase in both average price and transactions.
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 butcher shop
The next step is to estimate the expenses needed to run your butcher shop 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 butcher shop's operating expenses should include the following items at a minimum:
- Staff costs: This includes wages, salaries, and benefits for your employees such as butchers, cashiers, and cleaners.
- Accountancy fees: You may need to hire an accountant to handle your financial records and tax filings.
- Insurance costs: As a butcher shop, you will need to have insurance to cover potential liabilities and protect your business.
- Software licenses: You may need to purchase software licenses for inventory management, accounting, or point-of-sale systems.
- Banking fees: This includes fees for your business bank account, such as monthly maintenance fees and transaction fees.
- Rent: If you are leasing a storefront for your butcher shop, this will be a significant expense.
- Utilities: You will need to pay for electricity, water, and gas for your shop.
- Supplies: This includes the cost of meat, packaging materials, cleaning supplies, and other necessary items for your shop.
- Marketing and advertising: To attract customers, you may need to spend money on marketing and advertising, such as creating flyers or running social media ads.
- Equipment maintenance: Regular maintenance and repairs for your equipment, such as meat slicers and refrigerators, will be necessary to keep your shop running smoothly.
- Professional fees: You may need to hire lawyers or consultants for legal or business advice.
- Taxes: As a business owner, you will need to pay taxes, including income tax and sales tax.
- Training and development: It's important to invest in your staff by providing training and development opportunities to improve their skills and knowledge.
- Renters insurance: If you are leasing your storefront, you may need to purchase renters insurance to protect your business in case of damage or theft.
- Uniforms and work attire: As a butcher shop, your employees may need to wear specific uniforms or work attire, which will be an ongoing expense.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small butcher shop might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a butcher shop?
Once you have an idea of how much sales you could achieve and what it will cost to run your butcher shop, it is time to look into the equipment required to launch or expand the activity.
For a butcher shop, capital expenditures and initial working capital items could include:
- Meat Processing Equipment: This includes items such as meat grinders, slicers, and saws. These are essential for a butcher shop to process and prepare meat products.
- Refrigeration Units: A butcher shop needs to have proper refrigeration units to store and preserve meat products. This can include walk-in coolers, display cases, and refrigerated trucks for transportation.
- Butcher Tables and Workstations: These are specialized tables and workstations designed for cutting and preparing meat. They are typically made of stainless steel, which is easy to clean and maintain.
- Point of Sale (POS) System: A modern butcher shop will need a POS system to efficiently process transactions and track inventory. This can include a computer, cash register, barcode scanner, and software.
- Storage and Shelving Units: To keep the butcher shop organized and maximize storage space, you will need to invest in storage and shelving units. These can include cabinets, shelves, and storage bins.
Again, this list will need to be adjusted according to the specificities of your butcher shop.
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 butcher shop
The next step in the creation of your financial forecast for your butcher shop 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 butcher shop?
Now let's have a look at the main output tables of your butcher shop's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your butcher shop's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a butcher shop 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 butcher shop'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 projection
The cash flow forecast of your butcher shop will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the butcher shop's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your butcher shop is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your butcher shop's financial plan.
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 butcher shop's financial forecast?
Creating your butcher shop's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your butcher shop'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 butcher shop 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 butcher shop's financial forecast?
Creating an accurate and error-free butcher shop 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 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 butcher shop, 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 butcher shop
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 butcher shop.
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 butcher shop. 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 butcher shop? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
