How to create a financial forecast for a casino?
Creating a financial forecast for your casino, 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 casino 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 casino?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your casino and ensure that it can be financially viable in the years to come.
A financial plan for a casino 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 casino 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 casino'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 casino 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 casino, 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 casino 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 casino, 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 casino's financial forecast.
The sales forecast for a casino
From experience, it usually makes sense to start your casino's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your casino (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 casino'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:
- Competition: The opening of a new casino in the area may lead to a decrease in your average price as customers may have more options to choose from and may negotiate for lower prices. It may also affect the number of monthly transactions as customers may be drawn to the new casino and may not visit your casino as frequently.
- Economic conditions: Changes in the economy, such as a recession, may lead to a decrease in customer spending on leisure activities like gambling. This can result in a decrease in both your average price and the number of monthly transactions.
- Regulations: Changes in gambling regulations, such as an increase in taxes or restrictions on certain games, may affect your average price and number of monthly transactions. For example, an increase in taxes may lead to an increase in your average price to cover the additional cost, while restrictions on certain games may decrease the number of monthly transactions.
- Tourism: The number of tourists visiting your area can greatly impact your business. A decrease in tourism may lead to a decrease in the number of monthly transactions, while an increase in tourism may lead to an increase in both your average price and the number of monthly transactions.
- Technology: The use of technology, such as online gambling platforms, may affect your average price and number of monthly transactions. Customers may prefer the convenience of online gambling, leading to a decrease in your average price and number of transactions at your physical casino.
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 casino
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your casino 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 casino will include some of the following items:
- Staff costs: This includes salaries, wages, benefits, and other expenses for all casino employees, such as dealers, bartenders, security personnel, and administrative staff.
- Accountancy fees: You will need to hire accountants to manage your financial records, prepare tax filings, and provide financial advice.
- Insurance costs: Running a casino involves a lot of risk, so you will need to pay for insurance to protect your business against potential losses, such as property damage, liability claims, and employee injuries.
- Software licenses: To operate your casino, you will need to purchase licenses for gambling software, point-of-sale systems, and other specialized software.
- Banking fees: You will need to pay fees for processing credit and debit card transactions, as well as for maintaining bank accounts and managing cash deposits and withdrawals.
- Marketing expenses: It's important to promote your casino to attract customers, so you will need to budget for advertising, promotions, and other marketing activities.
- Utilities: Running a casino requires a lot of electricity, water, and other utilities, so you will need to budget for these ongoing expenses.
- Rent or mortgage: If you don't own the building where your casino is located, you will need to pay rent, and if you do own it, you may have a mortgage to pay off.
- Food and beverage costs: Many casinos offer dining options, so you will need to budget for food and beverage costs, including ingredients, supplies, and staff wages.
- Entertainment expenses: To keep customers coming back, you may want to offer live entertainment, such as concerts or shows, which will require a budget for booking fees and production costs.
- Maintenance and repairs: To keep your casino running smoothly, you will need to budget for ongoing maintenance and repairs of equipment, facilities, and other assets.
- Security expenses: Casinos are a prime target for theft and fraud, so you will need to invest in security measures, such as surveillance systems, security personnel, and cyber security.
- Taxes and licenses: You will need to pay taxes on your casino's revenue, as well as obtain and renew licenses to legally operate your business.
- Professional fees: You may need to hire lawyers, consultants, or other professionals for legal advice, regulatory compliance, or other specialized services.
- Supplies and equipment: You will need to purchase supplies, such as playing cards, chips, and other gaming equipment, as well as office supplies and equipment for running your business.
This list will need to be tailored to the specificities of your casino, but should offer a good starting point for your budget.
What investments are needed to start or grow a casino?
Your casino 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 casino, these could include:
- Slot machines: These are an essential component of any casino and can be a significant capital expense. You will need to consider the initial purchase cost as well as ongoing maintenance and repairs.
- Gaming tables: Another crucial element of a casino, gaming tables can be a substantial investment. You will need to factor in the costs of purchasing the tables, chairs, and accessories, as well as ongoing maintenance and repairs.
- Security systems: A robust security system is necessary for any casino to ensure the safety of both staff and patrons. This may include surveillance cameras, alarms, and other security measures. Keep in mind the initial cost as well as ongoing maintenance and monitoring fees.
- Decor and furnishings: Creating an inviting and luxurious atmosphere is important for a casino, and this may require significant investments in decor and furnishings. This can include items such as lighting, carpets, furniture, and artwork.
- Food and beverage equipment: If your casino includes restaurants, bars, or a buffet, you will need to purchase equipment such as kitchen appliances, bar equipment, and serving supplies. This can be a large upfront cost, but it is essential for providing quality food and beverage services to your customers.
Again, this list will need to be adjusted according to the size and ambitions of your casino.
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 casino
The next step in the creation of your financial forecast for your casino 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 casino?
Now let's have a look at the main output tables of your casino's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your casino's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a casino 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 casino'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 casino. 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 casino'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 casino:
- 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 casino'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 casino'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 casino's financial projections?
Building a casino 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 casino'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 casino 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 casino's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free casino financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your casino's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially 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 casino, 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 casino
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 casino.
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 casino. 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
- Financial forecast template for a business idea
- How to project revenues for a business?
Know someone who runs or wants to start a casino? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
